Lesson 17: Incomplete records

Question 1

What are the disadvantages of keeping incomplete records and single entry>

Answer 1

-Detection of errors is difficult as a trial balance cannot be prepared
-Fraudulent entries are easy to make
-Omission of important items or transactions as there are no or inadequate records of accounts payable, expenses, revenue, etc.

Question 2

What are the methods for Ascertaining operating results and financial position?

Answer 2

-Comparison method
-Analysis method

Question 3

When and how is the Comparison method used?

Answer 3

This method is used where almost no accounting records are available

Under this method, a comparison is made of the equity at the beginning and end of the accounting period

Question 4

What does Equity at end>Equity at beginning and Equity at end<Equity at beginning represent ?

Answer 4

-Equity at end > Equity at beginning = Profit
-Equity at end < Equity at beginning = Loss

Question 5

What must be adjusted during the period when using the Comparison method? `

Answer 5

-Issue of shares
-Dividends declared

Question 6

What is the formula for Net profit?

Answer 6

Net profit = Ending Equity - Issue of Shares - Opening Equity + Dividends declared