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INCOMPLETE RECORDS O Level

This document outlines the steps to prepare financial statements using incomplete accounting records. It begins by preparing an opening statement of affairs. It then discusses preparing a cash book, calculating sales/purchases using control accounts, adjusting expenses, and calculating provisions. The final steps are to prepare an income statement and statement of financial position. It also defines mark-up and margin, and their relationship. Benefits of full double entry accounting are listed as improved accuracy, reduced errors/fraud, and assistance with financial statement preparation.

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RECALL JIRIVENGWA
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946 views5 pages

INCOMPLETE RECORDS O Level

This document outlines the steps to prepare financial statements using incomplete accounting records. It begins by preparing an opening statement of affairs. It then discusses preparing a cash book, calculating sales/purchases using control accounts, adjusting expenses, and calculating provisions. The final steps are to prepare an income statement and statement of financial position. It also defines mark-up and margin, and their relationship. Benefits of full double entry accounting are listed as improved accuracy, reduced errors/fraud, and assistance with financial statement preparation.

Uploaded by

RECALL JIRIVENGWA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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INCOMPLETE RECORDS

It is any method of recording transactions that is not based on the double entry model. It is whereby a
single entry or no entry at all is made for the books of accounts.

Steps in preparing Income Statement and Statement of financial position

Step 1 Prepare an Opening Statement of affairs to calculate Opening capital

Opening Statement of affairs as 1 January 2000

Assets
Buildings XXX
Motor Vehicles XXX
Inventory XXX
Trade receivables XXX
Cash at bank XXX
Prepaid expense XXX
XXX
Less liabilities
Trade payables XXX
Bank overdraft XXX
Accrued expenses XXX (XXX)
Opening capital XXX

Step 2 Prepare a receipts and payments account ( cash book) in order to calculate closing cash and bank
balances for the closing SFP.

DR (Receipts) Cash book CR (payments)

Date Details Cash bank Date Details Cash bank

Step 3 calculate sales and purchases figures to be used use Control accounts

a)Paid during the year XXX b) Receipts during the year XXX

Add closing creditors balance XXX add closing debtors balance XXX

XXX XXX

Less opening creditors balance (XXX) less opening debtors balance (XXX)

Purchases during the year XXX Sales during the year XXX

OR
Purchase Ledger Control Account

Date Details folio $ Date Details folio $

Balance b/d xxx Balance b/d xxx

Purchases Return xxx Credit Purchases xxx

Set off: SL xxx Interest due xxx

Discount Received xxx Balance c/d xxx

Bank and Cash xxx

Balance c/d xxx

xxx xxx

Balance b/d xxx Balance c/d xxx

Sales Ledger Control Account

Date Details folio $ Date Details folio $

Balance b/d xxx Balance b/d Xxx

Credit Sales xxx Sales Return xxx

Dishonoured Cheque xxx Bad Debts xxx

Interest received xxx Discount Allowed xxx

Balance c/d xxx Bank and Cash xxx

Set off: contra xxx

Balance c/d xxx

xxx xxx

Balance b/d xxx Balance c/d xxx

Step 4 Adjust expenses for accruals and prepayments

Expenses Account

Prepaid b/d XXX Accrued b/d XXXX

Cash/Bank XXX Income Statement XXX

Accrued c/d XXX Prepaid c/d XXX

XXX XXX

Step 5 Calculate provision for doubtful debts, depreciation etc


Step 6 Prepare Income statement and Statement of financial position

Mark-up and margin

Mark-up is gross profit as a percentage of cost of sales. Gross profit X 100

Cost of sales

Margin is gross profit as a percentage of sales.

Relationship between mark-up and margin

When a margin is a then mark-up = a and when mark-up is c then margin = c

b b-a d d+c

Benefits of keeping full double entry accounting records for a business

 It improves the accuracy of accounting records


 It reduces the risk of errors and fraud
 It assists with the preparation of income statement and SFP
 It also helps to prepare Trial balance

Example

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