DDWG 2523

FINANCIAL ACCOUNTING II

Chapter 3
Single Entry and
Incomplete Records
 Course Outline

 Incomplete Records of Revenue Income

and Expenditure

 Single Entry And Preparation of

Financial Statements

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 Objectives

By the end of the lecture (and with

private study) students should be able
to:
 Describe the different forms of
incomplete records; and
 Prepare final financial statements from
incomplete records and single entry.

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 Why double entry is not used

 Many small business owners keep their

records by using a single entry system
comprising a cash book and a list of
debtors and creditors.
 This may be because they simply do not
know double entry bookkeeping.
 However, they will have to prepare their
financial statements each year.

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 Incomplete records

Incomplete records is a general term given to a

situation where the transactions of an organisation
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.

It is not uncommon for sole traders to have

incomplete records since it is often too expensive
for them to maintain a full set of records, and
these may be of limited usefulness to the owner.

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 Forms of incomplete records

1. Incomplete
records of
revenue income 3. Incomplete
and 2. Single entry
single entry
expenditure

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 1. Incomplete records of revenue
income and expenditure
 This refers to situations where there are
no basic documents or records of
revenue income and expenditure, or
when these 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 any records
of the income and/or expenses.

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 1. Incomplete records of revenue
income and expenditure
 It is therefore not possible to construct a
statement of profit and loss.

 To ascertain the profit for a given period

it is necessary to prepare a statement of
financial position at the start and end of
the relevant period. The profit is then
computed from the change in the value of
net assets/capital over the period.

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 An illustration of incomplete records
Statement of financial position at 1 January 20X3
£ £
Capital - 20,000 Assets 25,000
(difference) Less: liabilities 5,000
20,000 Net Assets 20,000

Statement of financial position as at 31 December 20X3

£ £
Capital - 30,000 Assets 38,000
(difference) Less: liabilities 8,000
30,000 Net Assets 30,000

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 An illustration of incomplete records

Statement of profit For the year ended 31 December

20X3
£
Capital at end of period 30,000
Less: capital at start of period 20,000
= increase in capital 10,000
Less: capital introduced during period 3,000
7,000
Add: drawings during the period 4,000
= Profit for the period 11,000
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 2. Single entry

 This refers to where transactions have only

been entered in a book of prime entry, usually a
cash book, and not in the ledger.
 However, there is usually also documentation
relating to the value of non-current assets,
inventories, trade receivables, trade payables,
accruals and prepayments, and any loans.
 Thus a statement of profit and loss and a
statement of financial position can be prepared
from the cash book and supporting
documentation relating to assets and liabilities,
often using control/total accounts.
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 2. Incomplete single entry

 This refers to where there are no books of

account but the amount of each type of
income and expenditure can be ascertained
from the bank statements and/or supporting
documents.
 In this case it is necessary to produce a cash
book summary from the bank statements,
paying-in book and cheque book stubs.
 The final financial statements are usually
prepared from this cash book summary and the
supporting documentation relating to assets
and liabilities.
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 Procedure in preparing final accounts
from incomplete single entry records

1. Prepare a statement of affairs as at the end of the

previous year to ascertain the capital.

2. Prepare a cash book summary (from the bank statements)

to ascertain the balance at the end of the year and the total
amounts for each type of income and expenditure.

3. (a) Compute the net credit purchases by preparing a

purchase ledger control account.
(b) Compute the cash and cheque purchases.
(c) Total purchases = (a) + (b)
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 Procedure in preparing final accounts
from incomplete single entry records

4. (a) Compute the net credit sales by preparing a sales

ledger control account.
(b) Compute the cash and cheque sales.
(c) Total sales = (a) + (b)
Note: Steps (a) and (b) may have to be combined for
purchases and/or sales.

5. Compute the charges to the income statement account

for expenses with accruals or prepayments by preparing
the relevant ledger accounts.

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 Procedure in preparing final accounts
from incomplete single entry records

6. Compute the charges/credits to the income statement

account in respect of provisions for bad debts,
depreciation, sales of non-current assets, etc.

7. Prepare final financial statements remembering to add

together any cheque and cash expenditure of the same
type, and include any new assets acquired, drawings (e.g.
goods taken by proprietor) and/or capital introduced.

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 Activity

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 Activity (Continued)

Stage 1

Draw up a Statement of Affairs on the closing day

of the earlier accounting period.

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 Activity (Continued)

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 Activity (Continued)

Stage 2

Prepare a cash and bank summary, showing the

totals of each separate item, plus opening and
closing balances.

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 Activity (Continued)

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 Activity (Continued)

Stage 3

Calculate the figures for purchases and sales to

be shown in the trading account. Remember
that the figures needed are the same as those
which would have been found if double entry
records had been kept.

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 Activity (Continued)

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 Activity (Continued)

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 Activity (Continued)
Stage 4

Where there are no accruals or prepayments

either at the beginning or end of the period,
then the expenses paid will be the income
statement figure. However, where accruals or
prepayments exist, an expense account should
be drawn up for that particular item.

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 Activity (Continued)

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 Activity (Continued)

Stage 5

Now draw up the financial statements.

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 Activity (Continued)

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 Activity (Continued)

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 Dealing with missing figures

 Often there is missing information relating to

cash receipts or payments.
 If the missing information is one type of
payment, then it is normal to assume that the
missing figure is the amount required to make
both totals agree in the cash column of the
cash book.

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 Activity

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 Activity (Continued)

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Activity (Continued)
Activity (Continued)
 Summary – some key points
 Many small organisations do not have
proper accounting systems, resulting in
incomplete records.
 There are three types, completely
incomplete, single entry and incomplete
single entry.
 In-depth knowledge of ledger accounts,
double entry and control accounts is vital
for the construction of a set of financial
statements.

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 Reference
 Thomas, A., & Ward, M. A. (2015).
Introduction to Financial Accounting. (8th
Edition). Mc Graw Hill Education.

 Wood, F. & Sangster, A. (2012). Business

Accounting 1. (12th Edition). Pearson.

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Thank You