SINGLE ENTRY AND INCOMPLETE RECORDS

CLASS: S.S.2.

SUBJECT: FINANCIAL ACCOUNTING.

TOPIC: SINGLE ENTRY AND INCOMPLETE RECORDS .

Book-keeping is based on the double entry principle. The principle of double entry states that for every debit entry, there must be a corresponding credit and also for every credit entry there must be a corresponding debit entry. Any system which does not follow this principle is known as single entry.

Single entry can be defined as a system of book-keeping which does not conform with the basic principles of double entry. It is an aspect of incomplete records. When the records prepared by the record keeper are incomplete or insufficient, superior officers have to use their professional experience to prepare the accounts from the available information presented.
In single entry book-keeping or incomplete records, there might be record of the double aspect of certain transactions, a single aspect of others and no record at all of some. In the absence of these details, it is impossible to prepare the Trading and Profit and Loss account of any organization.
A rough idea of the trading and profit and loss account can be obtained through the assets and liabilities of the business.

COMPUTATION OF PROFIT FROM TWO BALANCE SHEETS.

Under this system, the assets and liabilities are given but information relating to sales and purchases are not given thereby making the records to be incomplete. The profits or losses can be calculated under this system by a comparison of the value of the opening capital with the value of the closing capital. Due to the insufficiency of the information, the statement of affairs method will be used.

THE BOOK-KEEPING RULES FOR SINGLE ENTRY.

(1) The opening statement of affairs will be prepared to show the opening capital. The necessary information required before we can calculate the opening statement of affairs are:
(a) All fixed assets.
(b) Total debtors and creditors.
(c) Expenses owing
(d) Payments made in advance.
(e) Cash in hand and bank, etc

(2) The capital will be adjusted by adding any additional capital contributed either in cash or assets and deduct drawings either cash or goods.

(3) A new statement of affairs will be constructed to show the closing capital using all the assets and liabilities at the end of the period.

(4) The opening capital will be compared with the closing capital.

(5) If the capital at close is greater, then there is a profit.

PREPARATION OF FINAL ACCOUNTS FROM A SET OF INCOMPLETE RECORDS.

it is possible to improve the system of accounting by introducing a complete double entry system books which are kept under the single entry system. It is possible for complete records to be reconstructed by applying the principles of double entry from the information available.

The books necessary may include:
(i) Sales ledger
(ii) Purchases ledger
(III) Day book
(iv) Cash book
(v) Assets and liabilities account
(vi) Nominal accounts

ACCOUNTING ENTRIES
In the preparation of the final accounts from incomplete records or single entry, the following operations must be followed:

(i) Preparation of statement of affairs to calculate the opening capital.

(ii) Analysis of the cash book.

(iii) Reconstruct those accounts are necessary to find figures not given in the question. Analysis of the purchases and sales control accounts to get both purchases and sales respectively.

(iv) Preparation of any other required schedule e.g. reconstruction of all necessary nominal accounts.

(v) Preparation of trading, profit and loss account.

(vi) Balance sheet.

CHARACTERISTICS OF SINGLE ENTRY ACCOUNTING.

(i) Only personal accounts of debtors and creditors are kept.

(ii) Profit or loss can be ascertained by comparing capital at the beginning and capital at the end.

(iii) Real and nominal accounts are not kept.

(iv) There is need to prepare an opening statement of affairs to ascertain the opening capital.

DISADVANTAGES OF SINGLE ENTRY ACCOUNTING SYSTEM.

(i) It is difficult to arrive at accurate profit or loss.

(ii) Fraud and dishonesty will not be easily detected/checked

(iii) Double entry principle is ignored.

(iv) Records of transactions are not complete.

(v) It is not possible to ascertain the arithmetical accuracy of the books.

(vi) It could lead to wrong assessment of taxes.

(vii) There is the possibility of arbitrary spending leading to business collapse.

(viii) It could lead to loss of vital business records.

(ix) It makes it difficult to prepare financial statements.

(x) It could lead to difficulty in planning business activities.

(xi) It makes it difficult for business to obtain credit facilities.

(xii) It makes it difficult to detect errors.