Single Entry and Incomplete Records

 

Welcome to class! 

In today’s class, we will be talking about single entry and incomplete records. Enjoy the class!

Single Entry and Incomplete Records

Single Entry and Incomplete Records | classnotes.ng

INTRODUCTION

Most businesses keep records of receipts and payments. The records may consist of bank paying – in – book counterfoils, cheque book counterfoils and bank statements in addition to supplies invoices and copies of sales invoices. From these records, it may be possible to prepare a P&L A/C and Balance Sheet.

STEPS INVOLVED IN PREPARING A P&L A/C AND BALANCE SHEET FROM INCOMPLETE RECORDS

The necessary steps are as follows:-

Step 1: Preparing an opening statement of affairs (so as to obtain opening capital)

Step 2: Prepare a receipt and payments A/C

Step 3: Prepare control A/CS for debtors and creditors, if necessary to calculate sales and purchases. It is the sales and purchase figure that will be required to make the account balance.

Step 4: Adjust the receipts and payments accounts prepayments and accruals at the beginning and end of the period.

Step 5: Calculate provisions for doubtful debts, depreciation and any other matters not mentioned above.

Step 6: Prepare the P&L A/C and Balance Sheet from the information now available

Example:

The only record that Azim has kept for his business are bank pay-in-book, counterfoils, cheque book counterfoils and records of debtors and creditors. With these, it is possible to summarize his transactions with the bank in the year ended 31/12/03 as follows taking paid into the bank: N8000

Cheques drawn: Payment to suppliers N2430, rent N600, electricity N320, postage and stationeries N80, purchase of shop fittings N480, cheques drawn for personal expenses N2700.

Azim banked all his taking after paying the following in cash:-

Creditor for supplies N400 and sundry expenses N115.

Azim estimated his assets and liabilities as at 1st January 2003 to be: shop fittings N1600. Stock N1960, debtors N240 rent prepaid N80. Bank balance N1500, cash in hand N 50, creditors for goods N420; electricity owing N130.

At 31st December 2003, Azim listed his assets and liabilities as follows. Shop fittings N1800; stock N1520; debtors N380 rent repaired N50; bank balance N2640; cash in hand N 50; creditors for goods N390; electricity owing N225.

Required prepare Azim’s profit and loss account for the year ended 31 December 2003 and his Balance Sheet at that date.

Solution:

Step 1: Opening statement of Affairs

N                                 N

Assets

Shop fittings                                                                                                 1600

Stock                                                                                                              1960

Debtors                                                                                                           240

Rent prepaid                                                                                                 80

Bank                                                                                                               1500

Cash in hand                                                                                                  50

5,430

Less Liabilities

Creditors for goods 420

Electricity owing      130                                           550­­

CAPITAL AT 1ST JAN. 2003                                     4,880

 

Step 2: Receipts and payments Account. This includes only those amounts actually received and spent. It is a cash book summary with columns for cash and bank.

Cash              Bank                                       Cash             Bank

N                    N                                             N                      N

1/1/03 Balance b/f            50                    1500      Trade

Takings                                                             Creditors                400                 2430

(8000+460+115)      8515                              Rent                                                  600

Cash                                                  8000      Electricity                                         320

Postage and

Stationery                                          80

Shop fittings                                    480

Sundry Exps.                                   115

*Drawings

(2700+250)                                    2,950

Bank C                  8,000

Balance c/d             50               2640

8565              9500                                       8565              9,500

*N250 is money not accounted for and is treated as Azim’s drawing.

Step 3: Debtors and creditors controls accounts

Debtors Control A/C                                    Creditors   Control A/C

N                                              N                        N                             N

1/1/03 Bal b/f 240     31/12/03 Cash       8515

Bal b/f                  N380     31/12 Bank1/1/03 Bal b/f     420

Sales (2) 8655                                                            and Cash 2830   Purchase (3) 2800

8895                                          8895          Bal b/f        390

3220                                      3220

Steps 4: Adjustment for Prepayment and Accounts

Rent A/C                   N                                            Electricity A/C

N                                                                     N                       N

Prepaid                     Cash              320         1/1/03

At 31/12/03       50      Owing                           Accrued b/f        130

1/1/03P&L ac          31/12/03        225    P&L A/C        415

Prepaid b/f 80        (payable for 545                            545

Cash         600          the year         630

680                                         680

Steps 5: Calculate depreciation of shopfitting: Shop fittings at valuation 1/1/03     1600

Add fittings purchased in the year                                                                     480

2080

Shop fittings at valuation 31/12/03                                                                                           1800

Therefore Depreciation for the year                                                                                        = 280

 

Step 6:                                               AZIM

Trading and profit and loss account for the year

Ended 31 December 2003

N                                 N

Sales                                                                                                               8655

Less cost of sales

Stock at 1st Jan                                                       1960

Add Purchases                                                       2800

Less closing stock                                                   4700

Less stock at 31/12                                                 1520                           3240

Gross Profit                                                                                                   5415

Less:    EXPENSES

Rent                                                                           630

Electricity                                                                  415

Postage and stationery                                         80

Sundry expenses                                                    115

Depreciation – shop fitting                                  280                             1520

NET PROFIT                                                               3,895

The balance sheet as at 31st December 2008

$                                  $                                  $

Fixed assets: shopfitting                                                                                       1800

CURRENT ASSETS

Stock                                                                          1520

Trade debtors                                                           380

Rent prepaid                                                              50

Bank                                                                           2640

Cash                                                                              50

4640

 

LESS CURRENT LIABILITIES

          Trade creditors        390

Electricity owing     229                               615                           4025

5825

 

Capital  at 1st Jan.                                                                         4880

Profit for the year                                                                                       3895

8775

Less drawings                                                                                              2925

5825

 

EVALUATION QUESTIONS

  1. What is the purpose of the opening statement of affairs incomplete records?
  2. What is the debtors’ control account prepared to reveal?

 

We hope you enjoyed the class.

Should you have any further question, feel free to ask in the comment section below and trust us to respond as soon as possible.

LEARN TO CODE IN 8 WEEKS. Pay Only ₦25000 To Join Class💃

Access Fun Video Lessons to Pass WAEC, NECO, JAMB, POST-UTME in One Sitting💃

Leave a Reply

Your email address will not be published.

Don`t copy text!