Incomplete records Flashcards
What are the techniques ?
- Net assets approach
- cash and bank account
- receivables and payable
- mark-ups and margins
What is the net asset approach?
- no details records
- destroyed
- only net assets - start of the year, end of the year , capital
What is the accounting equation ?
- Net assets = capital
- Net assets = assets - liabilities
- expanded to - increase in net assets = capital introduced + profit - drawings
What is important to remember about the accounting equation?
- increase in net assets = new capital / making profit less drawings
Using the accounting equation: what is the increase in net assets?
difference - between opening and closing net assets figures
Using the accounting equation: when can the profit be deduced?
captial introduced + drawings made
What is meant by the term ‘ cash’?
- Notes and coins
- Till/ Petty cash box
What is meant by the term ‘bank’?
- current account / cheque account of business
What if there is one missing figure: from cash and bank account ?
- opening and closing balance of cash and bank
- movements in and out
- one missing figure = balancing figure
What is the double entry for banking cash?
- Dr Bank
- Cr cash account
What may you find in an exam regarding cash and bank accounts ?
- columns : bank and cash
- joint account
What would the ‘ banking figure’ mean in an exam?
- amount paid in - bank
- joined account - dr bank / cr cash
How would you find a missing figure in the sales/ purchase ledger control account?
Recreate receivables and payables
How can the sales figure be found?
Opening and closing receivables known
receipts from customers , sales returns , details of irrecoverable debts, disocunts allowed and contras
How would you combine the cash,bank and receivable, payables technique in an incomplete records question?
cash and bank > receipts from customers > transfer to SLCA > sales figures
Tackling an incomplete records question steps?
- Step 1 - amount of cash received - cash and bank workings - add from credit side
- step 2 - determine sales - SLCA - add from credit side
- step 3 - determine purchases - PLCA - add from debit side
When are margins and mark- ups useful?
- records of retailer
- reconstructing missing figures
What is the key to dealing with mark-ups and margins?
- cost structure - sale of organisation
- info given
What is a costs structure?
- relationship
- selling price of goods - costs of goods - gross profit in percentage terms
What is a mark-up on costs ?
Costs of goods sold = 100%
sales = mark up on costs of difference
What is the sales margin ?
sales revnue 100%
What does gross profit margin mean?
Gross profit on sales
What must accountants apply when they are considering reasonableness figures provided in a given context?
- Professional scepticism
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What is professional sceptism?
- Questioning mind
- alert to conditions
- misstatement - error/fraud
