TOPIC THREE: INCOMPLETE RECORDS

• When preparing the accounts of sole traders or other small

businesses, the books or records may fall short of a
complete system of double entry.
• Such situations may vary from cases where virtually no
records or bank accounts are maintained to cases where
bank accounts and some record of transactions are
maintained.
• Such accounting records, which fall short of a system of
complete double entry, are known as incomplete records
 Approaches in preparing accounts
• Two approaches used:
a) Single entry method
b) Double entry method
 Single entry method
• Statement of affairs method:
• One of the main methods that helps to determine profit/loss
where single entry system has been used.
• This method is based on the accounting equation of Capital
= Assets – Liabilities
• Statement of profit or loss would look as follows:
Closing Capital Balance xx
Less: Opening Capital Balance (xx)
Net increase or decrease xx
Add: Drawings made during the year xx
Add: Interest on drawings xx
Less: Interest on opening capital (xx)
Less: Fresh capital introduced during the year (xx)
Less: Salary to the businessman (xx)
Profit or loss during the year xx
Eg1. Mr. Pambazuka keeps his accounts on single entry
system. He has given the following information about his assets
and liabilities:
ITEM 31-03-2015 31-03-2016
Creditors 55,200 58,500
Cash at Bank 600 1,500
Bills Payable 26,400 28,200
Bills Receivable 16,200 18,300
Debtors 45,600 56,000
Stock in Trade 31,000 47,300
Machinery 66,200 78,000
Computers 18,000 17,000
During the year, Pambazuka brought in additional Rwf. 7,500
cash into the business. He withdrew goods worth Rwf. 2,100
and cash of Rwf. 7,200 for his personal use. Interest on opening
capital is to be given at 5% and interest on drawing is to be
charged at 10%.
Required:
• Prepare the statement of profit or loss for the year ended
31-03-2016 for Mr. Pambazuka using the statement of
affairs method.
Eg2. On 1st April 2014, Claudette started a beauty parlour. She
acquired a shop for Rwf. 1,200,000 and paid Rwf.200,000 for
interior fittings. She put Rwf. 400,000 into the business bank
A/c. She carried on till 31st March 2016, when she wanted to
know what the parlour has earned over the period of two years.
She has approached you to find out the business results with
following information as on 31-03-2016:
• In addition to the shop and fittings she had the following
possessions:
1. Stock (inventory) Rwf. 600,000
2. Motor car (purchased on 30-09-2015) at Rwf. 550,000
3. Cash at bank Rwf. 250,000
4. Based on her limited knowledge of accounting, she has told you
to charge depreciation at 2% per annum on the shop, 5% per
annum on fittings and 20% on the car
5. On 31-3-2016, Rwf. 140,000 was payable to creditors, and Rwf.
1,000,000 to a friend for money borrowed for the business.
6. She had withdrawn Rwf. 2,000 per month from the business.
Required:
• Prepare her statement of profit or loss for the two years,
ending 31/03/2016 using the ‘Statement of Affairs’
method.
 TOPIC FOUR: ACCOUNTS FOR NON-
TRADING ORGANIZATIONS
• Are organizations that are set up to promote or to cater for
the welfare of the members involved and not to make a
profit.
• E.g. clubs, (e.g. football clubs, sports clubs), welfare
associations and any other societies (charitable institutions)
• The types of accounts to prepare are different from the ones of
trading organizations.
i) Instead of a cashbook, the clubs will maintain a receipts and
payments which has similar entries to those of a cashbook.
ii) Instead of profit and loss account, we have an income and
expenditure account.
iii) Because the club is not formed by any one owner (has no
owner), it is funded by members’ contributions, donations,
income from investments to get an accumulated fund instead of
capital.
iv) Instead of profit(or loss), we have surplus( or deficit)
Note: A club may carry out some trading activities on a small
scale to finance some of the clubs activities.
Then prepare an income and expenditure account, the balance
sheet and a Bar Trading Account
 Format
ABC Club
Income and Expenditure Account
For the Year Ended 31st December 2018
Incomes Rwf Rwf
Profit from trading activities XX
Subscriptions XX
Income from Investments XX
Donations XX
Total Income XX
Loss from trading activities XX
All other expenses XX (XX)
Surplus XX
 ABC Club
Balance Sheet
As at 31st December Rwf Rwf Rwf
NonCurrent Asset
Buildings XX
Less: Provision for Depreciation (XX) XX
Fixtures & Fittings XX
Less: Provision for Depreciation (XX) XX
Motor Vehicle XX
Less: Provision for Depreciation (XX) XX
Investments XX
Total NonCurrent Assets XX
Current Assets
Stock XX
Debtors XX
Prepayments XX
Accrued Income XX
Cash XX
Bank XX XX
Current Liabilities
Creditors XX
Accrued Expenses XX
Prepaid Income XX
Bank Overdraft XX (XX) XX
XX
Accumulated Fund bal b/d XX
Add Suplus XX
XX
Other Funds
Life Membership Funds XX
Building Fund XX
Education Fund XX XX
XX
• Notes to the Formats above:
a)Subscriptions
• These are the amounts received by the club from the members to
renew their membership. It is often paid on an annual basis.
• It is income for the club and therefore reported in the income and
expenditure account.
• Depending on the policy of a club, any subscriptions due but not
received are shown as accrued income (debtors for subscriptions) in
the balance sheet.
• Any amounts prepaid are shown as prepaid (creditors for
subscriptions).
• Some clubs will not report subscriptions as income until it is
received in form of cash.
b).Income from investments
• Some clubs invest excess cash in the bank (fixed deposit
account), shares of limited companies, treasury bills and any
other investment that may be available.
• If the club is investing with no specific intention (i.e. a general
investment) then income from this investment should be
reported in the income and expenditure account.
• If the investment is for a specific purpose and relates to a
specific fund (e.g. building fund) it will not be reported in the
income and expenditure account but credited directly to the
fund
c) Other funds
• These are funds set up for a specific purpose and not
general. They will be shown together with the
accumulated fund.
• Any incomes relating to these funds, will be credited
directly to the funds and any expenses will be taken off
from these funds e.g. building fund, education fund.
• Depending on the policy of a club, the following accounting
treatment may be allowed:
i) The full amount is reported in the Income and Expenditure
account in the year it is received and therefore no balance is
retained in the life membership account.
ii) The amount is shown separately in the life membership fund
with no transfer in the Income and Expenditure account and
hence no balance in the life membership account.
iii) To transfer some amounts from the life membership funds to
the income and expenditure account over the expected life of
membership to the club.
 Eg1. From the following income and expenditure account
Prepare an income and expenses account for the year ended
31st December 2020
XYZ Club
Receipts and Payments Account
For the year ended 31st Dec 2020
RECEIPTS 000Rwf PAYMENTS 000Rwf
Balance b/d 5,000 Salaries paid 2,000
Donations received 2,000 Grounds-man wage 2,000
Profit on investment 2,000 Rent and rates expenses 2,000
Subscription received 5,000 Stationery and postage expenses 3,000
Entrance fee 3,000 Utility expenses paid 1,000
Balance c/d 7,000
17,000 17,000
Eg2. ABC receipts and payments account is shown below
ABC Friendship Club
Receipts and Payments account
For the year ended 31st Dec 2020
RECEIPTS 000Rwf PAYMENTS 000Rwf
Balance b/d 53,000 Salaries paid 25,000
Donations received 24,000 Grounds-man wages 12,400
Profit on investment 12,000 Rent and rates expenses 36,000
Subscription received 8,000 Stationery and postage expenses 30,600
Entrance fee 30,000 Utility expenses paid 10,500
Balance c/d 12,500
127,000 127,000
Additional information (all amount 000Rwf):
Total Subscription received was 8,000, out of which 1,000
related to the previous year and 2,000 were received in
advance for the next year or 2021.

Required:
Income and expenses account for the year ended on
31st December, 2020
Eg3. The following is the receipts and payments account of the
Friendship Club for the year ended 31 December 2017.
Receipts USD Payments USD
Bank bal b/d 102 Bar Purchases 4,434
Entrance fees 42 Wages 160
Subscriptions: 2015 25 Rent 220
2016 305 Heating& Lighting 128
2017 35 Postage & Stationery 120
Bar Sales 5,227 Insurance 110
Sale of Investment 750 General Expenses 89
Payments on account of
new furniture 450
Bank bal b/d 775
6,486 6,486
• The following information is also supplied
1. 31st Dec 2016
31st Dec 2017
Bar Stock, at cost 272 315
Creditors, bar purchases 306 358
Rent due 18 36
Heating &Lighting due 16 19
Subscription due 25 40
Insurance Paid in advance 5 7
2. On 31 December 2016, the club held investments which cost
USD 500. During the year ended 31 December 2017, these were
sold for USD 750.
3. Furniture was valued at USD 300 on 31 December 2016. On June
2017, the club purchased additional furniture at a cost of USD 520.
Depreciation of all furniture is to be provided for at the rate of 10%
per annum.
Required:
(a) Prepare an income and expenditure account for the year
ended 31 December 2017
(b) Prepare a balance sheet at that date.