Single Entry / Incomplete Records

1. What is Single Entry / Incomplete Records?

Definition: Accounting records not kept according to double-entry principles are called Incomplete Records or Single Entry. We still have to make accounts — but we have no proper double-entry books to take them from.

Why do we have no double-entry records? (2 reasons)

1. No professional accountant — small business / small shop that cannot afford a full-time accountant, and the owner is not familiar with accounting terms ⇒ no updated records.
2. Records destroyed — there was an accountant, but the records were lost in a fire, flood or other natural calamity / disaster.

Fix (case 1): at year-end hire an accountant for a few days / weeks and pay him to prepare the accounts using single-entry concepts.

Vocabulary you will meet (same thing, different names)

2. Statement of Affairs

Definition: a list of assets and liabilities prepared without double-entry records is a Statement of Affairs (a rough balance sheet), not a “Balance Sheet / SFP”. Its only job is to calculate capital (= net assets).

3. Profit / Loss from Capital (no income statement)

Sometimes there are no records of sales, purchases, expenses or other income (very casual business). We still need to know how much profit was earned that year ⇒ use the capital reconciliation from the SFP — worked backwards.

Normal (forward) format — profit is known:

(the (−) / (+) signs on the right are what the teacher wrote on the board = what you do to each item in the reverse working)

Logic behind it (teacher's example)

Capital rose by 70,000 during the year — that increase is the profit. If the figure is negative ⇒ loss.

Board example (Video 43)

Opening capital $100,000; additional investment $50,000; drawings (cash + goods) $120,000; closing: total assets $600,000, total liabilities $150,000.

4. Making an Income Statement from Incomplete Records

The format of the income statement is exactly the same as for a sole trader with a trial balance. The only difference: sales and purchases are not given — and there is no trial balance because there are no balanced T-accounts. So we calculate them first.

5. Total Sales = Cash Sales + Credit Sales

Cash sales are normally given in the question as cash takings (or “takings banked” = cash sales already deposited in the bank). Credit sales are not given ⇒ find them with the Sales Ledger Control Account (SLCA).

An income statement always shows total sales (credit + cash), never only credit sales.

① Sales Ledger Control Account (SLCA = debtors a/c)

One account for all customers together (not one debtor), kept in the general ledger. (3 ledgers: sales ledger = individual debtors, purchase ledger = individual creditors, general ledger = combined accounts incl. the two control accounts.) Revise the “Control Accounts” topic first.

• Debtors are an asset ⇒ opening balance b/d on DEBIT; closing balance c/d on CREDIT (opposite side).
• No abnormal (“minority”) balances in single entry — just write the normal balance.
• Credit sales (the unknown, X): Dr Debtors / Cr Sales — total for the year, dated at year-end.
• Customers pay: Dr Bank / Cr Debtors ⇒ if the question doesn't say cash or cheque, write Bank (businesses prefer banking).
• Discount allowed, bad debts (irrecoverable), return inwards: all credit the SLCA (they reduce debtors).

② Alternative formula (if no SLCA is asked for)

Why add DA, RI and bad debt? They only arise on credit customers (discount for early payment, goods returned, customer cannot pay) ⇒ they are part of credit sales.

③ Finding cash sales — the cash account

Cash in hand is an asset ⇒ opening b/d always Dr, closing c/d always Cr. Cash sales: Dr Cash / Cr Sales (the missing figure). Cash deposited in bank: Dr Bank / Cr Cash. Cash expenses / drawings: Dr Expense or Drawings / Cr Cash.

6. Total Purchases = Credit + Cash Purchases

Cash purchase = any purchase paid for immediately — cash, cheque, debit card, wire transfer: all count as cash purchases. It is usually missing in the question because businesses buy on credit; if the business also buys for cash, it will be stated. Credit purchases are found with the PLCA.

① Purchase Ledger Control Account (PLCA = creditors a/c)

• Creditors are a liability ⇒ opening b/d on CREDIT; closing c/d on DEBIT. No abnormal balances.
• Credit purchases (unknown): Dr Purchases / Cr PLCA.
• Paying suppliers: Dr PLCA / Cr Bank (write Bank if mode not stated).
• Discount received (an income) and return outwards both debit the PLCA (liability falls).
• Debit side is the greater side (purchases missing on Cr) ⇒ total both sides ⇒ purchases = total − b/d.

② Alternative formula

Same figures as the PLCA — only in equation form. Discount received arises only on credit purchases (we pay suppliers early) and returns go to credit suppliers ⇒ both are part of credit purchases.

③ Drawings of goods

Owner takes goods for personal use: Dr Drawings / Cr Purchases (we first debited purchases when buying them for resale, so we credit it back). ⇒ deduct from purchases.

7. Cash Book — finding other missing figures

If some other item is missing (receipts from debtors, drawings, an expense …) use a cash account, a bank account, or a two-column cash book (cash | bank) if both have missing items — make only what you need.

Rules

• Cash is always an asset: b/d Dr, c/d Cr.
• Bank b/d can be Dr (money in bank) or Cr (overdraft, OD); c/d can also be either — e.g. start with a balance, end with an overdraft, or vice-versa.
• Only ONE closing balance for bank — either a bank balance or an overdraft, never both.
• Receipts (Dr): cash sales; receipts from debtors (cash ⇒ cash column, cheques ⇒ bank); sale of non-current asset; capital introduced by owner; bank loan.
• Payments (Cr): drawings; payment to suppliers; expenses paid; purchase of non-current assets.
• Method: total the greater side, write it on both sides; the gap on the other side is the missing figure.

Board layout shows where each balance can sit: cash b/d on Dr, c/d on Cr. Bank b/d may be Dr or Cr (overdraft, OD). A closing OD is the balancing figure on the debit side; a closing bank balance sits on the credit side — use only one. The “?” (receipt from debtors in cash) is the figure to find. NCA = non-current asset.

8. Missing Expenses — accruals & prepayments

Cash book gives expenses paid, but the income statement needs expenses incurred for the year. Adjust for accruals / prepayments.

Why? (logic)

• Prepaid = paid in advance = an asset ⇒ opening Dr, closing Cr. Closing prepaid belongs to next year ⇒ deduct.
• Accrued = service used but not paid = a liability ⇒ opening Cr, closing Dr. Closing accrued is this year's cost not yet paid ⇒ add.
• Opening accrued belonged to last year (we paid it this year) ⇒ deduct. Opening prepaid was paid last year but used this year ⇒ add.
• Expenses are debit in nature (they reduce capital, which is credit) ⇒ Dr Expense / Cr Bank when paid; at year-end balance → income statement.

9. Markup vs Margin — finding missing closing inventory

If closing inventory is not given, the question gives a profit percentage instead. First decide which one:

Markup can NOT be applied on sales (and margin not on cost). If you have sales but are given a markup ⇒ convert markup → margin first. (Revise the Ratios topic.)

Worked example (Video 42): find closing inventory

Sales $25,500; return inwards $1,200; opening inventory $12,500; purchases $9,000; return outwards $550; carriage inwards $500; markup 25%; closing inventory not given.

Board signs beside the lines (−, −, +, −) = what you do to each item when working backwards from cost of sales: deduct opening, purchases, carriage in; add back return outwards. (The board writes “gross profit 25% of $24,300 = 4,860” — 4,860 is 20% (the margin) of 24,300; 25% is the markup on cost.)

If you are given margin and have cost of sales, convert margin → markup (÷ (100 − margin)) and apply it on cost.

10. Depreciation — Revaluation Method

In single entry the question usually gives no depreciation method, rate or life ⇒ you cannot use straight-line / reducing balance ⇒ use the revaluation method (also used for small-value assets: loose tools, crockery, crates).

• Opening value = value (NBV) at start of year = last year's closing value. If both cost and value are given, use value, not cost.
• Addition = cost of non-current assets bought this year (added).
• Disposal = value of the asset sold — NOT the original cost and NOT the sale proceeds. (Bought for 4,000 years ago, value 2,000 at disposal, sold for something else ⇒ deduct 2,000.)
• Closing value = estimate by the manager / owner or a professional valuer at year-end.
• The missing amount is depreciation ⇒ goes to the income statement.

11. The Income Statement (single-entry version)

Worked income statement — loss example (Video 42, year ended 31 Dec 2020)

5,110 − 18,200 = −13,090 ⇒ expenses exceed profit ⇒ loss.

12. Past Paper — Charles Atlas (Paper 22, May/June 2014, Q1)

(The question on the slide is cut off at the bottom, so figures marked † are taken from the teacher's workings.)

(a) Sales ledger control account — credit sales

(b) Purchases ledger control account [5]

(c) Expenses incurred [4]

Other payables 5,600 at 1 Jan = accrued (opening liability ⇒ Cr b/d). Other receivables 1,720 at 31 Dec = prepaid (closing asset ⇒ Cr c/d).

Cash sales & total sales — the “where did the cash go?” trick

“Cash takings banked” 30,000 plus the 29,000 not banked ⇒ cash sales = 59,000. The 29,000 was spent: 10,000 wages (expense) and the remaining 19,000 = drawings (personal use).

(d) Income statement for the year ended 31 Dec 2013 [15]

Single entry in a service business — The City School (board example, Video 20)

“The City School has the following receipts and payments account for the year ended 31 Dec 2019.”

The slide only shows these first lines (the rest of the table is cut off) and the recording does not work through this example — shown here only so nothing from the board is missing.

13. Quick Recap — Full Chapter Cheat-sheet