Preparation of Full Final Accounts from Incomplete Records
Business organizations whose books are being kept under the single entry system may decide to improve the system of accounting by introducing a complete double-entry system. It is possible to draw conventional trading, profit, and loss accounts from incomplete records. In order to do this, there must be a thorough knowledge of the amount received from customers and paid to suppliers, as well as expenses incurred in the nominal accounts.
In preparing final accounts from incomplete records the following operation must be followed:
1. Preparation of opening statement of affairs to ascertain the opening capital.
2. Study the cash and bank transactions to ascertain missing items like payment to creditors, receipt from debtors, cash sales, cash purchases, expenses paid, opening or closing cash, and bank balances.
3. Prepare Total Debtors Account to ascertain credit sales and closing creditors.
4. Prepare Total creditors Account to ascertain credit purposes and closing creditors.
5. Ascertain and transfer the balance of bills receivable and bills payable to total debtors and total creditors account respectively.
6. Obtain the total sales and purchases by adding cash sales and cash purchases if any to credit sales and credit purchases.
7. Make necessary adjustments on both income and expenses.
8. Prepare the trading profit and loss account and balance sheet.