CBSE Class 11 Accountancy Accounts For Incomplete Records Notes Set 02

UNIT:10

ACCOUNTS FOR INCOMPLETE RECORDS

“A system of book-keeping in which, as a rule, only records of cash and of personal accounts are maintained, it is always incomplete double entry system, varying with circumstances” Unit at a Glance:

•  Introduction
•  Salient features
•  Uses
•  Limitations
•  Difference between double entry system and incomplete records
•  Ascertainment of profit or loss from incomplete records
•  Conversion into double entry method
•  numerical exercises

Introduction:

Accounting records which are not prepared in accordance with double entry system method are described as accounts for incomplete records. SALIENT FEATURES

1. Apply of personal accounts only ( ignores nominal and real accounts)

2. Maintenance of cash book.( Cash book is prepared )

3. Based on original vouchers. (Collection of data is made with original vouchers)

4. Lack of Similarity. (Method of preparation of books differs from firm to firm, it prepared as per the need of the business.

5. Preparation of final accounts. (After converting the information into double entry system final accounts are prepared. Due to this Statement of affairs is prepared instead of Balance sheet)

Uses

1. Easy method (Not requires any specific knowledge)

2. Economical( Can be prepared by without having more staff)

3. Suitable for small concerns (Few assets and liabilities are to be recorded)

4. Not – rigid (Can be modified/changed as per requirement of business)

5. Easy finding of profit & losses. (Only opening and Closing capital is required)

Limitations

1. Impossible to find fraud (As Trial balance is ignored)

2. Incomplete system (No set rules are followed)

3. Unable to find adequate profit & losses. (Ignorance of nominal accounts)

4. Difficulty in preparation of balance sheet.(Lack of valuation of goodwill)

5. Unable to retain full control on asserts. (Real accounts are ignored, it is difficult to make full control on assets)

6. Unsuitable for planning in control(Lack of reliable figure)

7. Lack of internal checking(Fails to adopt double entry system)

8. Improper evaluation of asserts (Ignorance of certain information like depreciation etc.)

DIFFERENCE BETWEEN DOUBLE ENTRY SYSTEM & INCOMPLETE RECORDS

Basis of difference Recording of both aspects (Double entry records every transaction and incomplete records few transactions)

1. Type of accounts (All accounts are considered in double entry only personal account are considered in incomplete records)

2. Trial balance (Trial balance is prepared in double entry system,Trial balance is not prepared in incomplete records )

3. Net profit/ loss (Profit/Loss is calculated by preparing trading and profit &loss a/c in double entry system, Statement of profit is prepared in incomplete records to find the same.

4. Financial position (Balance sheet is prepared in double entry and statement of affairs is prepared in incomplete records)

5. Adjustment (Adjustment are considered in double entry ,while adjustments are not considered in incomplete records)

ASCERTAINMENT OF PROFIT OR LOSS FROM INCOMPLETE RECORDS

1. Statements of affairs method

2. Conversion into double entry method

Statement of affairs method: Under this method Opening and Closing capital is calculated. Then statement of profit is prepared to find profit/loss during the year.

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