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 reco rd

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 Comparison MethodAnalysis Method

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 Beginning Capital Ending capital Additional capital DrawingNet profit Net Loss i.29,00033,48010,80010,9804660 ii.45,00047,76015,7507,4405550 iii.21,00036,400-7,20022600 iv.35,60021,100-6,3208180 v.33,80030,44010,7109,9504120 vi.32,00040,80012,0006,7503550

7. 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 ?

8. Beginning capital ? All beginning ASSET – beginning LIABILITY Asset: Cash750 Bank4500 Debtors11,250 Stock2790 Vehicle15,000 34,290 Liabilities: Creditors(8,670) Accrued general exp(300) 25,320

9. Ending capital ? Consider all the adjustment ( additional info) Additional info : i. Obsolete debt RM500 had occurred but 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. DR bad debt RM500 CR Debtors RM5 00 Dr Drawing 6,000 CR ………..

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 Dr Equipment 560 CR ………………. Dr Depre 1500 Cr Provi for depre1500

11. Ending capital =All ending ASSET – ending LIAB ILITY Asset: Cash1230 Bank5250 Debtors(10560-500)10060 Equipment560 Stock3,450 Vehicle15,000 - Provi for depre(1500)13,500 34,050 Liabilities: Creditors(7680) Accrued general exp(360) Ending capital26,010

12. Profit = Ending capital + Drawing – Additional Capital – Beginning capital = 26010 + 6000 – 25320 = RM6690 Profit & Loss Statement fye 31 Dec 2007 Ending capital26,010 + Drawing6,000 - Additional capital - - Beginning capital(25,320) Net Profit6,690

13. Balance Sheet as at 31 Dec 2007 Non Current AssetOwner’s Equity Vehicle15,000Beginning capital25,320 - Accu Depre(1,500)13,500+ Net profit6690 Equipment560- Drawing(6,000) 14,060XXXX Current Asset :Current Liabilities Cash1230Creditors7680 Bank5250Accrued general exp360 Debtors10,060 Closing stock3,450XXXX 34,050

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 : 20102011 StockRM25,00032,000 Equipment18,50020,000 Debtors36,40042,700 Creditors28,80036,600 Bank5,70010,500

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………

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

18. Ending Capital = Stock32,000 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 capital63,565

19. P&L Statement for year ended 31/12/… Ending capital63,565 + Drawing900 64,465 - Beginning capital(56,800) Profit7665

20. Balance Sheet as at 31/12/ … Non Current AssetOwners Equity Equipment20,000Capital56,800 - Provi for depre(2,000)18,000+Net profit7665 - Drawing(900) Current AssetEnding capital63,565 Closing stock32,000 Debtors42,700Current Liab -PDD(2135)40,565Creditors36,600 Bank(10500-900)9,600 100,165

21. 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

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 Debtors Control Bal b/f4080Payment from debtors 10,090 Credit sales12055Sales return315 Dis. allowed395 Bad debt220 Bal c/f5115 16135 Creditors Control Purchase return280Bal b/f3775 Cash (payment to creditor) 6880Credit purchase7965 Dis received460 Bal c/f4120

26. Cont… Commission Bal b/f105Cash570 P&L625Bal c/f160 730 Insurance Expenses Bal b/f (prepaid)120Bal b/f ( accrued)- Cash525P&L465 Bal c/f (accrued)-Bal c/f (prepaid)180 Salary Expenses Bal b/f(prepaid)-Bal b/f(accrued)390 Cash4115P&L4175 Bal c/f (accrued)450Bal c/f(prepaid-

27. Prepare profit & loss…. Najib Shop Book Trading, Profit & Loss for year ended 31 Dec 2005 Beginning stock 5665Sales19,280 + Purchase11,415- Sales return(315) - Purchase return (280) - Drawing(500) Net purchase 10,635 - Closing Stock (5,880) COGS10,420 Gross profit8,545 18,965

28. cont…. - Expenses :Gross profit8,545 Salary4,175+ Other Income: Insurance465Commission625 General expenses660Dis.rec460 Rent1,200Bad debt recovered100 Dis allowed395 Bad debt220 Net profit2615 9730

29. 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 : Summary of Bank Account 1/1/201131/12/2011 Debtors4,4506,600 Inventory3,6505,850 Bank2,800? Creditors3,3002,700 Prepaid rental300350 ReceiptsPayments Debtors11,600Creditors5,800 Rent700 Drawing400

30. Discount allowed RM90, discount received RM55 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

31. Solution : Debtors Control Bal b/f4450Dis. allowed90 Credit sales13,840Bank11,600 Bal c/f6,600 18,290 Creditors Control Discount55Bal b/f3,300 Bank5,800Credit purchase5,255 Bal c/f2,700 8,555

32. Beginning Capital = 4,450+3,650+2,800+300-3,300 Income Statement Sales13,840 (-) COGS: Stock3650 + Purchase5,255 8905 -Closing stock(5850)(3055) Gross profit10,785 Dis received55 (-) Expenses : Dis allowed90 Rent650(740) Net profit10,100

33. Balance Sheet as at ……………… Current AssetOwners Equity Debtors6600Beginning capital7900 Stock5850+ Net profit10,100 Bank7500- Drawing(400) Prepaid rent35017,600 Current Liabilities: Creditors2,700 20,300

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 : 1 Jan 0831 Dec 08 Building30,200Stock3,250 Stock2,680Debtors4,210 Equipment10,410Creditors3,295 Accu dep-equip2,120Equipment? Debtors3,950Bank? Creditors2,815 Prepaid insurance 125 Bank4,935

35. Additional info : a. Summary of bank account : REceiptsPayments Debtors5628Creditors1120 Sales13,192Water & Electricity748 Salary2860 Purchase5630 Loan interest400 Insurance1874 General expenses618 Drawing6533 Licence fees870 Equipment (purchased on 1/6/08) 10,000 Installation fee for equipment 2,000

36. b. Discount received RM195, Discount allowed RM520 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

37. Solution : Debtors Control A/c Bal bf3950Bank5628 Sales6408Discount allowed520 Bal cf4210 10358 Creditors Control A/c Bank1120Bal bf2815 Discount received195Purchase1795 Bal cf3295 4610

38. Income Statement for year ended 31 Dec 2008 Sales19600 -COGS : Opening stock2680 + Purchase7425 10 105 - Closing stock(3250) 6855 Gross profit12 745 + Other income : Discount received 195 -Expenses : Discount allowed520 Depre – equipment1741 Insurance1999 Water & Electricity748 Salary2860 Loan interest400 General expenses618 Lisence fees870 9756 Net profit3184

39. Statement of Financial Position / Balance Sheet as at 31 Dec …… Non Current Asset : Building30 200 Equipment22 410 -ADD(3 861)18 549 48 749 Current Assets : Stock3 250 Debtors4 210 7 460 -Current Liabilities : Creditors3 295 OD Bank8 898 Working capital(4 733) 44 016 Owners Equity : Capital47 365 + Net profit3 184 -Drawing(6 533) 44 016

40. Exercise 3 : Damia – refer to the hand-out

41. Income Statement for year ended 31 Dec 2011 Sales40 800 -COGS : Opening stock10 000 + Purchase16 400 26 400 - Closing stock(8 000) 18 400 Gross profit22 400 + Other income : Discount received 400 -Expenses : Freight outwards3 000 Salaries5 400 Rent8 000 Rates1 000 Expenses5 000 Dis allowed800 Depre2 000 (25 200) Net LOSS 2 400

42. Statement of Financial Position / Balance Sheet as at 31 Dec 2011 Non Current Asset : Machinery34 000 Current Assets : Stock8 000 Debtors18 000 Prepaid rates500 26 500 -Current Liabilities : Creditors9 000 Accrued rent800 Accrued salaries400 Working capital16 300 50 300 Owners Equity: Capital53 700 - Net Loss(2 400) -Drawing(1 000) 50 300 Take 5

43. Exercise 4 : Damia Cash Ac Bl bf550Salaries600 Debtors930General expenses140 Drawing (personal expenses)270 Stationeries80 1480 Debtors Control Bl bf5100Bank31200 Sales32830Cash930 Bal cf5800

45. Income Statement for year ended 31 Dec 2010 Sales32 830 -COGS : Opening stock3 400 + Purchase23 000 26 400 - Closing stock(3 800) 22 600 Gross profit10 230 + Other income : - -Expenses : General expenses710 Salaries3 500 Stationeries80 Insurance2 200 Rent & Rates1 500 Depre400 Interest on loan600 (8 990) Net Profit 1 240

46. Statement of Financial Position / Balance Sheet as at 31 Dec 2010 Non Current Asset : Building10 000 Equipment2 600 Current Assets : Stock3 800 Debtors5 800 Bank1 300 Cash390 Prepaid insurance400 11 690 -Current Liabilities : Creditors4 100 Accrued general expe150 Accrued loan interest600 Working capital6 840 19 440

47. Owners Equity: Capital11 470 + Net Profit1 240 -Drawing(5 270) 7 440 Non Current Liabilities: Bank loan12 000 19 440 Cont : ……