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17. INCOMPLETE RECORDS (Section 1)

Objective of the lesson - Calculate the profit for the year by comparing the open and
closing equity figures.

Introduction
Small businesses do not maintain a full set of double entry record. As a result trial balances
can't be produced and complete set of final accounts can't be prepared without further
analysis of the records that do exist.

Where the 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 an income statement and a statement of financial position.

Advantages of maintaining double entry records

1. Full detail of assets, liabilities, revenues and expenses of the business is available
2. Easier to prepare financial statements
3. Calculation of profit/loss is likely to be accurate and reliable (Less risk of errors)
4. Less risk of fraud
5. Easier to refer to previous transactions
6. Financial position can be ascertained
7. Easier to make business decisions
8. Business can compare its results with its previous years and with other businesses
9. Information required by banks or other lenders is readily available
10. Easier to calculate accounting ratios

Statement of affairs
The information of liabilities and assets are listed in a Statement of affairs which is similar to a
statement of financial position in order to find the “OPENING CAPITAL”.

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 –

Closing capital + drawings - opening capital - capital introduced = Profit

An alternative way to calculate the profit is to construct a capital account and insert the missing
figure of profit.

CAPITAL ACCOUNT
Date Detail Amount date Detail Amount
31/12/2019 Drawings xxx 1/1/2019 Balance//b/d xxx
Balance/c/d xxx 31/12/2019 Bank xxx
Profit ?
xxxx xxxx

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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1/1/2020 Balance//b/d xxx

Exercise 1

Khurram is a sole trader and does not keep full set of accounting records. He is able to provide
the following information.

1st April 2018 ($) 31st March 2019 ($)

Property at cost 120000 120000

Motor vehicles at cost 50000 60000

Machinery at cost 12000 15000

Bank 1300 -

Bank overdraft - 850

Cash 350 50

Trade payables 2000 2200

Trade receivables 3330 3750

Inventory 1200 1500

During the year ended 31st March 2019 Khurram introduced $10,000 of his own savings. He
took cash drawings of $5,000 and goods costing $2,500 for his personal use.

a) Prepare statement of affair at 1st April 2018.

b) Prepare statement of affair at 31st March 2019.

c) Calculate Khurram’s profit for the year ended 31st March 2019.

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Statement of affair at 1st April 2018

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Statement of affair at 31st March 2019

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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c)

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Capital account

Date Detail Amount Date Detail Amount

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Exercise 2

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Statement of Affairs at 1st September 2015

Non-current Assets $ $

Current Assets

Total Assets

Equity & Liabilities

Equity at 1st September 2015

Non-current Liabilities

Current Liabilities

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Total Liabilities and Equity

Statement of Affairs at 31st August 2016

Non-current Assets $ $

Current Assets

Total Assets

Equity & Liabilities

Equity at

Non-current Liabilities

Current Liabilities

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Total Liabilities and Equity

c)
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________

Capital A/C
Date Detail Amount Date Detail Amount

Exercise 3

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Statement of Affairs at 1st October 2003

Non-current Assets $ $

Current Assets

Total Assets

Equity & Liabilities

Equity at

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Current Liabilities

Total Liabilities and Equity

Statement of Affairs at 30th September 2004

Non-current Assets $ $

Current Assets

Total Assets

Equity & Liabilities

Equity at

Current Liabilities

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Total Liabilities and Equity

c)
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________

Capital A/C
Date Detail Amount Date Detail Amount

Exercise 4

Kiyoko did not maintain a full set of accounting records and provided the following information:

i. At 1 March 2018, the non-current assets which originally cost $8,200 had accumulated
depreciation of $3,500. Kiyoko’s policy is to depreciate non-current assets at 15% per
annum using reducing balance method.

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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ii. Kiyoko’s capital on 1 March 2018 was $6,200. During the year she made drawings of
$3,050.
iii. On 28 February 2019;

Inventory 820
Other operating expenses accrued 230
Bank overdraft 415
Trade receivables 620
Trade payables 745

Prepare Kiyoko’s statement of financial position at 28 February 2019. Give both opening and
closing balances in the equity section. Insert profit for the year as a balancing figure.

Kiyoko’s Statement of financial position at 28 February 2019

Non-current Assets $ $

Current Assets

Total Assets

Equity & Liabilities

Equity at

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN
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Current Liabilities

Total Liabilities and Equity

SUBJECT: EDEXCEL IGCSE ACCOUNTING

TEACHER: MURSHID MOHIDEEN