Incomplete Records

FAC 0034
Financial Accounting 2
Incomplete Records
Learning Outcomes
 To deduce the figure of profits where only the

increase in capital and details of drawings are
known
 To draw up an income statement and balance
sheet from records not kept on a double entry
system.
 To deduce the figure of sale and purchases from
incomplete records
Incomplete Records
 The term “incomplete records” implies that the trader

may have some records, but that they are incomplete as
they do not form a double entry book-keeping system,
and therefore only some aspects of the trader’s business
relationships are recorded.
 The extent to which the trader’s records are incomplete
will vary.
Incomplete Records
 For every small business like market stall, shopkeeper

– it is more likely that they would enter details of a
transaction once only, using single entry system.
 Many of them would fail to record every transaction,
resulting in incomplete records.
Incomplete Records
So how can the financial statements be prepared if the

bookkeeping records are inadequate or incomplete?
Four basic techniques used for incomplete
records
1. Construction of opening & closing balance
sheets or capital
2. Construction of a cash and / or bank summary
3. Construction of sales and purchase figures -
usually done via control accounts
4. Use of gross / net profit percentage
Construction of Opening & Closing OE or Capital
Four reasons why capital might change

1. Introduction of extra capital
2. Withdrawal of capital
3. Profit earned by the business
4. Loss suffered by the business
PROFIT OR LOSS = THE INCREASE
OR DECREASE IN CAPITAL
We can calculate profit when we have details of the

opening and closing capital.
Activity 1
The opening capital of Edna Clouds at 1 Jan 2023 was
RM2,000. At 31 December 2023 the capital figure was
RM8,500.
How much profit has been earned during the year?
Opening capital 2,000
Profit (must be) 6,500
Closing capital 8,500
We can calculate profit when we have details of
the opening and closing capital and have details
of capital introduced and withdrawn during the
year.
Activity 2
The opening capital of Ivy Cladwall at 1 Jan 2023
was RM16,000. On 1 July 2023 she introduced
further capital of RM4,000 and during the year
withdrew a total of RM8,000. On 31 December
2023 the capital figure was RM30,000.
How much profit has been earned during the
year?
Opening capital 16,000
Capital introduced 4,000
Withdrawals - 8,000
12,000
Profit (must be) 18,000
Closing capital 30,000

Activity 3
The opening capital of Ivor Pain at 1 Jan 2023 was
RM32,000. During the year he withdrew RM1,000 a
month. On 31 December 2023 the capital figure was
RM18,000.
How much profit or loss has been earned or suffered
during the year?
Opening capital
32,000
Withdrawals
-12,000
Loss (must be) -
2,000 20,000
Closing capital
18,000
PROFIT OR LOSS WHEN THE NET
ASSETS AT THE BEGINNING AND
END OF THE YEAR ARE KNOWN
Activity 4
What do we mean by net assets?
FIXED ASSETS + CURRENT ASSETS – NON- CURRENT LIABILITIES –

CURRENT LIABILITIES
What is the accounting equation?
ASSETS – LIABILITIES = CAPITAL + PROFIT - DRAWINGS

Activity 5
Eileen Dover has not kept proper bookkeeping records but has kept
notes in diary form of the transactions of her business. She is able to
give you details of her assets and liabilities as at 31 December 2022
and 31 December 2023
Dec 2022
Dec 2023
RM RM
Van 2,000 (after depreciation)
1,600 (after depreciation)
Fixtures 1,400 (after depreciation)
1,260 (after depreciation)
Inventory 1,700
1,980
Debtors 1,900
2,880
Bank 2,200
3,400
Draw up a Statement of Affairs at each balance sheet date.
December 2022 December 2023

Van 2,000 1,600
Fixtures 1,400 3,400 1,260 2,860
Inventory 1,700 1,980
Debtors 1,900 2,880
Bank 2,200 3,400
Cash 200 400
Creditors 400 600
Loan 1,200 (1,600) 800 (1,400)
7,800 10,120
Capital 7,800 7,800

(+) Net Profit 4,120
(-) Drawing (1,800)
7,800 10,120
This method of calculating profit is
unsatisfactory and should only be done in
exceptional circumstances.
A full set of financial statements should be

drawn up from the available information.
Construction of a Cash or Bank Summary
If we know the opening and closing bank

account balances we might be able to
calculate a missing figure for sales receipts
or purchases.
Construction of a Cash or Bank Summary
Donald does not keep proper accounting records. His

bank statements show that his opening bank balance
was RM100 and his closing bank balance was RM400.
He knows that his payments to suppliers were RM1,200

and he took out RM700 (paid by cheque) but he has no
idea of his receipts from debtors?
Construction of an Opening Cash or Bank
Summary
T Account
Date Detail RM Date Detail RM

Bal b/d 100 Creditors 1200
Debtors 2200 Drawings 700
Bal c/d 400
2300 2300
We now know our receipts from debtors, which might be the

sales figure OR could help us calculate the sales figure
Construction of Sales and Purchase figures - via
Control Accounts
 Construct a control account
 Control accounts essentially contain 4 items..
1. Opening debtors
2. Closing debtors
3. Credit sales
4. Receipts from debtors
If we know 3 items , we can calculate the fourth!!

Construction of Sales and Purchases
Donald does not keep proper accounting

records. He knows that his opening debtors were
RM500 and his closing debtors were RM400.
He has already reconstructed his bank account

and knows that receipts from debtors were
RM2,200. He needs to calculate his sales.
Construction of Debtors Control account to
calculate Sales
Debtors control
Detail RM Detail RM
Bal b/d 500 Bank receipts 2200
Sales 2100
Bal c/d 400
2600 2600
Use of Gross / Net profit Percentage
 Missing figures can also be calculated using gross or net

profit percentages
 If we know that gross profit is 20% of sales, we can
calculate the cost of sales if we know our sales figure.
 If we know cost of sales and our opening and closing
stock, we can easily calculate purchases
Use of Gross / Net Profit Percentage
 Duck has sales of RM100. He knows that his gross
profit percentage is 20% of sales.
 His opening stock was RM20 and his closing
stock was RM25. What is Ducks purchases?
1. C.O.S is 80% of RM100 = RM80
2. RM20 + Purchases - RM25 = RM80
3. Purchases = RM85

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FAC 0034

 To deduce the figure of profits where only the

 The term “incomplete records” implies that the trader

 For every small business like market stall, shopkeeper

So how can the financial statements be prepared if the

Four reasons why capital might change

We can calculate profit when we have details of the

Closing capital 30,000

FIXED ASSETS + CURRENT ASSETS – NON- CURRENT LIABILITIES –

What is the accounting equation?

ASSETS – LIABILITIES = CAPITAL + PROFIT - DRAWINGS

December 2022 December 2023

Capital 7,800 7,800

A full set of financial statements should be

If we know the opening and closing bank

Donald does not keep proper accounting records. His

He knows that his payments to suppliers were RM1,200

Date Detail RM Date Detail RM

We now know our receipts from debtors, which might be the

If we know 3 items , we can calculate the fourth!!

Donald does not keep proper accounting

He has already reconstructed his bank account

 Missing figures can also be calculated using gross or net

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