Lesson 3: Incomplete records

Lesson 3: Incomplete records

Incomplete records questions may test your ability to prepare accounts in the following situations.
– A trader does not maintain a ledger and therefore has no continuous double entry record of
transactions.
– Accounting records are destroyed by accident, such as fire.
– Some essential figure is unknown and must be calculated as a balancing figure. This may
occur as a result of inventory being damaged or destroyed, or because of misappropriation
of assets.

Two equations are very useful in incomplete records calculations.
– The accounting equation:
assets = capital + liabilities
– The business equation:
closing net assets = opening net assets + capital introduced + profit – drawings

Drawings often feature as the missing item in an incomplete records problem. The trader has been
drawing money but does not know how much.
The approach to incomplete records questions is to build up the information given so as to complete the necessary double entry. This may involve reconstructing control accounts for:
– Cash and bank
– Trade receivables and payables

Where inventory, sales or purchases is the unknown figure it will be necessary to use information on gross profit percentages to construct a working for gross profit in which the unknown figure can be inserted as a balance.
The construction of a cash book, largely from bank statements showing receipts and payments of a
business during a given period, is often an important feature of incomplete records problems.

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