TN 12th STATEBOARD ACCOUNTANCY 2021 - UNIT 1 - CHAPTER 1 - ACCOUNTS FROM INCOMPLETE RECORDS BOOK BACK ANSWERS

ACCOUNTS FROM INCOMPLETE RECORDS

II. Very Short Answer Questions

Question 1. What is meant by incomplete records?

Answer

1. When accounting records are not strictly maintained according to double entry system, these records are called incomplete accounting records. 2. Generally, cash accounts and the personal accounts of customers and creditors are maintained fully and other accounts are maintained based on necessity.

Question 2. State the accounts generally maintained by small sized sole trader when double entry accounting system is not followed.

Answer. Generally cash account and the personal accounts of customers and creditors are maintained by small sized sole trader. When double entry accounting system is not followed.

Question 3. What is a statement of affairs?

Answer. A statement of affairs is a statement showing the balances of assets and liabilities on a particular date. The balance of assets are shown on the right side and the balance of liabilities on the left side. This statement resembles a balance sheet. The difference between the total of assets and total of liabilities is taken as capital. Capital = Assets — Liabilities.

III. Short Answer Questions

Question 1. What are the features of incomplete records?

Answer

1. Nature:

• It is an unscientific and unsystematic way of recording transactions.

• Accounting principles and accounting standards are not followed properly.

2. Types of accounts maintained — In general only cash and personal accounts are maintained fully. Real accounts and nominal accounts are not maintained properly. Some transactions are correctly omitted.

3. Lack of uniformity — there is no uniformity in recording the transactions among different organisations. Different organisations record their transactions according to their needs and conveniences.

4. Financial statements may not represent true and fair view — Due to the incomplete information and inaccurate records of accounts, the profit or loss calculated from these records cannot be relied upon. It may not represent true profitability. Assets and liabilities may not represent a true and fair view of financial position.

5. Suitability — only the business concerns which have no legal obligation to maintain books of accounts under double entry system may maintain incomplete records. Hence. it may be maintained by small sized sole traders and partnership firms.

6. Mixing up of personal and business transactions — generally, personal transactions of the owners are mixed up the with the business transactions. For example, purchase of goods for own use may be mixed up along with business purchases.

Question 2. What are the limitations of incomplete records?

Answer. Limitations of Incomplete records:

1. Lack of proper maintenance of records — it is an unscientific and unsystematic way of maintaining records. Real and nominal accounts are not maintained properly.

2. Difficulty in preparing trial balance — as accounts are not maintained for all items, the accounting records are incomplete. Hence, it is difficult to prepare trail balance to check the arithmetical accuracy of accounts.

3. Difficulty in ascertaining true profitability of the business — Profit is found out based on available information and estimates. Hence, it is difficult to prepare ascertain true profit as the trading and profit and loss account cannot be prepared with accuracy.

4. Difficulty in ascertaining financial position — In general, only the estimated values of assets and liabilities are available from incomplete records. Hence, it is difficult to ascertain true and fair view of state of affairs or financial position as on a particular date

5. Errors and frauds cannot be detected easily — as only partial records are available, it may not be possible to have internal checks in maintaining accounts to detect errors and frauds.

6. Unacceptable to government and other activities — as accounts maintained are incomplete, these may not comply with the legal requirements. Hence, government, tax authorities and other legal authorities do not accept accounts prepared from incomplete records.

Question 3. State the differences between double entry system and incomplete records.

Answer:

Question 4. State the procedure for calculating profit or loss through statement of affairs.

Answer. The difference between the closing capital and the opening capital is taken as profit or loss of the business. Due adjustments are to be made for any withdrawal of capital from the business and for the additional capital introduced in the business. Adjusting closing capital = Closing capital + Drawings-Opening capital. Closing capital + Drawings - Additional capital - Opening capital = Profit/Loss.

Question 5. Differentiate between statement of affairs and balance sheet.

Answer:

Question 6. How is the amount of credit sale ascertained from incomplete records?

Answer. Ascertainment of Credit Sales:-

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IV EXERCISES:

QUESTION: 1