INCOMPLETE RECORD

1. INCOMPLETE RECORD • Specific Objectives : • 1. Define ‘incomplete record’ • 2. Understand the cause & effect of incomplete record • 3. Using Comparison Method & Analysis Method • 4. Prepare financial report from incomplete record

2. Usually happens in retailing & small businesses What is incomplete record…. Financial record that is not properly recorded – not according to double entry sys. (recorded only once)

3. What 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 made • 3. Business owner are purposely didn’t keep proper record because of some reason ( eg. avoid tax ) • 4. Business record have been lost/damaged/stolen

4. Method used to determine profit for ICR

5. Comparison Method • Used when the record kept are very limited • Profit = Ending capital – Beginning capital • Profit = Ending capital + Drawing – Additional Capital – Beginning capital Use your background knowledge of PA101

6. Example 1 : Ex 5.1 pg 133 • Calculate net profit

7. Example 2 : Ex 5.3 pg 137-En Halim • ……..you are required to • Calculate the profit • Prepare balance sheet Solution : Profit = Ending capital – Beginning capital Determine these capital. How ?

8. Beginning capital ? • All beginning ASSET – beginning LIABILITY

9. Ending capital ? • Consider all the adjustment ( additional info) • Additional info : • i. Obsolete debt RM500 hadoccurredbut was not recorded yet in business record • ii. Owner withdrew cash RM6,000 to pay his child’s fee and this was only recorded in Cash Book.

10. iii. 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

11. Ending capital =All ending ASSET – ending LIABILITY

12. Profit = Ending capital + Drawing – Additional Capital – Beginning capital = 26010 + 6000 – 25320 = RM6690 • Profit & Loss Statement fye 31 Dec 2007 Ending capital 26,010 + Drawing 6,000 - Additional capital - - Beginning capital (25,320) Net Profit 6,690

14. Example 3 : • An owner didn’t keep a proper record for his business. He need to know the profit gained for 2011. Below were the information as at 31 Dec : 2010 2011 Stock RM25,000 32,000 Equipment 18,500 20,000 Debtors 36,400 42,700 Creditors 28,800 36,600 Bank 5,700 10,500

15. Additional information : • 1. The owner paid house rent RM900 using cash from business • 2. Allocate 5% for doubtful debt • 3. Equipment will be depreciated at 10% per year Calculate : A. Net profit/loss as at 31 Dec 2011 B. Prepare Balance Sheet

16. Solution : • 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 best………

18. Ending Capital = Stock 32,000 Equipment (20,000-2,000) 18,000 Debtors (42,700-2135 PDD) 40,565 Bank (10,500-900) 9,600 100,165 • Liab Creditors (36,600) Ending capital 63,565

19. P&L Statement for year ended 31/12/… • Ending capital 63,565 + Drawing 900 64,465 • Beginning capital (56,800) Profit 7665

20. Balance Sheet as at 31/12/ …

21. Analysis Method • At least, these records should be kept : • Cash book ( receipts & payment) • Cash balance & Bank balance • Debtors & Creditors a/c • Records for assets & liabilities

22. Cash Book • Some information's can be obtained from this docs : • Cash sales & purchase • Payment received from debtors, payment for creditors • Cash drawing • Purchase of non current asset (by cash, by cheque) • Sales of non current asset (capital expenditure) • Expenses • Other income ( eg?) • Contra ( cash transfer to bank , or vice versa) • Beginning & ending balance)

23. Debtors Control A/c • Some information's can be obtained from this docs : • Opening bal • Credit sales • Returned • Payment from debtors • Discount allowed • Bad debt • Ending bal

24. Creditors Control A/c • Some information's can be obtained from this docs : • Opening bal • Credit purchase • Returned • Payment to creditors • Discount received • Ending bal

25. Example 5.8 pg 149

26. Cont…

27. Prepare profit & loss….

28. cont….

29. Exercise 1: • MrHalim 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 Account

30. Discount allowed RM90, discount received RM55 • You are required to : • Prepare Debtors and Creditors Control A/c • Income Statement for the year ended 31 Dec 2011 • Balance Sheet

31. Solution :

32. Beginning Capital = 4,450+3,650+2,800+300-3,300 • Income Statement

34. EXERCISE 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 :

35. Additional info : a. Summary of bank account :

36. b. Discount received RM195, Discount allowed RM520 c. Depreciation to be charged on equipment at the rate of 10% per annum. Prepare : Debtors & Creditors Account Income Statement Statement of Financial Position/Balance Sheet

37. Solution :

38. Income Statement for year ended 31 Dec 2008 • Sales 19600 • COGS : • Opening stock 2680 • + Purchase 7425 • 10 105 • - Closing stock (3250) • 6855 • Gross profit 12 745 • + Other income : • Discount received 195 • Expenses : • Discount allowed 520 • Depre – equipment 1741 • Insurance 1999 • Water & Electricity 748 • Salary 2860 • Loan interest 400 • General expenses 618 • Lisence fees 870 9756 • Net profit 3184

39. Statement of Financial Position / Balance Sheet as at 31 Dec …… • Non Current Asset : • Building 30 200 • Equipment 22 410 • ADD (3 861) 18 549 • 48 749 • Current Assets : • Stock 3 250 • Debtors 4 210 • 7 460 • Current Liabilities : • Creditors 3 295 • OD Bank 8 898 • Working capital (4 733) • 44 016 • Owners Equity : • Capital 47 365 • + Net profit 3 184 • Drawing (6 533) • 44 016

40. Exercise 3 : Damia – refer to the hand-out Discuss in your group

41. Income Statement for year ended 31 Dec 2011 • Sales 40 800 • COGS : • Opening stock 10 000 • + Purchase 16 400 • 26 400 • - Closing stock (8 000) • 18 400 • Gross profit 22 400 • + Other income : • Discount received 400 • Expenses : • Freight outwards 3 000 • Salaries 5 400 • Rent 8 000 • Rates 1 000 • Expenses 5 000 • Dis allowed 800 • Depre 2 000 (25 200) • Net LOSS 2 400

42. Statement of Financial Position / Balance Sheet as at 31 Dec 2011 • Non Current Asset : • Machinery 34 000 • Current Assets : • Stock 8 000 • Debtors 18 000 • Prepaid rates 500 • 26 500 • Current Liabilities : • Creditors 9 000 • Accrued rent 800 • Accrued salaries 400 • Working capital 16 300 • 50 300 • Owners Equity: • Capital 53 700 • - Net Loss (2 400) • Drawing (1 000) • 50 300 Take 5

43. Exercise 4 : Damia

44. Please do the rest of adjustment needed

45. Income Statement for year ended 31 Dec 2010 • Sales 32 830 • COGS : • Opening stock 3 400 • + Purchase 23 000 • 26 400 • - Closing stock (3 800) • 22 600 • Gross profit 10 230 • + Other income : • - • Expenses : • General expenses 710 • Salaries 3 500 • Stationeries 80 • Insurance 2 200 • Rent & Rates 1 500 • Depre 400 • Interest on loan 600 (8 990) • Net Profit 1 240

46. Statement of Financial Position / Balance Sheet as at 31 Dec 2010 • Non Current Asset : • Building 10 000 • Equipment 2 600 • Current Assets : • Stock 3 800 • Debtors 5 800 • Bank 1 300 • Cash 390 • Prepaid insurance 400 • 11 690 • Current Liabilities : • Creditors 4 100 • Accrued general expe 150 • Accrued loan interest 600 • Working capital 6 840 • 19 440

47. Cont : …… • Owners Equity: • Capital 11 470 • + Net Profit 1 240 • Drawing (5 270) • 7 440 • Non Current Liabilities: • Bank loan 12 000 • 19 440