Accounts of Incomplete Records NCERT Textbook PDF

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Accounts of Incomplete Records NCERT Textbook With Solution PDF Free Download

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Chapter 11: Introduction to Accounting

We have so far studied accounting records of firms, which follow the double entry system of book keeping.

This gives us an impression that all business units follow this system. However, in practice, all firms do not maintain accounting records strictly as per the double entry system.

Many small size enterprises keep incomplete records of their transactions. But, they also have to ascertain the profit or loss for the year and the financial position of the firm as at the end of the year.

This chapter deals with the ascertainment of profit or loss and financial position of the firm that have not been maintaining records as per double entry bookkeeping or whose records are otherwise incomplete.

11.1 Meaning of Incomplete Records Accounting records, which are not strictly kept according to double entry system are known as incomplete records.

 Many authors describe it as single entry system. However, single entry system is a misnomer because there is no such system of maintaining accounting records.

It is also not a ‘short cut’ method as an alternative to double entry system. It is rather a mechanism of maintaining records whereby some transactions are recorded with proper debits and credits while in case of others, either one-sided or no entry is made.

Normally, under this system records of cash and personal accounts of debtors and creditors are properly maintained, while the information relating to assets, liabilities, expenses and revenues is partially recorded.

Hence, these are usually referred as incomplete records. Features of Incomplete Records Incomplete records may be due to partial recording of transactions as is the case with small shopkeepers such as grocers and vendors.

In case of large sized organisations, the accounting records may be rendered to the state of incompleteness due to natural calamity, theft or fire.

 The features of incomplete records are as under : (a) It is an unsystematic method of recording transactions. (b) Generally, records for cash transactions and personal accounts are properly maintained and there is no information regarding revenue and/ or gains, expenses and/or losses, assets and liabilities.

(c) Personal transactions of owners may also be recorded in the cash book. (d) Different organisations maintain records according to their convenience and needs, and their accounts are not comparable due to lack of uniformity.

(e) To ascertain profit or loss or for obtaining any other information, necessary figures can be collected only from the original vouchers such as sales invoice or purchase invoice, etc.

Thus, dependence on original vouchers is inevitable.

(f) The profit or loss for the year cannot be ascertained under this system with high degree of accuracy as only an estimate of the profit earned or loss incurred can be made.

The balance sheet also may not reflect the complete and true position of assets and liabilities.

Reasons of Incompleteness and Its Limitations It is observed, that many businessmen keep incomplete records because of the following reasons : (a) This system can be adopted by people who do not have the proper knowledge of accounting principles;

(b) It is an inexpensive mode of maintaining records. Cost involved is low as specialised accountants are not appointed by the organizations;

(c) Time consumed in maintaining records is less as only a few books are maintained; and (d) It is a convenient mode of maintaining records as the owner may record only important transactions according to the need of the business.

However, the mechanism of incomplete records suffers from a number of limitations. This is due to the basic nature of this mechanism.

Broadly speaking, unless a systematic approach to maintenance of records is followed, reliable financial statements cannot be prepared.

AuthorNCERT
Language English
No. of Pages38
PDF Size2.4 MB
CategoryAccountancy
Source/Creditsncert.nic.in

NCERT Solutions Class 11 Accountancy Chapter 11 Accounts of Incomplete Records

1. State the meaning of incomplete records.

Accounting records prepared without following the double entry book keeping system strictly are called incomplete records. In this type of recording mechanism some of the transactions are recorded either by making one entry or no entry. In this way it impacts assets, liabilities, revenue and expenses and hence are known as incomplete records.

2. What are the possible reasons for keeping incomplete records?

Incomplete records are kept due to the following reasons:

  • Businesspersons lack a requisite accounting knowledge and are more inclined to follow this method.
  • Recording transactions using single entry system tends to be less time consuming and requires less maintenance.
  • It is cost effective way of keeping records as it doesn’t require a specialist.
  • It gives the owner flexibility to record those transactions which are more important for business

3. What practical difficulties are encountered by a trader due to incompleteness of accounting records?

Following difficulties are faced by traders due to incompleteness of accounting records:

1. It is not possible to determine accuracy of accounts and correctly prepare trial balance as the records are not as per the double entry system.

2. It is difficult to make tax authorities believe, the reliability of the income that is computed.

3. Determining and evaluating the financial results of a business will not be possible

4. True profit or loss cannot be determined as all transactions are not recorded.

5. Profitability, liquidity and solvency of a business cannot be determined. Hence, investors will be doubtful about investment.

6. Encourages fraud as there is no arithmetical accuracy in the records.

NCERT Class 11 Accountancy Textbook Chapter 11 With Answer PDF Free Download

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