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Single Entry Part One

This document discusses preparing financial statements from incomplete single-entry bookkeeping records. It explains that single-entry records like a cash book and lists of debtors and creditors are commonly used by small businesses that do not know double-entry bookkeeping. The document provides instructions on how to calculate profit as an increase in capital when only start and end capital balances are known. It also outlines a multi-stage activity to deduce figures for purchases, sales, and expenses in order to prepare an income statement and statement of financial position from incomplete records. The document addresses dealing with missing cash receipt or payment information by assuming the missing figure balances the cash book totals.

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Patric Cletus
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195 views

Single Entry Part One

This document discusses preparing financial statements from incomplete single-entry bookkeeping records. It explains that single-entry records like a cash book and lists of debtors and creditors are commonly used by small businesses that do not know double-entry bookkeeping. The document provides instructions on how to calculate profit as an increase in capital when only start and end capital balances are known. It also outlines a multi-stage activity to deduce figures for purchases, sales, and expenses in order to prepare an income statement and statement of financial position from incomplete records. The document addresses dealing with missing cash receipt or payment information by assuming the missing figure balances the cash book totals.

Uploaded by

Patric Cletus
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 13

5/15/2019

Single entry and incomplete


records

Learning objectives
After you have studied this chapter, you
should be able to:
 Deduce the figure of profits where only
the increase in capital and details of
drawings are known
 Draw up an income statement and
statement of financial position from
records not kept on a double entry
system

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5/15/2019

Learning objectives (Continued)


 Deduce the figure for cash drawings
when all other cash receipts and cash
payments are known
 Deduce the figures of sales and
purchases from incomplete records

Why double entry is not used


 Many small business owners keep their
records by using a single entry system
comprising a cash book and a list of
debtors and creditors.
 This may be because they simply do not
know double entry bookkeeping.
 However, they will have to prepare their
financial statements each year.

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Profit as an increase in capital


 If you know the capital figure at the start and
end of a period, you can work out the profit
figure for the year:
Net profit = This year’s capital − Last year’s capital

 If there are drawings, this would be worked


out as:
Last year’s capital + profits − drawings = This year’s
capital

Activity

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Activity (Continued)
Stage 1

Draw up a Statement of Affairs on the


closing day of the earlier accounting
period.

Activity (Continued)

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Activity (Continued)
Stage 2

Prepare a cash and bank summary, showing


the totals of each separate item, plus opening
and closing balances.

Activity (Continued)

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Activity (Continued)
Stage 3

Calculate the figures for purchases and


sales to be shown in the trading
account. Remember that the figures
needed are the same as those which
would have been found if double entry
records had been kept.

Activity (Continued)

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Activity (Continued)

Activity (Continued)
Stage 4

Where there are no accruals or


prepayments either at the beginning or
end of the period, then the expenses paid
will be the income statement figure.
However, where accruals or prepayments
exist, an expense account should be drawn
up for that particular item.

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Activity (Continued)

Activity (Continued)
Stage 5

Now draw up the financial statements.

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Activity (Continued)

Activity (Continued)

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Dealing with missing figures


 Often there is missing information
relating to cash receipts or payments.
 If the missing information is one type of
payment, then it is normal to assume
that the missing figure is the amount
required to make both totals agree in
the cash column of the cash book.

Activity

10
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Activity (Continued)

Activity (Continued)

11
5/15/2019

Activity (Continued)

Learning outcomes
You should have now learnt:

1. The difference between a single entry


system and a double entry system.
2. How to calculate net profit for a small
trader when you know the changes in
capital over a period and the amount of
drawings during the period.

12
5/15/2019

Learning outcomes (Continued)


3. How to prepare an income statement
and statement of financial position from
records not kept on a double entry
system.
4. How to deduce the figures for
purchases and sales from a total
accounts payable account and a total
accounts receivable account.

13

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