INCOMPLETE RECORD Specific Objectives 1 Define incomplete record

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

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)

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

Method used to determine profit for ICR • Comparison Method • Analysis Method

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 PA 101

Example 1 : Ex 5. 1 pg 133 �Calculate net profit i. iii. iv. v. Beginning Capital Ending capital Additional Drawing capital Net profit 29, 000 45, 000 21, 000 35, 600 33, 800 33, 480 47, 760 36, 400 21, 100 30, 440 10, 800 15, 750 10, 710 10, 980 7, 440 7, 200 6, 320 9, 950 4660 6, 750 3550 vi. 32, 000 40, 800 12, 000 Net Loss 5550 22600 8180 4120

Example 2 : Ex 5. 3 pg 137 -En Halim �……. . you are required to a. Calculate the profit b. Prepare balance sheet Solution : Profit = Ending capital – Beginning capital Determine these capital. How ?

Beginning capital ? �All beginning ASSET – beginning LIABILITY Asset: Cash 750 Bank 4500 Debtors 11, 250 Stock 2790 Vehicle 15, 000 34, 290 Liabilities: Creditors (8, 670) Accrued general exp (300) 25, 320

Ending capital ? �Consider all the adjustment ( additional info) �Additional info : �i. Obsolete debt RM 500 had occurred but was not recorded yet in business record DR bad debt RM 500 CR Debtors RM 500 �ii. Owner withdrew cash RM 6, 000 to pay his child’s fee and this was only recorded in Cash Book. Dr Drawing CR ………. . 6, 000

�iii. New equipment was bought RM 560 and was not yet recorded in asset account. Dr Equipment 560 CR ………………. �iv. En Halim suggested that vehicle to be depreciated at 10% annualy Dr Depre 1500 Cr Provi for depre 1500

Ending capital =All ending ASSET – ending LIABILITY Asset: Cash 1230 Bank 5250 Debtors(10560 -500) 10060 Equipment 560 Stock 3, 450 Vehicle 15, 000 - Provi for depre (1500) 13, 500 34, 050 Liabilities: Creditors (7680) Accrued general exp (360) Ending capital 26, 010

�Profit = Ending capital + Drawing – Additional Capital – Beginning capital = 26010 + 6000 – 25320 = RM 6690 � Profit & Loss Statement fye 31 Dec 2007 Ending capital 26, 010 + Drawing 6, 000 - Additional capital - Beginning capital (25, 320) Net Profit 6, 690

Balance Sheet as at 31 Dec 2007 Non Current Asset Owner’s Equity Vehicle 15, 000 Beginning capital 25, 320 - Accu Depre (1, 500) 13, 500 + Net profit 6690 - Drawing (6, 000) Equipment 560 14, 060 Current Asset : XXXX Current Liabilities Cash 1230 Creditors 7680 Bank 5250 Accrued general exp 360 Debtors 10, 060 Closing stock 3, 450 XXXX 34, 050

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 RM 25, 000 32, 000 Equipment 18, 500 20, 000 Debtors 36, 400 42, 700 Creditors 28, 800 36, 600 Bank 5, 700 10, 500

�Additional information : � 1. The owner paid house rent RM 900 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

Solution : �Profit = Ending capital– Beginning capital �=(25, 000+18, 500+36, 400+5, 700) - (28, 800) = RM 56, 800 Ending capital ? ? ? Ending Capital ? Try your best………

The acts of this life are the destiny of the next. Eastern Proverb Most of the shadows of this life are caused by our standing in our own sunshine. Ralph Waldo Emerson

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

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

Balance Sheet as at 31/12/ … Non Current Asset Owners Equity Equipment 20, 000 - Provi for depre (2, 000) 18, 000 Current Asset Closing stock 56, 800 +Net profit 7665 - Drawing (900) Ending capital 63, 565 32, 000 Debtors 42, 700 -PDD (2135) Bank(10500 -900) Capital Current Liab 40, 565 Creditors 36, 600 9, 600 100, 165

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

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)

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

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

Example 5. 8 pg 149 Debtors Control Bal b/f 4080 Payment from debtors 10, 090 Credit sales 12055 Sales return 315 Dis. allowed 395 Bad debt 220 Bal c/f 5115 16135 Creditors Control Purchase return 280 Bal b/f 3775 Cash (payment to creditor) 6880 Credit purchase 7965 Dis received 460 Bal c/f 4120

Cont… Commission Bal b/f 105 Cash 570 P&L 625 Bal c/f 160 730 Insurance Expenses Bal b/f (prepaid) 120 Bal b/f ( accrued) - Cash 525 P&L 465 Bal c/f (accrued) - Bal c/f (prepaid) 180 Salary Expenses Bal b/f(prepaid) - Bal b/f(accrued) 390 Cash 4115 P&L 4175 Bal c/f (accrued) 450 Bal c/f(prepaid -

Prepare profit & loss…. Najib Shop Book Trading, Profit & Loss for year ended 31 Dec 2005 Beginning stock 5665 + Purchase 11, 415 - Purchase return (280) - Drawing (500) Net purchase 10, 635 - Closing Stock (5, 880) COGS 10, 420 Gross profit 8, 545 18, 965 Sales 19, 280 - Sales return (315) 18, 965

cont…. - Expenses : Gross profit 8, 545 Salary 4, 175 + Other Income: Insurance 465 Commission 625 General expenses 660 Dis. rec 460 Rent 1, 200 Bad debt recovered 100 Dis allowed 395 Bad debt 220 Net profit 2615 9730

Exercise 1: �Mr Halim opened Hai O Mini Mart last year but did not keep the records using double entry system. He gave you the following information : 1/1/2011 31/12/2011 Debtors 4, 450 6, 600 Inventory 3, 650 5, 850 Bank 2, 800 ? Creditors 3, 300 2, 700 Prepaid rental 300 350 �Summary of Bank Account Receipts Debtors Payments 11, 600 Creditors 5, 800 Rent 700 Drawing 400

�Discount allowed RM 90, discount received RM 55 �You are required to : a. Prepare Debtors and Creditors Control A/c b. Income Statement for the year ended 31 Dec 2011 c. Balance Sheet

Solution : Debtors Control Bal b/f 4450 Dis. allowed 90 Credit sales 13, 840 Bank 11, 600 Bal c/f 6, 600 18, 290 Creditors Control Discount 55 Bal b/f 3, 300 Bank 5, 800 Credit purchase 5, 255 Bal c/f 2, 700 8, 555

Beginning Capital = 4, 450+3, 650+2, 800+300 -3, 300 �Income Statement Sales 13, 840 (-) COGS: Stock 3650 + Purchase 5, 255 8905 -Closing stock (5850) (3055) Gross profit 10, 785 Dis received 55 (-) Expenses : Dis allowed 90 Rent 650 Net profit (740) 10, 100

Balance Sheet as at ……………… Current Asset Owners Equity Debtors 6600 Beginning capital 7900 Stock 5850 + Net profit 10, 100 Bank 7500 - Drawing (400) Prepaid rent 350 17, 600 Current Liabilities: Creditors 20, 300 2, 700 20, 300

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 : 1 Jan 08 31 Dec 08 Building 30, 200 Stock 3, 250 Stock 2, 680 Debtors 4, 210 Equipment 10, 410 Creditors 3, 295 Accu dep-equip 2, 120 Equipment ? Debtors 3, 950 Bank ? Creditors 2, 815 Prepaid insurance 125 Bank 4, 935

Additional info : a. Summary of bank account : REceipts Payments Debtors 5628 Creditors 1120 Sales 13, 192 Water & Electricity 748 Salary 2860 Purchase 5630 Loan interest 400 Insurance 1874 General expenses 618 Drawing 6533 Licence fees 870 Equipment (purchased on 1/6/08) 10, 000 Installation fee for equipment 2, 000

b. Discount received RM 195, Discount allowed RM 520 c. Depreciation to be charged on equipment at the rate of 10% per annum. Prepare : a. Debtors & Creditors Account b. Income Statement c. Statement of Financial Position/Balance Sheet

Solution : Debtors Control A/c Bal bf 3950 Bank 5628 Sales 6408 Discount allowed 520 Bal cf 4210 10358 Creditors Control A/c Bank 1120 Bal bf 2815 Discount received 195 Purchase 1795 Bal cf 3295 4610

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

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

Exercise 3 : Damia – refer to the hand-out Step 4 ? Step 3 ? Step 2 ? Step 1 ? Discuss in your group

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

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

Exercise 4 : Damia Cash Ac Bl bf 550 Salaries 600 Debtors 930 General expenses 140 Drawing (personal expenses) 270 Stationeries 80 1480 Debtors Control Bl bf 5100 Bank 31200 Sales 32830 Cash 930 Bal cf 5800

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

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

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