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BAC 100 FUNDAMENTALS OF ACCOUNTING 1 L10 - TOPIC TEN:...

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TOPIC TEN: ACCOUNTING FOR INCOMPLETE RECORDS OR SINGLE ENTRYACCOUNTINGIn this topic, the concern is accounting systems which do not fully record thedual aspect of each accounting transactions.Where a record of each transaction does not exist, but not the dual aspect ofit, then this is known as single entry.On the other hand, where records of only part of the transactions areavailable, then this is known as incomplete recordsMany firms especially retail shops can have all the information they want bymerely keeping a cash book and have some form of record, not necessarilyin double entry form, of their debtors and creditors.There are two main kinds of questions based on incomplete records:i.Those requiring a computation of profit based on increase in net assetsii.Those requiring the production of final accounts from cash book.1
Computation of profitThe net assets basis uses the principles of fundamentalaccounting equation to build up a set of accounts and tocalculate the profit figure. The accounting equation is:Notei.The net worth of a business means the net value of assetswhich belongs to the proprietor.ii.Any increase in capital represents the increase in net valueof assets.iii.Any increase in outside liabilities like bank loan is alsodeducted2
ExampleThe records of P. Wekesa provide the following information for the yearending 31stDec 2010.Capital: 1stJan.2010 sh.5,60031stDec. sh.8,500Drawings in the course of the year sh.2,500New capital introduced by P. Wekesa during the year sh.1,500Required:Calculate P.Wekesa’snet profit on the basis of these figuresProfit = sh.2,900 (8,500-5,600) + sh.2,500sh.1,500= sh. 3,900Increase in assets is the increase in capitalORLAST YEAR’S CAPITAL +ADDITIONAL CAPITAL+ PROFITS –DRAWINGS = THISYEAR’S CAPITAL3
Final accounts from incomplete recordsTo prepare the final accounts from incomplete

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Term
Spring
Professor
N/A
Tags
Balance Sheet, bank account, Mr Kimutai

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