Steps to Dealing with Incomplete Records
The nature of the “incompleteness” in the records will vary from problem to problem, but the approach, suitably applied, should be successful in arriving at the final accounts whatever the particular characteristics of the problem might be.
The approach is as follows.
- Step one. If possible, and if it is not already known, establish the opening balance sheet and the proprietor’s interest.
- Step two. Open up four accounts these are Trading account, a cash book, a debtors account, a creditors account.
- Step three. Enter the opening balances in these accounts.
- Step four. Work through the information you are given line by line; and each item should be entered into the appropriate account if it is relevant to one or more of these four accounts. You should also try to recognize each item as a profit and loss account income or expense item or a closing balance sheet. It may necessary to calculate an amount for drawings and an amount for fixed asset depreciation.
- Step five. Look for the balancing figures in your four accounts. In particular you might be looking for a value for credit sales, cash sales, purchases, the cost of goods sold, the cost of goods stolen or destroyed, or the closing bank balance. Calculate these missing figures, and make any necessary double entry.
- Step six. Now complete the profit and loss account and balance sheet.