CBSE Class 11 Accountancy Revision Notes Chapter 11

CBSE Class 11 Accountancy Revision Notes Chapter-11 Accounts From Incomplete Records

Up until now, Class 11 students were learning about the double entry bookkeeping system and how financial statements and accounts are made assuming that a firm is keeping complete records of their transactions as per the double entry system. However, many small firms do not follow the double entry bookkeeping system but still need to assess their financial position by creating financial statements.

This chapter deals with this problem of creating financial statements from incomplete records. In order to prepare for this chapter, Students can access CBSE Class 11 Accountancy Revision Notes Chapter 11 Accounts from Incomplete Records. These notes explain all the important concepts covered in the chapter in a concise manner. Students can access these notes from the Extramarks’ website.

Revision Notes for CBSE Class 11 Accountancy Chapter-11 – Download 

Access CBSE Class 11 Accountancy Chapter-11 Accounts From Incomplete Records Notes

The NCERT solutions and CBSE Revision Notes for all classes are prepared by subject experts and specialists. These notes contain an in-depth and thorough explanation of all the concepts of the chapter. Students can have hassle free access to all these study materials from Extramarks’ website or app and they can attain the maximum benefit from them.

Meaning of Incomplete Records

Incomplete records can be defined as accounting records that do not follow the double-entry accounting system. For example: if a one-sided entry or no other entry is recorded, it will be classified as an incomplete record. 

Features of Incomplete Records

Small businesses like mom and pop stores mostly keep incomplete records of transactions. In the case of large-scale businesses, the problem of incomplete records might arise because of loss, theft, or damage to property. 

Following are the features of incomplete records.  

1. It is not a proper process of recording transactions.
2. While there is proper information about cash transactions and personal accounts, there is no information about revenue, gains, losses, assets, and other liabilities.
3. Cash books may also contain records of personal transactions of owners.
4. It is impossible to compare accounts because of lack of uniformity among the various organizations.
5. There is a need to check original vouchers and figures to calculate the overall profit or loss.
6. The annual profit or loss might not be reliable.
7. At the end of the year, the balance sheet does not reflect the actual picture of assets and liabilities.

Reasons for Incompleteness and Its Limitations

1. It is easy to maintain incomplete records for those who lack the right time management skills and the required accounting expertise.
2. There is no need for an accountant, so it is an inexpensive way of keeping track of a firm’s financial transactions.
3. It saves time as only a few books need to be maintained. 
4. The owners can maintain some transactions and not record less important ones. 

Limitations:

1. Not possible to ensure accuracy. The lack of a double-entry system means a trial balance cannot be prepared to ensure the accuracy of the accounts. 
2. The financial results of the operations cannot be ascertained. 
3. Lack of reliable financial statements and analysis of a business’s liquidity, profitability, and solvency cannot be made.
4. The lack of reliable financial statements and analyses makes it difficult to collect the funds required. 
5. Not possible to claim insurance in case of inventory loss due to theft or fire.
6. Tax authorities cannot be convinced about the reliability of the income generated. 

Statement of Affairs

A Statement of Affairs, just like a balance sheet, lists assets of the business on one side and liabilities on the other. The difference between the two is the capital, which becomes the balancing figure in this case.

The basic format of a Statement of Affairs is shown as follows:

Statement of Affairs as at _____

Difference between Statement of Affairs and Balance Sheet

Statement of Profit and Loss

Preparing a profit and loss statement requires complete information on a business’s income, expenses, current assets, current liabilities, and many other accounts. Since all of this information is not available in case of incomplete records, there are different methods used to ascertain the incomplete information in accounts. This has been discussed further.

The basic format of a Statement of Profit or Loss is shown as follows:

Statement of Profit or Loss for the year ended ____

Preparing Trading and Profit and Loss Account and the Balance Sheet

It is required to prepare a complete financial statement that would include all information on various items needed. While adding incomplete records, some items’ details need to be checked using the logic of the double-entry system of bookkeeping. This involves making a summary of cash, ledger accounts, etc., to find the balancing figures and then using details to prepare a financial statement.

The common entries which are missing from records include 

• Opening capital
• Creditors payment
• Debtors payment
• Bills payable
• Bills receivable
• Credit sales

Ascertaining Credit Purchases

While maintaining records, there might be some information related to creditors that are missing. This information may be credit purchases, payments made to creditors, or other figures. 

These missing figures can be found by preparing the total creditors account, entering information, and finding out the balancing figure. 

Ascertainment of Credit Sales

Like credit purchases, some information about debtors might be missing. This missing information can be credit sales, the payment received from debtors, or other figures. 

The missing figure can be found by preparing the total debtor’s account, entering information related to debtors, and then finding the balancing figure. The balancing figure helps find any missing information about debtors. Any bill which is dishonored is debited to the total debtor’s account. 

Ascertainment of Bills Receivable and Bills Payable

In certain cases, information regarding bills payable and receivable is missing. Even if these are available, there might be no match in the figures of the bills. The total bills receivable or payable account needs to be prepared to check these figures. This is done based on the figure ascertained. 

Ascertainment of Missing Information through Summary of Cash

Using formulas, a cash book summary is made to find the missing figure related to cash transactions. It can be used to find the missing amount paid to creditors and the amount received from debtors, the receipt or payments, and even missing opening and closing balances entries. It is also possible to prepare debtors’ accounts first and then prepare the cash book to find the amount paid to creditors.