STUDY MATERIAL C2
364
INCOMPLETE RECORDS; INCOME AND EXPENDITURE STATEMENTS
11.2 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
F
rom this the value of capital can be calculated at any time. A change in the value of capi-
tal can be caused b
y 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 sev-
eral techniques to identify these missing fi gures.
11.2.1 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.