Incomplete-Records Igcse Edexcel

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Exam code:4AC1

Incomplete records

Incomplete records are accounting records kept by businesses that do not keep a full set of records
A business might keep incomplete records for several reasons:
- The owner lacks the technical skills to prepare the records
- It is the usual practice of the business to make single entries
- Some accounting information may have been lost, damaged or stolen

A trial balance cannot be prepared from incomplete records
- Therefore the business is unable to use it as a way to verify the accuracy of the ledger accounts
The owner is unable to determine the financial position of the business
- The owner is unable to assess if the business will continue to trade in the future
The owner is unable to make comparisons of its performance with previous years
It is very difficult to detect fraud in the business
Information is not readily available for banks and lenders
It is challenging to identify areas for development and to make decisions

You need to be able to use incomplete records to prepare:
- An income statement
- A statement of financial position
 You can spot questions involving incomplete records by looking out for the following phrases
- “…does not keep full accounting records…”
- “…does not keep a full set of records …”
- “…does not keep proper books of account …”
Identify which information is missing
Find the missing information using the following methods:
- Preparing a statement of affairs
  - This is useful for finding the equity balance
- Preparing the ledger accounts
  - These are useful for finding the cash and bank balances, expenses and income
- Prepare the trade receivables and trade payables control accounts
  - These are useful for finding credit sales, credit purchases, trade receivables and trade payables
- Using accounting ratios
  - These are useful for finding sales, purchases, gross profit, inventory