ZIMSEC O Level Principles of Accounting: Single entry and Incomplete records: Introduction

  • It is not at all uncommon for business owners to have incomplete accounting records
  • A lot of SMEs (small and medium enterprises) often do not keep double entry accounting systems
  • Consider the example of a banana vendor it would be ridiculous for him to keep a double entry system
  • In such cases this is because the transactions involved and the size of the business do not really require such as a system
  • Often such a vendor would have a book where they write down their transactions so as not to forget
  • These transactions are often in single entry format
  • Sometimes the lack of proper accounting records can be due to the fact that the proprietors lack accounting training
  • Most of these entities are not really required to prepare financial statements
  • At some point however these entities might find the need to prepare financial statements
  • For example when applying for loan with a bank the entity might be required to submit its proper financial statements
  • Sometimes records might be destroyed in a fire or other “act of God”
  • In such cases accountants have to create financial statements using incomplete records
  • Indeed during Auditing exercises incomplete record techniques are often used to authenticate the books
  • The thing is for a number of reasons it is important for an accounting student to learn how to:
    1. Calculate Profit and
    2.  Prepare Financial Statements
  • Now while the techniques employed in doing these vary in the real life in examinations the following stages are required to prepare financial statements from incomplete and single entry records:
    1. Prepare a Statement of Affairs
    2. Create a bank and cash account summary for the period showing opening and closing balances
    3. Calculate Purchases and Sales figures for the period
    4. Determine expenses and other income for the period
    5. Draw up the financial statements using this data
  • We will examine each step in detail

To access more topics go to the Principles of Accounting Notes.