Theory on Incomplete Records

Definition:

Any method of recording financial transactions which does not use a full double-entry system is described as incomplete. It is also known as single-entry bookkeeping.

1. Types of Incomplete Records

(a) No written record

-“cash only” transactions

-no invoices issued or received

-there may be deliberate attempts to evade tax

(b) A cash book is kept

-money received and money paid is known

-bank balance is known

-cheque counterfoils and bank deposit slips are available

(c) Single-entry records are kept

-journals are kept to show who owes us and whom we owe

-no personal ledgers are kept

(d) Usual accounting records kept but no final accounts prepared

2. Advantages

(a) No book-keeping knowledge required

(b) Double-entry made may be too cumbersome for a small business as the owner can      remember every aspect of the operation without referring to written records

3. Disadvantages

(a) Trial Balance cannot be extracted to check accuracy of ledger entries

(b) Difficult to calculate profit and loss

(c) Difficult to calculate financial position because of incomplete information on assets and liabilities

(d) Difficult to compare trading operations with previous year

(e) Difficult to control expenses

(f) Difficult to trace errors

(g) Difficult to deal with queries from customers and suppliers

(h) Risk of violating legislation eg taxation

(i) Eventual cost of hiring an accountant to clear mess may outweigh any initial savings

Advertisements
This entry was posted in Principles of Advanced Accounting and tagged , , . Bookmark the permalink.

One Response to Theory on Incomplete Records

  1. ZACHARIA PH.MJUNGU says:

    my comment is that it is that you explain a little beet the matters so that may some how to be well understood by the beginers rather than skeleton Thanks keep it up

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s