INCOMPLETE RECORD
INCOMPLETE RECORDSpecific Objectives :1. Define incomplete record2. Understand the cause & effect of incomplete record3. Using Comparison Method & Analysis Method4. Prepare financial report from incomplete record1
Usually happens in retailing & small businessesWhat is incomplete record.Financial record that is not properly recorded not according to double entry sys. (recorded only once)2What can cause incomplete record?1. Not all type of businesses are compulsory to keep complete financial record.2. Lack of knowledge among business owner, so no record of transac.have been made3. Business owner are purposely didnt keep proper record because of some reason ( eg. avoid tax )4. Business record have been lost/damaged/stolen
3Method used to determine profit for ICR 4Comparison MethodUsed when the record kept are very limited
Profit = Ending capital Beginning capital
Profit = Ending capital + Drawing Additional Capital Beginning capitalUse your background knowledge of PA1015Example 1 : Ex 5.1 pg 133Calculate net profit
Beginning CapitalEnding capitalAdditional capitalDrawingNet profitNet Lossi.29,00033,48010,80010,9804660ii.45,00047,76015,7507,4405550iii.21,00036,400-7,20022600iv.35,60021,100-6,3208180v.33,80030,44010,7109,9504120vi.32,00040,80012,0006,75035506Example 2 : Ex 5.3 pg 137-En Halim..you are required toCalculate the profitPrepare balance sheet
Solution :Profit = Ending capital Beginning capitalDetermine these capital. How ?7Beginning capital ?All beginning ASSET beginning LIABILITY
Asset:Cash750Bank4500Debtors11,250Stock2790Vehicle15,00034,290Liabilities:Creditors(8,670)Accrued general exp(300)25,3208Ending capital ?Consider all the adjustment ( additional info)Additional info :i. Obsolete debt RM500 had occurred but was not recorded yet in business record
ii. Owner withdrew cash RM6,000 to pay his childs fee and this was only recorded in Cash Book.
DR bad debt RM500 CR Debtors RM500Dr Drawing 6,000 CR ..9iii. New equipment was bought RM560 and was not yet recorded in asset account.
iv. En Halim suggested that vehicle to be depreciated at 10% annualy
Dr Equipment 560 CR .Dr Depre 1500 Cr Provi for depre150010
Ending capital =All ending ASSET ending LIABILITYAsset:Cash1230Bank5250Debtors(10560-500)10060Equipment560Stock3,450Vehicle15,000- Provi for depre(1500)13,50034,050Liabilities:Creditors(7680)Accrued general exp(360)Ending capital26,01011Profit = Ending capital + Drawing Additional Capital Beginning capital = 26010 + 6000 25320 = RM6690
Profit & Loss Statement fye 31 Dec 2007Ending capital26,010+ Drawing6,000- Additional capital -- Beginning capital(25,320)Net Profit6,69012Balance Sheet as at 31 Dec 2007Non Current AssetOwners EquityVehicle15,000Beginning capital25,320- Accu Depre(1,500)13,500+ Net profit6690Equipment560- Drawing(6,000)14,060XXXXCurrent Asset :Current LiabilitiesCash1230Creditors7680Bank5250Accrued general exp360Debtors10,060Closing stock3,450XXXX34,05034,05013Example 3 :An owner didnt keep a proper record for his business. He need to know the profit gained for 2011. Below were the information as at 31 Dec :20102011StockRM25,00032,000Equipment18,50020,000Debtors36,40042,700Creditors28,80036,600Bank5,70010,50014Additional information :1. The owner paid house rent RM900 using cash from business2. Allocate 5% for doubtful debt3. Equipment will be depreciated at 10% per year
Calculate :A. Net profit/loss as at 31 Dec 2011B. Prepare Balance Sheet
15Solution :Profit = Ending capital Beginning capital
Beginning capital =(25,000+18,500+36,400+5,700) - (28,800)= RM56,800
Ending capital ???
Ending Capital ?Try your best16Most of the shadows of this life are caused by our standing in our own sunshine.
Ralph Waldo Emerson
The acts of this life are the destiny of the next.Eastern Proverb
17Ending Capital =Stock32,000Equipment (20,000-2,000)18,000Debtors (42,700-2135 PDD)40,565Bank (10,500-900)9,600100,165LiabCreditors(36,600)Ending capital63,56518P&L Statement for year ended 31/12/Ending capital63,565+ Drawing90064,465Beginning capital(56,800)Profit766519Balance Sheet as at 31/12/ Non Current AssetOwners EquityEquipment20,000Capital56,800- Provi for depre(2,000)18,000+Net profit7665- Drawing(900)Current AssetEnding capital63,565Closing stock32,000Debtors42,700Current Liab-PDD(2135)40,565Creditors36,600Bank(10500-900)9,600100,165
100,16520Analysis MethodAt least, these records should be kept :Cash book ( receipts & payment)Cash balance & Bank balanceDebtors & Creditors a/cRecords for assets & liabilities
21Cash BookSome information's can be obtained from this docs :Cash sales & purchasePayment received from debtors, payment for creditorsCash drawingPurchase of non current asset (by cash, by cheque)Sales of non current asset (capital expenditure)ExpensesOther income ( eg?)Contra ( cash transfer to bank , or vice versa)Beginning & ending balance)22Debtors Control A/cSome information's can be obtained from this docs :Opening balCredit salesReturnedPayment from debtorsDiscount allowedBad debtEnding bal23Creditors Control A/cSome information's can be obtained from this docs :Opening balCredit purchaseReturnedPayment to creditorsDiscount receivedEnding bal24Example 5.8 pg 149Debtors ControlBal b/f4080Payment from debtors10,090Credit sales12055Sales return315Dis. allowed395Bad debt220Bal c/f51151613516135Creditors ControlPurchase return280Bal b/f3775Cash (payment to creditor)6880Credit purchase7965Dis received460Bal c/f412025ContCommissionBal b/f105Cash570P&L625Bal c/f160730730Insurance ExpensesBal b/f (prepaid)120Bal b/f ( accrued)-Cash525P&L 465Bal c/f (accrued)-Bal c/f (prepaid)180Salary ExpensesBal b/f(prepaid)-Bal b/f(accrued)390Cash4115P&L4175Bal c/f (accrued)450Bal c/f(prepaid-26Prepare profit & loss.Najib Shop BookTrading, Profit & Loss for year ended 31 Dec 2005 Beginning stock5665Sales19,280+ Purchase11,415- Sales return(315) - Purchase return(280) - Drawing(500) Net purchase10,635
- Closing Stock(5,880)COGS10,420Gross profit8,54518,96518,96527cont.- Expenses :Gross profit8,545Salary4,175+ Other Income:Insurance465Commission625General expenses660Dis.rec460Rent1,200Bad debt recovered100Dis allowed395Bad debt220Net profit26159730973028Exercise 1:Mr Halim opened Hai O Mini Mart last year but did not keep the records using double entry system. He gave you the following information :
Summary of Bank Account1/1/201131/12/2011Debtors4,4506,600Inventory3,6505,850Bank2,800?Creditors3,3002,700Prepaid rental300350ReceiptsPaymentsDebtors11,600Creditors5,800Rent700Drawing40029Discount allowed RM90, discount received RM55
You are required to :Prepare Debtors and Creditors Control A/cIncome Statement for the year ended 31 Dec 2011Balance Sheet30Solution :Debtors ControlBal b/f4450Dis. allowed90Credit sales13,840Bank11,600Bal c/f6,60018,29018,290Creditors ControlDiscount55Bal b/f3,300Bank5,800Credit purchase5,255Bal c/f2,7008,5558,55531Beginning Capital = 4,450+3,650+2,800+300-3,300Income Statement
Sales13,840(-) COGS:Stock3650+ Purchase5,2558905-Closing stock(5850)(3055)Gross profit10,785Dis received55(-) Expenses :Dis allowed90Rent650(740)Net profit10,10032Balance Sheet as at Current AssetOwners EquityDebtors6600Beginning capital7900Stock5850+ Net profit10,100Bank7500- Drawing(400)Prepaid rent35017,600Current Liabilities:Creditors2,70020,30020,30033EXERCISE 2 :
Aminah, a sole trader did not keep full accounting record during her first year Of business. She wants to maintain the double entry and seek your help.
Following are the assets & liabilities of the business :
1 Jan 0831 Dec 08
Building30,200Stock3,250Stock2,680Debtors4,210Equipment10,410Creditors3,295Accu dep-equip2,120Equipment?Debtors3,950Bank?Creditors2,815Prepaid insurance125Bank4,93534Additional info :a. Summary of bank account :
REceipts
PaymentsDebtors5628Creditors1120Sales13,192Water & Electricity748Salary2860Purchase5630Loan interest400Insurance 1874General expenses618Drawing6533Licence fees870Equipment (purchased on 1/6/08)10,000Installation fee for equipment2,00035b. Discount received RM195, Discount allowed RM520
c. Depreciation to be charged on equipment at the rate of 10% per annum.
Prepare :Debtors & Creditors AccountIncome StatementStatement of Financial Position/Balance Sheet36Solution :
Debtors Control A/cBal bf3950Bank5628Sales6408Discount allowed520Bal cf42101035810358Creditors Control A/cBank1120Bal bf2815Discount received195Purchase1795Bal cf32954610461037Income Statement for year ended 31 Dec 2008
Sales19600COGS : Opening stock2680 + Purchase742510 105 - Closing stock(3250)6855Gross profit12 745+ Other income : Discount received 195
Expenses :Discount allowed520Depre equipment1741Insurance1999Water & Electricity748Salary2860Loan interest400General expenses618Lisence fees870 9756Net profit318438Statement of Financial Position / Balance Sheet as at 31 Dec
Non Current Asset :Building30 200Equipment22 410ADD(3 861)18 54948 749Current Assets :Stock3 250Debtors4 2107 460
Current Liabilities : Creditors3 295 OD Bank8 898Working capital(4 733)44 016
Owners Equity :Capital47 365+ Net profit3 184Drawing(6 533)44 01639Exercise 3 :
Damia refer to the hand-out
Discuss in your group40Income Statement for year ended 31 Dec 2011
Sales40 800COGS : Opening stock10 000 + Purchase16 40026 400 - Closing stock(8 000)18 400Gross profit22 400+ Other income : Discount received 400
Expenses :Freight outwards3 000Salaries5 400Rent8 000Rates1 000Expenses5 000Dis allowed800Depre2 000 (25 200)Net LOSS 2 40041Statement of Financial Position / Balance Sheet as at 31 Dec 2011
Non Current Asset :Machinery34 000
Current Assets :Stock8 000Debtors18 000Prepaid rates50026 500
Current Liabilities : Creditors9 000 Accrued rent800 Accrued salaries400Working capital16 30050 300
Owners Equity:Capital53 700- Net Loss(2 400)Drawing(1 000)50 300
Take 542Exercise 4 : DamiaCash AcBl bf550Salaries600Debtors930General expenses140Drawing (personal expenses)270Stationeries8014801480Debtors ControlBl bf5100Bank31200Sales32830Cash930Bal cf580043Please do the rest of adjustment needed
44Income Statement for year ended 31 Dec 2010
Sales32 830COGS : Opening stock3 400 + Purchase23 00026 400 - Closing stock(3 800)22 600Gross profit10 230+ Other income : -
Expenses :General expenses710Salaries3 500Stationeries80Insurance2 200Rent & Rates1 500Depre400Interest on loan600 (8 990)Net Profit 1 24045Statement of Financial Position / Balance Sheet as at 31 Dec 2010
Non Current Asset :Building10 000Equipment2 600
Current Assets :Stock3 800Debtors5 800Bank1 300Cash390Prepaid insurance40011 690
Current Liabilities : Creditors4 100 Accrued general expe150 Accrued loan interest600Working capital6 84019 440
46Owners Equity:Capital11 470+ Net Profit1 240Drawing(5 270)7 440
Non Current Liabilities:Bank loan12 00019 440
Cont : 47
