Class 11 Accounts from Incomplete Records

Ordinarily, businesses maintain their books adhering to the double-entry system of bookkeeping. But small-scale enterprises commonly don’t use an organized system of bookkeeping and rather follow the Single-Entry Method. Class 11 Accountancy syllabus familiarizes students with the single entry method of bookkeeping to impart them with the nuances of accounting in a small-scale business. To help you understand the same, this blog brings you the study notes and chapter summary for chapter 11 accounts from incomplete records. 

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Accounts Under Single Entry

The chapter starts with a mention of a list of accounts that are or are not maintained under the single entry system. These are:

• Cash Book
• Personal Accounts
• Real Accounts, as needed
• Nominal Accounts are not prepared in this method

Features of Incomplete Records

The following are the features of incomplete records:

• Unsystematic Recording: As there are nor specified rules of bookkeeping followed, the transactions are recorded in an unsystematic manner
• Lack of Uniformity: there is lack of uniformity that due to which books of accounts of two business cannot be compared
• Inaccuracy: Due to lack of full information, profits and losses ascertained are inaccurate
• Convenient Recording: Records are maintained conveniently by keeping the need and convenience of business owner in mind.

Benefits of Using the Single Entry System of Accounting

Single entry system of accounting comes with its own set of perks and benefits. As per the chapter on Accounts from Incomplete records, here are some advantages of using this system of accounting.

• Simple to Follow: Small scale traders and businessmen use this system. They cannot afford to employ dedicated staff for accounting or set up a sophisticated accounting system. This system is easy to follow. It does not require extensive technical knowledge of bookkeeping and accountancy
• Inexpensive: This system of accounting does not require a dedicated team. It can be done by one employee who possesses basic accounting skills. Therefore, there is minimal labour cost involved in this system. Additionally, it does not require expensive IT infrastructure or customized software. Thus, there are minimal setup and installation charges
• Flexibility: This system can be customized according to the needs of the business and convenience of the trader
• Apt for small scale enterprises and concerns: This system is widely used by small firms who do not have large turnover and large volumes of daily transactions. It is useful to track daily cash transactions and a small number of assets and liabilities

Limitations of Single Entry System of Accounting

However important the system of a single entry is, it has some limitations due to which it is not feasible to use this system in every possible situation. As per the class 11 chapter on Accounts from Incomplete records chapter, mentioned below are the disadvantages of this system:

• Arithmetical Accuracy: Real and nominal accounts are not maintained. Therefore, accuracy is compromised in this system since it is not possible to prepare a trial balance and check the balances
• Accurate Gain or Loss Cannot be Ascertained: All accounts are not prepared in this system. Thus, the actual amount of profit or loss cannot be ascertained since nominal accounts are necessary for that purpose 
• A True and Fair View of the Financial Statements Cannot be Guaranteed: Not all real accounts are prepared under this system of Accounting. Therefore, it is not possible to prepare a balance sheet to judge the true and fair view and the financial performance of the entity
• Not Useful in Income Tax and other Statutory Assessments: This system is not reliable when it comes to ascertaining the actual amount of profit or loss. Therefore, it is not accepted by tax authorities in assessments and proceedings
• Not Completely Reliable: This method lacks credibility since accounting principles and assumptions are not followed. Therefore, it is not completely reliable.

Accounts From Incomplete Records: Theoretical Questions

Now that you are aware of the important theoretical pointers of the chapter accounts from incomplete records, let us go through some important theory questions and answers:

How to ascertain profit and loss under the Single Entry System of Accounting?

Accounts from Incomplete Records, profit or loss can be ascertained by Statement of Affairs Method. It is also known as the Net Worth Method. The following steps are followed to find out profit or loss: – 

• The first step is to calculate the opening capital amount with the help of the Statement of Affairs, if not given in the problem. It is the amount of capital at the beginning of the accounting period. 
• Calculate the amount of closing capital at the end of the accounting period by preparing the Statement of Affairs. 
• Calculate the amount of profit or loss in the following manner: – 

Particulars	Amount (INR)	Amount (INR)
Closing Capital	XXX
Add: – Drawings during the year	XXX
Less: – Capital introduced during the year	XXX
	XXX
Adjusted capital at the end of the period		XXX
Less: – Opening Capital		(XXX)
Profit / Loss		XXX

What is a Statement of Affairs?

• Statement of Affairs is similar to a Balance Sheet.
• It is a statement showing balances of assets, including cash and bank balances on the assets side and liabilities on the other side. 
• The difference between the assets and liabilities is the amount of capital.  
• The equation for the same is Capital = Total Assets-Total Liabilities.

How is the Statement of Affairs prepared?

The Statement is prepared in the following manner: –

Statements of Affairs

As At _____

Liabilities	Amount (INR)	Assets	Amount (INR)
Capital (Balancing Amount)	XXXX	Stock	XXXX
Sundry Creditors	XXXX	Debtors	XXXX
Bills Payable	XXXX	Cash in Hand	XXXX
Outstanding Expenses	XXXX	Cash at Bank	XXXX
Income Received in Advance	XXXX	Prepaid Expenses	XXXX
Bank Overdraft	XXXX	Bills Receivable	XXXX
		Accrued Income	XXXX
Total Liabilities	XXXX	Total Assets	XXXX

 Statement of Affairs vs Balance Sheet   

The following are the differences in a tabular form as under: 

Basis	Statement of Affairs	Balance Sheet
Reliability	It is less reliable because it is  prepared from incomplete records	It is more reliable because it is prepared from double entry records
Objective	To estimate the balance in capital account on a particular date	To show the true financial position of an entity on a particular date
Omission	Omission of assets or liabilities cannot be discovered easily	Omission of assets or liabilities cannot be discovered easily and can be traced from accounting records

Accounts from Incomplete Records: Practical Questions  

Here are some practical question based on the topic ‘Accounts from Incomplete Records’:

P maintains her books on the Single Entry. She commenced her business in April 2013 with a capital of Rs. 80,000. On March 31st, 2014, the following data were extracted. 

1. Amount due to raw materials suppliers – Rs. 17,500
2. The stock of raw materials and finished goods – Rs. 2,000, and Rs. 2,500 respectively. 
3. Fixed assets – Rs. 34,000
4. Amount due from customers – Rs. 42,000
5. The amount is withdrawn for personal expenses – Rs. 2,500/month.
6. Capital introduced – Rs. 7000
7. Balance at bank and cash Rs. 21,000, and Rs. 1,800 respectively. 
8. Outstanding expenses – Rs. 2,250

Calculate profit or loss using the Net Worth method. 

Solution: – 

Statement of Affairs
As at 31^st March 2014

Liabilities	Amount (INR)	Assets	Amount (INR)
Capital (Bal. Figure)	83,550	Fixed Assets	34,000
Sundry Creditors	17,500	Debtors	42,000
Outstanding Expenses	2,250	Stock:
		Raw Materials	2,000
		Finished Goods	2,500
		Cash Balance	1,800
		Bank Balance	21,000
Total	1,03,300	Total	1,03,300

Statement of Profit & Loss for the year ended 31^st March 2014

Particulars	Amount (INR)
Capital at the end of the accounting period	83,550
Add: – Drawings	30,000
	1,13,550
Less: – Capital introduced	(7,000)
Adjusted Capital	1,06,550
Less: – Capital (Brought Forward Balance / Opening Balance)	(80,000)
=Profit / (Loss)	26,550

Worksheet on Accounts From Incomplete Records

From the following particulars find out profit or loss: 

Starting Capital of the year (1st April 2017)	INR 3,00,000
Closing Capital of the year (31st March, 2018)	INR 5,50,500
Additional Capital	INR 80,000
Drawings	30,000

From the following calculate the missing figures: 

Closing Capital as on 31st March 2020	INR 1,80,000
Additional Capital	40,000
Drawings	20,000
Opening Capital as on 1st April 2021	?
Loss at the end of the year 31st March 2020	30,000

From the following particular, calculate total sales: 

• Debtors on 1st April 2018: INR 2,50,000
• Bills receivable on 1st April 2018: INR 50,000
• Cash received from debtors: INR 7,00,000                      
• Cash received for bill receivable: INR 1,50,000                
• Bad debts: INR 20,000
• Bill receivable dishonoured: INR 15,000
• Returns inward: INR 40,000
• Bills receivable on 31st March 2019: INR 80,000
• Sundry debtors on 31st March 2019: INR 2,20,000
• Cash Sales: INR 2,50,000

Radhika started a bakery shop for providing good quality bakery products at affordable rates on 1st January 2020 with a capital of INR 2,00,000. She appointed a ten year old boy as a helper. She withdrew INR 50,000 for household expenses. She introduced INR 15,000 as fresh capital. Her assets and liabilities stands at the end of year, i.e 31st December 2020 as follows: 

Cash in hand	INR 50,000
Stock	INR 80,000
Bills receivable	INR 1,00,000
Debtors	INR 1,50,000
Creditors	INR 60,000
Bills payable	INR 10,000

Thus, we hope that through this blog about accounts from incomplete records, you are all clear about this chapter. To know more about trending career options and courses, get in touch with our Leverage Edu experts and we will help you explore the best options as per your choices and career goals. Hurry up! Book an e-meeting.