Accounts from Incomplete Records
Accounts from incomplete records, is a system of book keeping in which accounting records are not kept according to double entry principle of book keeping. It is also called single entry system. This system differs from firm to firm, as it is a mere adjustment of double entry system according to requirement. Under this system, only personal accounts are maintained. As real and nominal accounts are avoided in this system of accounting, therefore final accounts cannot be prepared easily. It is a simple method, suitable for small businesses and there is no need for the knowledge of principles of book keeping etc. Limitations of single entry system are that it is incomplete and unscientific method etc. The profit or loss in this system of accounting is ascertained with the help of Statement of Affairs Method. To ascertain profit, according to the Single Entry System, it is necessary to prepare a statement of affairs at the end of the year and also at the beginning of the year, if not already prepared. The difference between the opening capital and closing capital is the profit earned during the year. In case of single entry system, profit is also computed by adding drawings during the year to capital at the end and deducting additional capital and capital at the end from it.
Single entry system differs from double entry system in many aspects. The court does not consider Single entry system as authentic. Both statement of affairs and balance sheet show the assets and liabilities of a business entity on a particular date. However, there are some fundamental differences between the two. The objective of preparing statement of affairs is to estimate the balance in capital account on a particular date. The objective of preparing Balance Sheet is to show the true financial position of an entity on a particular date.