Summary

1. Incomplete records. Incomplete records refer to a lack of accounting records kept according

to the double entry system. The degree of incompleteness may vary — from highly disorganised

records to fairly organised but still incomplete ones.

2. Difference between statement of affairs and balance sheet. A statement of affairs shows the

assets and liabilities of a firm on a date, with the difference between the two sides denoting the

capital. Because the records are incomplete, the values are usually estimates rather than balances

taken from a properly maintained ledger, as is the case with a balance sheet derived from double

entry records.

3. Computation of profit or loss from incomplete records. The statement of affairs is used to

compute capital when the records are highly disorganised. To the difference between closing and

opening capital, any drawings are added back and any additional capital introduced is deducted, to

find the profit or loss for the period.

4. Preparation of profit and loss account and balance sheet. When a cash summary is available

along with information about the personal accounts of creditors and customers, the profit and loss

account and balance sheet can be prepared. Missing figures for purchases, sales, debtors and …