SINGLE ENTRY AND INCOMPLETE RECORDS

Introduction

This topic is about how to prepare trading, profit and loss account under an incomplete record or single-entry accounting system.

Meaning

This is system of accounting of financial transactions that are recorded without conformity with the rule of double entry’.

The records so prepared based on a single entry or one-leg entry by any bookkeeper or record keeper is hence incomplete or inadequate for proper accounting system. In order to prepare a normal accounting report, an accountant has to use one of his or her mental experience and ingenuity to prepare the accounts or financial reports from the incomplete records.

Features of Single Entry/Incomplete Records

• Final accounts are prepared by comparing financial data of two or more years.
• Accounting information is grossly inadequate.
• Accounting records or books are not in existence or not well organized.
• Mostly, records are kept on loose sheet or only cash book is kept.
• There is no any accounting system in such an organization.
• Record keeping is flexible.

Areas Where Single-Entry Accounting Systems Are Used

Areas where single accounting systems are used are as follows:

• Schools
• Government parastatals and agencies
• Club association, unions (not-for-profit organization) and so on.
• Sole traders, or small-scale business
• Organizations that have no finance or accounting unit
• Business or companies that are victims of artificial or natural disasters.
• Business where records are kept on loose sheets.

Preparation of Statement of Affairs

A statement of affairs is the summary of a firms’ or a business’ assets, liabilities and owners stake at any given time.

It could be drawn at the beginning or at the end of every accounting year or period. The statement is drawn to ascertain any growth or increases in the components of the statements at any point in time. The information required to prepare this statement are: all fixed assets, total of debtors and creditors, owing and prepaid expenses, cash in hand and at bank and so on.

When two statements of affairs for different periods are compared, it will help to ascertain the followings:

The format for the statement of affairs is given in the following:

(a)        Opening Statement of Affairs

	N
Fixed assets Current assets   Less: Liabilities Opening Capital	XXX XXX XXX (XXX) XXX

Opening capital = Total assets – Liabilities

(b)       Closing Statement of Affairs

	N
Fixed assets Current assets   Less: Liabilities Closing Capital	XXX XXX XXX XXX XXX

Computation of profit Between the Two Profits

	N	N
Closing capital		XXX
ADD: Drawings		XX
Less: Opening Capital	XX
Additional Capital	XX	(XX)
Net Profit		XX/(XX)

 Profit or loss can as well be computed as follows:

(a)        Opening capital + Profit – Drawings + Additional capital = New or closing capital

(b)       Profit = New capital + Drawing – Opening Capital – Additional Capital

Illustration 1

Abraka Ventures statements of affairs components as at 1 January, 2016 are given below.

	N
Creditors Bills payable Plants and equipment Stock Debtors Bills receivable Cash	40,000 12,000 60,000 20,000 10,000 20,000 2,000

On 31 December, 2010, the following information was extracted from the business. Creditors N30,000, bill payables N16,000 equipments N50,000, stock N10,000 Debtors N20,000, Bills receivable N14,000, Cash N200 and drawings for the period were N16,000.

You are required to:

• Calculate the opening capital
• Show the closing capital and net profit

Illustration 2

Olaore Supermarket records all its financial transaction in a notebook. The following are extracts from the notebooks:

Stock Creditors Debtors Cash in hands Bank overdraft Fixtures and fittings Motor van	Notebooks
	31 December, 2008	31 December 2009
	N 33,000 30,000 40,000 500 50,000 15,000 20,000	N 46,000 28,800 35,000 4,000 38,000 15,000 20,000

The drawings during the year amounted to N5,000. Depreciation on furniture and fittings to be 10%, while N2,000 to be written off motor van. N1,000 of the debtors are irrecoverable and a general provision of 5% should be made on the debtors balance.

You are required to:

• Ascertain the profit and loss for the year ended 31 December 2009.
• Prepare a statement of affairs as at that date.

PREPARATION OF FINAL ACCOUNTS FROM INCOMPLETE RECORDS:

Conversion of Single Entry to Double Entry

An organization that keeps single entry or incomplete records of accounting may decide to prepare its annual final accounts from the inadequate information. It is possible under this incomplete records situation to prepare such final accounts by merely converting the single entry records to double entry records given the available information.     The following are the necessary books that need to be opened for such conversion:

• Cash book
• Sales ledger
• Purchases ledger
• Assets and liabilities account
• Nominal accounts

If such conversion is done properly, a trial balance could be drawn to test the arithmetical accuracy of the records. For the purpose of the conversion and the preparation of final accounts from this situation, the following procedure should be adopted.

Step 1:            Prepare the opening statement of affairs purposely to ascertain opening capital.

Step 2:            Prepare the cash book with the details. This must include both the cash and bank accounts as the case may be either separately or in a cash book.

Step 3:            Prepare both debtors and creditors ledger control accounts to ascertain the total credit sales and total credit purchases.

Step 4:            Prepare a schedule or summary for total sales and purchases by adding the total credit sales and purchases with the cash sales and cash purchases.

Step 5:            Prepare control accounts for the nominal items that have outstanding or prepaids either at the beginning or at the end of the period in question.

Step 6:            Prepare any other required working schedules.

Step 7:            Prepare trading, profit and loss accounts from steps 1 – 6 above.

Step 8:            Prepare the balance sheet.

Illustration 3

Arsenal ventures had the assets and liabilities as at 1 January 2008.

	N
Delivery van	120,000
Machine	180,000
Debtors	70,000
Bank	100,000
Stocks	25,000
Creditors for expenses	10,000

They do not keep proper records for their business transactions but the following were extracted from sketch books.

	N
Opening cash balance	100,000
Receipts from debtors	85,000
Payments
Materials	52,000
Repairs of van	20,000
Telephones	2,500
Creditors for expenses	10,000

On 31, December 2008, debtors were owning N150,000 and closing stock was valued at N10,000

The following additional information was available:

	N
Provision for depreciation Delivery van Machine Accrued telephone expenses Provision for doubtful debts	10,000 20,000 4,000 3,000

You are required to prepare:

• Statement of affairs as at January 2008.
• Trading, profit and loss account for the year ended 31 December 2008 and the balance sheet as at that date.

Solution

Opening Statement of Affairs as at 1 January 2008.

	N
Delivery van Machine Debtors Stocks Bank   Less: Liabilities Creditors for expenses Opening capital	120,000 180,000 70,000 25,000 100,000 495,000   (10,000) 485,000

Bank Account

Receipts	N	N
Opening cash balance Receipts from debtors   Less: Payments Materials Repairs of van Telephone Creditors for expenses   Closing cash balance	52,000 20,000 2,500 10,000	100,000 85,000 185,000           84,500 100,500

Debtors Ledger Control Account

	N		N
Balance b/f Credit sales a/c   Balance b/f	70,000 165,000   235,000 150,000	Bank a/c Balance c/f	85,000 150,000 235,000

Accrued Expenses Account

	N		N
Balance a/c Balance c/f	10,000     4,000     14,000	Balance b/f P & L   Balance b/f	10,000 4,000 14,000 4,000

 

Arsenal Ventures

Trading Profits and Loss Account for the Period Ended 31 December 2008

	N	N
Sales Less: Cost of sales Opening stock Purchases   Closing stock   Gross Profit Less: Expenses Repairs of van Telephone (2,500 + 4,000) Provision for doubtful dents Depreciation: Delivery van Machines   Net profit	25,000 52,000 77,000 (10,000)       20,000 6,500 3,000     10,000 20,000	165,000           (67,000) 98,000                 (59,500) 38,500

 Arsenal Ventures

Balance Sheet as at 31 December 2008

	Cost	Depreciation Net	NET Book Value
	N	N	N
Delivery van Machine   Current assest Stock Debtors (150,000 – 3,000) Bank	120,000 180,000 300,000	(10,000) (20,000) (30,000)   10,000 147,000 100,500 257,500	110,000 160,000 270,000

 

Less: Accrued expenses     Financed by Capital Profits

(4,000)

253,500 523,500 N 485,000 38,500 523,500

Illustration 4

Wayne Salako Enterprises could not keep proper book for their business transactions during the year 2004. The following were extracted from the books.

	N
Purchases: Cash Credit Cash received from debtors Purchases of furniture Cash Sales Expenses Paid: Salaries Electricity Rent Insurance Rate Advertisement	300,000 500,000 1,300,000 48,000 500,000   144,000 24,000 48,000 80,000 12,000 24,000

The following additional information was available:

(a)

	01/01/2009 N	31/12/2009 N
Stock Outstanding electricity Rent owing Insurance Prepaid Debtors Creditors Rates In advance	100,000 1,600 4,000 3,600 50,000 30,000 3,000	140,000 2,400 3,600 4,000 64,000 44,000 2,400

(b)       Fixed assets on 1 January 2009 are as follows:

	N
Furniture Motor vehicle Building Cash at bank on 1 January 2009	72,000 500,000 700,000 200,000

(c)        Fixed asset should be depreciated as follows:

Furniture and building                   5%

Motor vehicle                                   20%

You are required to prepare trading, profit and loss accounts for the year ended 31 December 2009.

See also

ACCOUNTING RATIOS AND INCOMPLETE RECORDS

ADMISSION OF NEW PARTNER AND RETIREMENT OF AN EXISTING PARTNER IN CONTINUING BUSINESS

GOODWILL

ISSUE OF SHARES

THE FINAL ACCOUNTS OF LIMITED LIABILITY COMPANIES