Lesson Notes By Weeks and Term - Senior Secondary 2

Incomplete records (single entry)

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Term: 2nd Term

Week: 7

Class: Senior Secondary School 2

Age: 16 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Financial accounting

Topic:-       Incomplete records (single entry)

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. Explain the meaning of incomplete records (single entry)
  2. Outline the features of single entry
  3. State the advantages and limitations of single entry
  4. Compute profit from two balance sheets showing opening and closing capital

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on partnership account

Students pay attention

STEP 2

EXPLANATION

She explains the meaning of incomplete records (single entry) and outlines its features

 

Students pay attention and participates

STEP 3

DEMONSTRATION

She states the advantages and limitations of single entry and shows the learners how to compute profit from two balance sheets showing opening and closing capital

Students pay attention and participate

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

INCOMPLETE RECORDS (SINGLE ENTRY)

Incomplete records refer to a condition wherein; an establishment is not practising double-entry bookkeeping. Instead, it is practising an unconventional accounting system, namely, a single-entry system, to sustain a decreased amount of data about its financial results.

Under a single-entry system, it is reasonable to keep a cash-basis income statement, although not a balance sheet. It is also feasible that the administrators of a firm, resolve to maintain a double-entry bookkeeping system, but the accounting records are incomplete.

 

Reasons for Incomplete Records:

  • Fraudulent behaviour: Employees may voluntarily confuse or nevermore record some transactions, that they can flee with the company assets or record extreme degrees of profitability.
  • Inadequate systems: There may be an incomplete system of methods and helping authorities in place that different business transactions are not recorded in the accounting system.
  • Loss during the transition: A company may not sufficiently shield its old records when moving to a new accounting system, and loses a few or all the old records.

 

Features of Incomplete Records:

The features of incomplete records are as under :

  • It is an irregular process of recording transactions.
  • Personal transactions of owners might be recorded in the cash book.
  • To determine profit or loss or for taking any other data, certain figures can be obtained only from the original vouchers such as sales or purchase invoice, etc.. Therefore, dependency on original vouchers is necessary.
  • Many companies maintain records according to their preference and requirements, and their accounts are not relative due to lack of consistency.

 

Limitations of Incomplete Records:

  • Accurate evaluation and ascertainment of the financial outcome of business operations cannot be done.
  • The owners encounter numerous challenges in registering an insurance claim in case of loss of inventory, either by fire or theft.
  • It becomes hard to convince the income tax authorities about the reliability of the computed income.

Single Entry System
  • It is a system of recording a transaction when the double-entry system of accounting is not followed.

Advantages of Single Entry System
  • Flexible Method
  • Simple method
  • Less expensive
  • No need for advanced knowledge of accounting
  • Easy to compute profit and loss

 

COMPUTATION OF PROFITS FROM TWO BALANCE SHEETS

To compute profits from two balance sheets showing the opening and closing capital, we need to follow a simple formula:

Profit = Closing Capital - Opening Capital - Additional Investments + Drawings

Question:

Suppose we have the following balance sheets for a business at the beginning and end of a financial year:

Opening Balance Sheet (1st January, Year 1)

Capital: ₦100,000

Assets: ₦150,000

Liabilities: ₦50,000

Closing Balance Sheet (31st December, Year 1)

Capital: ₦120,000

Assets: ₦200,000

Liabilities: ₦80,000

Answer:

In this case, we can calculate the profit for the year as follows:

Profit = Closing Capital - Opening Capital - Additional Investments + Drawings

Profit = ₦120,000 - ₦100,000 - 0 + 0

Profit = ₦20,000

So the profit for the year is ₦20,000.

Here, we have not considered any additional investments made by the owner or any drawings made during the year. If there were any additional investments or drawings, they would need to be added or subtracted from the profit accordingly.

It is important to note that the profit calculated using this method is the accounting profit and not the cash profit. To calculate the cash profit, we need to consider the cash inflows and outflows during the year.

 

EVALUATION:    1. Define incomplete records

  1. Give reasons for incomplete records
  2. State the features of incomplete records
  3. What are the limitations for incomplete records?
  4. Explain single entry system
  5. What are the advantages of single entry system?
  6. State the formular for calculating profits from two balance sheets.

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively