Incomplete records

Question 1

What are the techniques ?

Answer 1

• Net assets approach
• cash and bank account
• receivables and payable
• mark-ups and margins

Question 2

What is the net asset approach?

Answer 2

• no details records
• destroyed
• only net assets - start of the year, end of the year , capital

Question 3

What is the accounting equation ?

Answer 3

• Net assets = capital
• Net assets = assets - liabilities
• expanded to - increase in net assets = capital introduced + profit - drawings

Question 4

What is important to remember about the accounting equation?

Answer 4

• increase in net assets = new capital / making profit less drawings

Question 5

Using the accounting equation: what is the increase in net assets?

Answer 5

difference - between opening and closing net assets figures

Question 6

Using the accounting equation: when can the profit be deduced?

Answer 6

captial introduced + drawings made

Question 7

What is meant by the term ‘ cash’?

Answer 7

• Notes and coins
• Till/ Petty cash box

Question 8

What is meant by the term ‘bank’?

Answer 8

• current account / cheque account of business

Question 9

What if there is one missing figure: from cash and bank account ?

Answer 9

• opening and closing balance of cash and bank
• movements in and out
• one missing figure = balancing figure

Question 10

What is the double entry for banking cash?

Answer 10

• Dr Bank
• Cr cash account

Question 11

What may you find in an exam regarding cash and bank accounts ?

Answer 11

• columns : bank and cash
• joint account

Question 12

What would the ‘ banking figure’ mean in an exam?

Answer 12

• amount paid in - bank
• joined account - dr bank / cr cash

Question 13

How would you find a missing figure in the sales/ purchase ledger control account?

Answer 13

Recreate receivables and payables

Question 14

How can the sales figure be found?

Answer 14

Opening and closing receivables known

receipts from customers , sales returns , details of irrecoverable debts, disocunts allowed and contras

Question 15

How would you combine the cash,bank and receivable, payables technique in an incomplete records question?

Answer 15

cash and bank > receipts from customers > transfer to SLCA > sales figures

Question 16

Tackling an incomplete records question steps?

Answer 16

• 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

Question 17

When are margins and mark- ups useful?

Answer 17

• records of retailer
• reconstructing missing figures

Question 18

What is the key to dealing with mark-ups and margins?

Answer 18

• cost structure - sale of organisation
• info given

Question 19

What is a costs structure?

Answer 19

• relationship
• selling price of goods - costs of goods - gross profit in percentage terms

Question 20

What is a mark-up on costs ?

Answer 20

Costs of goods sold = 100%

sales = mark up on costs of difference

Question 21

What is the sales margin ?

Answer 21

sales revnue 100%

Question 22

What does gross profit margin mean?

Answer 22

Gross profit on sales

Question 23

What must accountants apply when they are considering reasonableness figures provided in a given context?

Answer 23

• Professional scepticism
  *

Question 24

What is professional sceptism?

Answer 24

• Questioning mind
• alert to conditions
• misstatement - error/fraud

Question 25

What if the examination questions states drawings are between two amounts?

Answer 25

incomplete records techniques - drawings balancing figure