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Accounts from Incomplete Records 22.1
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C H A P T E R

Accounts from Incomplete Records

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Incomplete Records Incomplete records is a system in which accounting records are not kept
according to Dual Aspect Concept (Principle). In some of the transactions,
both aspects are recorded, while in others one aspect is recorded or it is
not recorded at all.
2. Single Entry System It is an incomplete double entry system varying with circumstances.
The records maintain under the Single Entry System are termed as
Incomplete Records.
3. Statement of Affairs It is a statement of assets and liabilities. The excess of assets over liabilities
represents proprietor’s capital.
Assets – Liabilities = Capital
4. Capital Amount invested by the owner.

5. Drawings Money or goods taken (withdrawn) by the proprietor from the business
for his/her personal use.

CHAPTER SUMMARY

• Single Entry System is a system in which accounting records are not kept strictly according to the double
entry principles of Book Keeping. Since all the transactions are not recorded strictly on the double entry
principle, it is not possible to prepare a Trial Balance and check the arithmetical accuracy of the books
of account.
Single Entry System is very simple, economical and time saving system for recording transactions.
• Disadvantages of Single Entry System are: (i) Arithmetical accuracy of accounts cannot be proved;
(ii) Difficult to detect fraud; (iii) True profit cannot be known; (iv) No control on Assets; (v) True financial
position of business cannot be ascertained; (vi) Not Acceptable to Tax Authorities.
• Profit under the Single Entry System is determined by any of the following two methods:
(i) Statement of Affairs Method and (ii) Conversion Method.
• Statement of Affairs Method. Under the method a statement, which shows assets on one side and the
liabilities on the other is prepared. The difference between the totals of the two sides is taken as the capital.
• Ascertainment of Profit or Loss. Under this method, Statement of Affairs at the end of the year and in
the beginning of the year are prepared to determine closing and opening capitals. The capital is adjusted
as to capital introduced and drawings made to determine profit earned during the year. We can express it
mathematically as follows:
Profit/(Loss) = Closing Capital – Additional Capital + Drawings – Opening Capital.