Calculate Sales Figure in Single Entry Accounting(Incomplete Records)

What is single entry and accounting from incomplete records.

So far, we have been looking at the preparation of fi nancial statements from a ledger, with the results summarised in the trial balance. But not every business uses the full system of daybooks, ledger accounts and so on. Particularly in small businesses, there may not be management time or the fi nancial expertise available. Even in larger businesses, it occasionally happens that accounting records are lost, damaged or destroyed. For all these reasons it may sometimes be necessary to prepare an income statement and statement of fi nancial position from more limited information. The same diffi culties may apply to records maintained by non-profi t-making bodies, such as clubs and societies, and many of the techniques covered in this tutorial apply to both. All the contents of this tutorial  hould be considered important for the examination, as it provides a good test of your knowledge of bookkeeping, which is essential to pass the computerbased assessment. The ability to prepare fi nancial statements from incomplete records may be regarded as more diffi cult than from complete records.

Calculating ‘missing figures ’

If an organisation does not keep its records in double-entry form, with the production of a trial balance, the preparation of the income statement and statement of fi nancial position may require some fi gures to be ascertained from other records and information. For example, a common situation is where the owner of a business has not kept records of his drawings from the business, but there are other fi gures available that would enable the drawings fi gure to be determined.

The accounting equation is usefully employed in this situation:

Assets =  Liabilities + Capital

From this the value of capital can be calculated at any time. A change in the value of capital can be caused by only three things:

1. an introduction/withdrawal of capital;

2. net profi t or loss for the period;

3. drawings.

Thus, if the opening and closing values of capital are known then, provided that the value of profi t and of capital introductions/withdrawals are known, the value of drawings can be calculated. In an organisation that does not keep full ledger accounts, there may be several fi gures that need to be determined with the aid of other fi gures that can be verifi ed. There are several techniques to identify these missing fi gures.

 Calculating Sales figures

It is common in organisations that do not keep full bookkeeping records to fi nd that some fi gures regarding sales are unavailable. It might be that opening receivables lists have been mislaid, or cash sales have not been recorded, or discounts given to customers might have been overlooked. Drawing up the equivalent of a sales ledger control account will enable the missing fi gure to be determined. Of course, it will not be a ‘ proper ’ sales ledger control account, because there is unlikely to be a sales ledger, but the technique is the same. The idea is to insert in the ledger accounts all known information, and then to derive the missing information as a balancing fi gure.

To take sales as an example:

● we probably know our opening fi gure for receivables – it is the fi gure that appeared in last year’s statement of fi nancial position;

● we probably know our closing receivables – they are the people who owe us money now ;

● bank statements should indicate the amount received from customers in the form of

cheques and other types of receipts (though we may have to look back through all the statements for the period in order to derive this information);

● we may have records of cash sales (e.g. till rolls) that will indicate the amounts received from cash customers;

● by entering all these known amounts into the sales total account we can derive a sales fi gure for the period as a balancing fi gure.

Note that, although we normally exclude cash sales from the sales ledger control account, it is permissible to include them in the ‘ sales total account ’ in order to get a complete total of sales, whether for cash or on credit.