Home BOOK KEEPING B/KEEPING FORM 3 TOPIC 11: INCOMPLETE RECORDS | B/KEEPING FORM 3

TOPIC 11: INCOMPLETE RECORDS | B/KEEPING FORM 3

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Statements Showing Profit or Loss From Incomplete Records

Draw up statements to show profit or loss from incomplete records Some times, businesses, especially small businesses do not maintain a full set of double entry records. Consequently, no trial balance will be produced and a complete set of final accounts cannot be prepared without further analysis of the records that do exist.
Where only records available are the assets and liabilities at the beginning of the year and at the end of the year, it is not possible to prepare a Trading and Profit and Loss account. The assets and liabilities are usually listed in a Statement of Affairs (Similar to a Balance Sheet).
This would have been called a Balance Sheet if it had been drawn up from
a set of double entry records. Like a Balance Sheet, a Statement of
Affairs can be prepared horizontally or vertically.
The
only way the profit for the year can be found is by comparing the
capital shown in the opening Statement of Affairs with the capital shown
in the closing Statement of Affairs.The basic formula is:
Profit Loss = Closing Capital – Opening Capital (Positive figure means Profit and Negative figure means Loss)
It
may be that the owner has made drawings during the year, which will
account for some of the difference in the capital figures. Similarly the
owner might have brought in additional capital during the year, which
will also account for some of the difference in the capital figures. In
this case the formula must again be modified:-
Profit
or Loss = Closing Capital + Drawings during the year – Additional
Capital during the year – Opening Capital (Positive figure means Profit
and Negative figure means Loss)
Calculation of Profit or Loss by converting the Incomplete Records into Double entry Records,
In
this case, in order to calculate the profit or loss of the business
during the year, the Trading and Profit and Loss accounts are prepared.
For preparing the Trading and Profit and Loss accounts, all necessary
information is not available in the books. So first the missing items
have to be calculated which are necessary for the preparation of Trading
and Profit and Loss accounts.
Example 1
Closing Financial Statement 1473755837256
Trading, Profit and Loss Account
Prepare trading, profit and loss account
Example 2
From the following balances extracted from the books of X & Co.,prepare a trading and profit and loss accounton 31st December, 1991.
$ $
Stock on 1st January 11,000 Returns outwards 500
Bills receivables 4,500 Trade expenses 200
Purchases 39,000 Office fixtures 1,000
Wages 2,800 Cash in hand 500
Insurance 700 Cash at bank 4,750
Sundry debtors 30,000 Tent and taxes 1,100
Carriage inwards 800 Carriage outwards 1,450
Commission (Dr.) 800 Sales 60,000
Interest on capital 700 Bills payable 3,000
Stationary 450 Creditors 19,650
Returns inwards 1,300 Capital 17,900
The stock on 21st December, 1991 was valued at $25,000.
Solution
X & Co.Trading and Profit and Loss Account For the year ended 31st December, 1991
To Opening stock 11,000 | By Sales 60,000
To Purchases 39,000 | Less returns i/w 1,300
Less returns o/w 500 | 58,700
38,500 | By Closing stock 25,000
To Carriage inwards 800 |
To Wages 2,800 |
To Gross profit c/d 30,600 |
|
83,700 | 83,700
|
To Stationary 450 | By Gross profit b/d 30,600
To Rent and rates 1,100 |
To Carriage outwards 1,450 |
To Insurance 700 |
To Trade expenses 200 |
To Commission 800 |
To Interest on capital 700 |
To Net profit transferred to capital a/c 25,200 |
|
|
30,600 | 30,600
Preparation of Balance Sheet
Prepare balance sheet
Example 3
From the following balances extracted from the books of X & Co.,prepare a balance sheeton 31st December, 1991.
$ $
Stock on 1st January 11,000 Returns outwards 500
Bills receivables 4,500 Trade expenses 200
Purchases 39,000 Office fixtures 1,000
Wages 2,800 Cash in hand 500
Insurance 700 Cash at bank 4,750
Sundry debtors 30,000 Tent and taxes 1,100
Carriage inwards 800 Carriage outwards 1,450
Commission (Dr.) 800 Sales 60,000
Interest on capital 700 Bills payable 3,000
Stationary 450 Creditors 19,650
Returns inwards 1,300 Capital 17,900
The stock on 21st December, 1991 was valued at $25,000.
Solution
X & Co. Balance Sheet as at 31st December, 1991
Liabilities $ | Assets $
Creditors 19,650 | Cash in hand 500
Bills payable 3,000 | Cash at bank 4,750
Capital 17,900 | Sundry debtors 30,000
Add Net profit 25,200 | Bill receivable 4,500
43,100 | Stock 25,000
| Office equipment 1,000
|
65,750 | 65,750
|
Calculating Amount of Cash Stolen
Calculate amount of cash stolen
The
loss on theft of cash and any other assets may be simply be expensed to
the income statement net of any insurance claim received or receivable.
Following accounting entries would therefore be required:
Debit Loss on asset theft (balancing amount)
Debit Accumulated Depreciation
Credit Asset (carrying amount)
Calculating the Value of Stock at Cost which had been Stolen
Calculate the value of stock at cost which had been stolen
Activity 1
Calculate the value of stock at cost which had been stolen

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