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SINGLE ENTRY AND INCOMPLETE RECORDS

Introduction:
Many countries including Tanzania most of business firms do not keep all the required books of
accounts. This is due to lack of book keeping knowledge, time and minimization of costs.
Therefore do not have complete set of books of accounts. Incomplete records imply that only few
records are kept. The firm may decide to maintain cash book only or purchases books or sales
books. Hence to prepare trading and profit or loss account it becomes very difficult due to little
information available.

DEFINITION OF SINGLE ENTRY

Single entry is any accounting system which is not following the double entry system.
OR
Single entry is a system of keeping the books of accounts without completing double entry
system.
OR
Single entry is a system of book keeping whereby the business transactions are recorded only
ONCE in the books of accounts.

Note:
This system is contrary to double entry system whereby every business transactions should be
recorded twice.

DEFINITION OF INCOMPLETE RECORDS

This is a practice whereby some figures of relevant items are not readily available in the books of
accounts i.e. some figures are missing in the books.
OR
Is a term associated with book keeping system which do not encompass maintenance of a full set
of books of prime entry or do not employ the double entry concept in its totality.

DEGREE OF INCOMPLETENESS
Incompleteness of records take varying degrees, in extreme cases it may be considerable lack of
records. In other cases it may be minor failure to keep double entry records for only some few
items.

SOME REASONS FOR SINGLE ENTRY AND INCOMPLETE RECORDS

For most sole traders, the size of their operations and the extent of owner’s involvement in
controlling daily operations make it affordable for such entities not to maintain elaborate double
entry book keeping system. Moreover they may have neither the expertise to operate double
entry book keeping system nor the resources to employ the appropriate assistants. Therefore
Prepared by: Mr. Abbasi Msese 0759 888 444
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incomplete records may be necessitated by realities of economic life although sheer neglect is
often the reason.

CAUSES OF INCOMPLETE RECORDS

1. A trader may keep a cash book for cash recordings but he does not post to the ledger
accounts.
2. His takings(sales) are partly in cash, but he does not pay the full amount into the bank
because:-
 He pays wages to assistant by cash.
 Take money for his own living expenses
3. He takes stocks for private use and sometime with / without a record.
4. He introduces capital by cash/ assets but no debit and credit entries made.

ADVANTAGES OF INCOMPLETE RECORDS

(i) Time is saved: Most of the time will be devoted to selling and finding markets.
(ii) Cost of running the business becomes smaller: It does not need to employ qualified
accountants and other accounts staffs. At the end of the period may be hired to complete
final accounts.
(iii) Assessment of taxes: taxes to be paid will be calculated basing on the explanation given by
the owner. Hence small amount taxes is paid.

DISADVANTAGES OF INCOMPLETE RECORDS

(i) Difficult in making assessment for the goods lost or destroyed in order to be compensated by
the insurance companies.
(ii) The taxes to be paid may be very high due to incorrect explanations and lack of accounting
records.
(iii) The system ignores the two fold aspect of each transaction and as such records in the ledger
are incomplete and partial.
(iv) Since double entry of each transaction is not recorded, the trial balance can not be prepared
and arithmetical accuracy of the books can not be tested.
(v) As the nominal accounts are not opened a profit or loss account can not be prepared and the
proprietor can not ascertain whether there is gain or loss.
(vi) In the absence of real and property accounts a balance sheet can not be prepared and the
financial position of the business can not be ascertained.
(vii) Frauds are likely to be committed and it is very difficult to detect in the absence of checks as
prevail in a double entry.
(viii) In the absence of any reliable information no comparison can be made between one trading
period and another.

Prepared by: Mr. Abbasi Msese 0759 888 444

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(ix) The given figure will depend on the memory of the proprietor i.e it is not an easy task to
remember all the transactions done during the period.
(x) Calculation of the ending net worth is very much difficult.
(xi) Makes planning and decision making difficult.

DIFFERENCES BETWEEN DOUBLE ENTRY SYSTEM AND SINGLE ENTRY

SYSTEM
Double Entry System Single Entry System
i. Under this system both aspects of each Under this system both aspects of each
transaction are recorded. transaction are not recorded.
i. Cash book, general ledgers, trade Only personal accounts are kept real accounts
receivable ledger and trade payable and nominal accounts are ignored.
ledger are maintained.
ii. Arithmetical accuracy can be checked Arithmetical accuracy can not be checked
by preparing trial balance. because no trial balance is prepared.
iii. Different ratios can be computed Vital ratios can not be prepared and
interpretation of financial statement is not
there.

COMPUTATION OF PROFIT UNDER INCOMPLETE RECORDS SYSTEM

For the firm which keeps its transaction on single entry system there are two methods of
computation of profit or loss during a particular period. These methods of determining profit or
losses under single entry system are:-
(i) Net Worth (increased net worth method) Method
(ii) Conversion (deriving to a full set of financial statements) Method

NET WORTH METHOD

This method records the transactions where few entries are available which require us to find the
net profit by reference to the net worth of the business. The net worth being calculated from
information given in the records. The net worth of the business means the net value of assets
which belongs to the proprietor (capital).

Under this method profit or loss made by the business is computed by comparing the net worth
(capital) of the business on two different periods i.e. opening capital and closing capital.
Due to that there is a need to determine the closing and opening capital and this is done by
preparing a statement of affairs.

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Adjustments needed under net worth method

i. Drawings
If there had been no drawings during the year, the closing capital would have been more
hence drawings are added back to the closing capital.

ii. Additional Capital

If the additional capital had not been invested during the year the closing capital will be
less, therefore additional capital should be deducted.

STATEMENT OF AFFAIRS
This is a statement showing the assets, capital and liabilities of the business on a particular date.

Note:
It is virtually the balance sheet of the business but a statement of affairs is better term than the
balance sheet because the later implies that they are accounts with balances on them.
Balance sheet is the statement showing assets and liabilities of the business with entries recorded
on double entry.

FORMAT OF STATEMENT FOR CALCULATING PROFIT OR LOSS

FOR THE YEAR ENDED 31st DECEMBER. 20x1
Closing Capital (Capital at close) xx
Add: Drawings during the year (cash, money or goods) xx
xxx
Less: Additional Capital xx
Adjusted Capital at close xxx
Less: Capital at start (Opening Capital) xx
Profit or Loss for the year xxxxx

Note:
1. Closing capital sometimes known as “this year capital”
2. Opening Capital sometimes known as “last year capital”
3. Additonal Capital sometimes known as “fresh capital” or “introduced capital”

Alternatively: By using formula:

P = (C.C + D) – (O.C + A.C)

Whereby:
P = Profit
C.C = Closing Capital
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D = Drawings
O.C = Opening Capital
A.C = Additional Capital

Example 01
Benson Kileo started in business on 1st January 2012 with $1,000,000 in a bank account.
Unfortunately he did not keep proper books of accounts.
He is forced to submit a calculation of profit for the year ended 31st December, 2012 to the
inspectors of taxes. He ascertains that at 31st December, 2012 he had stock valued at cost
$395,000, a motor van which had cost $280,000 during the year and which had depreciated by
$55,000, trade receivables of $497,000, expenses prepaid at $17,000, bank balance $256,400,
cash balance $5,500, trade payables $103,000 and expenses owing $47,000.
His drawings were: cash $10,000 per week for 50 weeks, cheque payments $67,300.
Draw up a statement to show profit or loss for the year.

Example 02
Kizito is a dealer who has not kept proper books of accounts. 31st August 2013 her state of
affairs was as follows:
$
Cash 11,500
Bank balance 220,900
Fixtures 400,000
Stocks 1,674,000
Trade receivables 1,189,000
Trade payables 905,200
Motor van (at valuations) 300,000

During the year 31st August 2014 her drawings amounted to $756,000. Gambling winnings
$280,000 was put into business. Extra fixtures were bought for $200,000.
At 31st August, 2014 his assets and liabilities were cash $8,400; bank overdraft $16,500,
inventories $2,149,100, trade payables for goods $600,200, trade payables for expenses $23,600.
Fixtures to be depreciated at $60,000, motor van be valued $250,000, trade receivables
$1,582,100, prepaid expenses $7,200.
Draw up a statement showing the profit or loss made by Kizito for the year ended 31st August
2014.

Prepared by: Mr. Abbasi Msese 0759 888 444

Al Muntazir Islamic Seminary Page 5
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Example 03
The following balance of Kwetu Pazuri business appeared as follows on:
Jan 1st 2012 Dec 31st 2012
Land 14,000 14,000
Furniture 56,000 50,000
Motorvehicle 40,000 100,000
Bank Balance 4,000 8,000
Trade receivables 28,000 24,000
Cash 12,000 16,000
Trade payables 10,000 14,000
Prepaid insurance 1,200 4,000
Unpaid rent 6,000 8,000
During the period Kwetu Pazuri use to withdraw $1000 per week and received a fresh capital of
$50,000 for expansion of the business.

Required;
(a) Statement of affairs as at 1st January 2012 to calculate initial capital
(b) Statement of affairs as at 31st December 2012 to ascertain the closing capital
(c) Statement of profit or loss during the year

Example 04
XYZ who keeps his books by single entry gives the following informations from which you are
to compute net profit if assets and liabilities for the 2011 and 2012 are given:
31st Dec 2011 31st Dec 2012
Furniture 1,200 1,200
Building 20,000 20,000
Inventories 6,000 4,000
Trade receivables 14,000 24,000
Trade payables 10,000 6,000
Bank loan 6,000 2,000
st
The following additional informations for the year ended 31 December, 2012 was as follows:
i) Provision for bad and doubtful debts $3,000.
ii) Depreciation of 5% is to be written off on building and furniture.
iii) Wages outstanding 6,000
iv) Insurance paid in advance 1,600
v) Drawing made during the year 8,000
Required:
Find profit or loss using net worth method.

Prepared by: Mr. Abbasi Msese 0759 888 444

Al Muntazir Islamic Seminary Page 6
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CONVERSION METHOD (COMPUTING MISSING FIGURES) DERIVING TO A

FULL SET OF FINANCIAL STATEMENTS
Net worth Method does not give details of the gross profit and net profit and throws very little
light on the business operations.

It is obvious that, ascertainment of profit using net worth method is not very much satisfactory
because it ignores much of the income statements elements. Therefore it would be of more
important to use incomplete records to prepare a full set of financial statement which will enable
the ascertainment of profit and provide a reasonable financial position of the business.

The profit of the business using single entry system can be obtained by collecting information
necessary for preparation of financial statements. This is done by preparing accounts like trade
receivables account (to know credit sales), trade payable account (for credit purchases), bills
receivables and bills payable basing on the principle of double entry system. The method of
collecting and converting incomplete information (single entry) to complete information (double
entry system) for preparation of financial statements is called CONVERSION METHOD.

CALCULATION OF MISSING FIGURES

In order to prepare the final accounts, there should be some information needed such as opening
stock, purchases, direct expenses, sales and closing stock for trading section; indirect expenses
and other incomes for profit or loss section.
And for balance sheet all assets, all liabilities, capital in the beginning and profit made during the
year.
The amount above can be calculated as given below;

COMPUTATION OF SALES AND PURCHASES (CREDIT AND CASH)

Sales and purchases may be of credit or cash in nature. Amounts of credit sales and credit
purchases may be ascertained by preparing sales ledger control account and purchases ledger
control account respectively.

Example 01
From the following data determine the amount of total sales and total purchases for the year
ending 31st December, 2012.
(i) Balance of debtors and creditors on 1st January 2012 are $400,000 and $300,000 respectively.
(ii) Cash received from customers and cash paid to suppliers are $1,200,000 and $700,000
respectively.
(iii)Discount allowed to customers and discount allowed by suppliers are $10,000 and $12,000
respectively.
(iv) Bills receivable from customers $30,000.

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(v) Bills receivable dishonoured $18,000.

(vi) Cash sales and cash purchases are $1,000,000 and $1,200,000.
(vii) Debtors and creditors balances as on 31st December, 2012 are $1,500,000 and $920,000.
(viii) Return outward $14,000.

CALCULATION OF CASH SALES

Usually the figures of cash sales may have to be derived from reconstruction of the cash book
from a closing balance of cash established by a cash discount. One may be able to calculate
receipts or payments to arrive at a figure of cash sales.

Example 02
EUTROPIA is a trader and has $300,000/= in the cash box. During the week $200,000/= was
spent on packaging and $80,000 on office tea. On Saturday the last day of the week $9,800,000/=
was banked leaving a balance of only $300,000/= as usual in the cash box.
Required; Calculate the figure of cash sales.

Example 03 (Cash Stolen)

SENORITA owns a small stationary supply retail business. At 1st January 2012 her cash in hand
was $3,200 while at the end of the year on 31st December 2012 it was $4,800. Her cash takings
for the year amounted to $4,295,600. She banked $3,050,000 after taking cash drawings of
$520,000 and pay the following expenses;
Wages 428,400
Rent 240,000
She believes that some cash was stolen in burglary during Christmas week.
Required;
A calculation showing clearly the amount of cash stolen.

Prepared by: Mr. Abbasi Msese 0759 888 444

Al Muntazir Islamic Seminary Page 8
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REVIEW QUESTIONS ON INCOMPLETE RECORDS

TEST YOUR UNDERSTANDING 01

The accountant has found the following details of transactions for Sajiya’s shop for the year
ended 31st December 2005.
(a) The sales are mostly on credit. No record of sales has been kept, but $61,500 has been
received from persons to whom goods have been sold – $48,000 by cheque and $13,500 in
cash.
(b) Amount paid by cheque to suppliers during the year was $31,600.
(c) Expenses paid during the year: by cheque: Rent $3,800; General expenses $310; by cash:
Rent $400.
(d) Sajiya took $250 cash per week as drawings.
(e) Other information is available:
At 31.12.2004 At 31.12.2005
$ $
Trade receivables 5,500 6,600
Trade payables 1,600 2,600
Rent owing – 350
Bank balance 5,650 17,940
Cash balance 320 420
Inventories 6,360 6,800
st
(f) The only fixed asset consists of fixtures which were valued at 31 December, 2004 at $3,300.
These are to be depreciated at 10 per cent per annum.

Required to prepare;
(a) Income Statement for the year ended 31st December, 2005
(b) A statement financial position as at that date.

TEST YOUR UNDERSTANDING 02

The books of Ulimbo showed the following figures;
Assets and Liabilities 31.12.2001 31.12.2002
$ $
Cash in hand and at bank 3,400 19,950
Inventory in trade 20,000 25,000
Trade accounts receivables ? 35,000
Trade accounts payables ? 18,500
Sundry assets 3,000

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Al Muntazir Islamic Seminary Page 9
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Cash book showed the following figures: $

Receipts from account receivables 136,000
Private dividend paid in 2,000
Indirect expenses 19,650
Drawings 4,600
Payments to accounts payables 112,000
Discount allowed by accounts payables 1,200

Additional information:
(a) Cost of goods sold during the year was $105,300.
(b) Ulimbo maintain a steady gross profit of 25% on sales.
(c) Bad debts written off during the period $400 and past bad debts recovered $200.
(d) Cash book difference is treated as a cash sales.
Required to;
Prepare the income statement for the year ended 31st December, 2002 and a statement of
financial position as at that date.

TEST YOUR UNDERSTANDING 03

Shriya is a trader who operate under single entry basis. She presents to you the following
information as extracted from her books on 31st December 2013

Dr. BANK ACCOUNT Cr.

$ $
01.01.1993 Balance b/d 821 Lighting and Heating 168
Cash received from customers 24,264 Cash paid to suppliers 18,624
31.12.1993 Balance c/d 1,030 Salaries 2,249
Rent and Rates 824
General Expenses 1,781
Drawing 2,469
26,115 26,115

The following informations are also available;

31.12.2012 31.12.2013
$ $
Stock in trade 2,141 2,648
Trade debtors 3,219 3,388
Trade creditors 1,842 1,891
Light and Heating owing 31 42
Fixed asset 2,200 1,980
Rent in advance 100 120

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Required;
Shriya’s income statement for the year ended 31st December, 2013 and a statement financial
position as at that date.

TEST YOUR UNDERSTANDING 04

Ishika has been running a small business for many years but has never kept adequate accounting
records. However a need to obtain a bank loan for the expansion of the business has necessitated
the preparation of financial statements for the year ended 31st August 2009. As result the
following information has been obtained after a carefully research.

(i) Ishika`s business assets and liabilities are as follows:

1st September 2008 31st August, 2009
$ $
Inventories in trade 4,300 8,400
Trade receivables 1,950 2,150
Trade payables 3,700 4,450
Rent prepaid 150 210
Electricity accrued 1,150 80
Balance at bank 180 825
Cash in hand 165
(ii) All taking have been banked after deducting the following payments:
Cash drawings (to be ascertained)___________?
Casual labour $600
Purchases of goods for resale $900
Note taking have been the source of all amounts banked.
(iii) Bank payments during the year ended 31st August, 2009 have been summarized as
follows: $
Purchases 50,750
Rent 2,520
Electricity 695
Delivery costs (to customers) 1,500
Casual labour 3,310
(iv) It has been established that a gross of 331/3% on cost of has been obtained all goods
sold.
(v) Despite her apparent lack of precise accounting records, Ishika is able to confirm that she
has taken out the business during the year under review goods for own use costing $300.
Prepare income statement for the year ended 31st August, 2009 and a statement financial position
as at that date (show all your working clearly)

Prepared by: Mr. Abbasi Msese 0759 888 444

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TEST YOUR UNDERSTANDING 05

A trader Shekha has kept records of her business transactions in a single entry form, but she did
not realize that she had to record cash drawings. Her bank account for the year 2008 is as
follows;
$ $
Balance 1.1.2008 920 Cash withdrawn from bank 12,600
Receipts from receivables 94,200 Trade payables 63,400
Loan from Junior 2,500 Rent 3,200
Insurance 1,900
Drawings 11,400
Sundry expenses 820
Balance 31.12.2008 4,300
97,620 97,620 ‘

Records of cash paid were: Sundry expenses $180; Trade payables $1,310. Cash sales amounted
to $1,540.
The following information is also available:
31.12.2007 31.12.2008
$ $
Cash in hand 194 272
Trade payables 7,300 8,100
Trade receivables 9,200 11,400
Rent owing – 360
Insurance paid in advance 340 400
Van (at valuation) 5,500 4,600
Stock 24,200 27,100
st
You are to draw up an income statement for the year ended 31 December 2008, and a statement
financial position as at that date. Show all of your workings.

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Al Muntazir Islamic Seminary Page 12
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TEST YOUR UNDERSTANDING 06

Bina a trader pays all his business taking into his bank account. All business transaction is made
by cheque. The following is the summary of his bank account for the year 2003:
Bank summary
Balance 31.12.2002 240 Trade creditors 12,400
Received from debtors for goods 15,780 General expenses 1,262
Rent 150
Drawings 1, 800
Balance 31.12.2003 408
16,020 16,020

The following information is obtained from the books:

31.12.2002 31.12.2003
Debtors for goods sold 950 1,172
Trade creditors 830 965
Creditors for general expenses 70 410
Stock in trade 1,020 924
Furniture and fittings 200 180

Discount allowed to customers during 2003 amounted to $300 no discount was received from
suppliers. Throughout 2003 Bina occupied a building a rental cost of $200 a year. The
building is divided equally between business and private occupation.
You are required:
(a) To show your calculation of the balance on Bina’s capital account at 31st December, 2002
and
(b) To prepare the income statement for the year 2003 and statement of financial position as
at that date.

Prepared by: Mr. Abbasi Msese 0759 888 444

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