Single entry and incomplete records

Incomplete records

A general term given to a situation where the transactions of an organization have not been recorded in double-entry form (or using a computer system), and thus there is not a full set of records of the enterprise's transactions

Statement of affairs

Another name for the statement of financial position. It is usually created at the start and end of the period. It shows the assets, liabilities and accumulated fund of the club

List the three main forms of incomplete records

Incomplete records of revenue income and expenditure: That is, there are no basic documents or records of revenue income and expenditure or the records are inadequate. This situation usually arises where the books and documents have been accidentally destroyed (e.g. in a fire) or the owner failed to keep proper records. In these circumstances, it is not possible to construct a statement of profit or loss. However, it may still be possible to ascertain the profit for the period provided there is information available relating to the assets and liabilities of the business at the start and end of the relevant period. Single entry: The term single entry is used to describe a situation where the business transactions have only been entered in a book of prime entry, usually a cash book, and not in the ledger. So one side of the entry has been completed. In addition, an accountant would also expect to be able to obtain documents or information relating to the value of non-current assets, inventories, trade receivables, trade payables, accruals, prepayments and any non-current liabilities. Given that this is available, it would be possible to prepare a statement of profit or loss and statement of financial position. Incomplete single entry: This term may be used to describe a variation on scenario 2 — however, there are no books of account (or these are incomplete). In this scenario, the receipts and payments can be ascertained from source documentation, such as the bank statements, paying-in book, VISA machine readouts and cheque book stubs. A starting point is usually to produce a cash book summary from the information given on the bank statements, paying-in book and cheque book stubs. The final financial statements will then be prepared from the cash book summary together with the supporting documents and information referred to in scenario 2.

Explain how an accountant would approach preparing the financial statements for an entity that has single entry record-keeping

One possibility is for the accountant to complete the records by posting the receipts and payments to the appropriate accounts in the ledger either in full or summarized form. The final financial statements are then prepared from the trial balance in the normal way. This is common in practice. However, in very small businesses this may be too expensive and/or impractical. In this case the final financial statements are prepared directly from the cash book or a summary thereof, and the appropriate adjustments made for trade receivables, trade payables, provisions, accruals, prepayments, and so on.

Credit card sales

Sales that have been paid by credit card. The amount recorded in the bank from the credit card company for sales needs to be grossed up by the amount of the commission.

Determine the profit/(loss) for the year from a reconstruction of the statement of changes in owner's equity accounts between the start and end of the year

The profit (or loss) is found by calculating the difference between the net asset value of the business at the start and end of the period as shown by the two statements of financial position

Single entry

Where the business transactions have only been entered in a book of prime entry, usually a cash book, and not in the ledger