| The accounting records of many smaller | | | | accounting records. |
| non-profit organisations such as clubs, cultural | | | | Assume that a trader has been in business for |
| societies and small undertakings are often kept by | | | | some time and that he wants to determine his |
| means of a single entry accounting system. | | | | interest in the undertaking at a specific date. In |
| Nevertheless, details of the financial activities of | | | | order to do this he must determine the total |
| such organisations and undertakings are available in | | | | interest in the business and against this, bring into |
| different documents such as bank statements, | | | | account any external interest. This can be done |
| invoices, accounts, wage sheets and minute | | | | by, constructing an equity statement. (Basically, |
| books. | | | | this contains the same information as the balance |
| There are two major disadvantages to such | | | | sheet, but is not prepared from balances of |
| incomplete (non-double entry basis) accounting | | | | accounts in a double entry accounting system.) |
| records: (1) a great deal of useful information may | | | | The equity statement must be prepared by |
| be lost. It is possible to prepare financial | | | | referring to any applicable information available. |
| accounting statements from the available | | | | Keeping in mind that, undertakings that do not |
| information, but this may be more difficult than | | | | have formal accounting systems will find it |
| when complete records are available. Certain | | | | necessary to keep records of certain basic |
| transactions may not be accounted for and there | | | | information in order to conduct their business. For |
| is also no continuity in the recording of financial | | | | example, records of cash received and paid and |
| and other useful information. (2) The advantages | | | | amounts owing, both to and by the undertaking, |
| of the controls inherent in a double entry | | | | are essential. Cash on hand can be determined by |
| accounting system are lost. | | | | a cash count, cash in bank from the bank |
| A discussion of the treatment of incomplete | | | | statement and amounts owing to and by the |
| records is useful for various reasons. First, it | | | | undertaking from invoices. Stock can be counted |
| emphasises the advantage of a comprehensive | | | | physically and the valued. The cost of fixed |
| double accounting system. Further, it is practical | | | | assets purchased can be determined from the |
| because accountants often have to prepare | | | | supporting documentation. Owner's equity will be |
| financial statements from such incomplete | | | | the difference between the values allocated to |
| records, chiefly for income tax purposes. In | | | | assets and liabilities. |
| practice, therefore, the conversion of single entry | | | | The most practical method of determining net |
| accounting information to a double entry basis is | | | | income or loss from incomplete accounting |
| an analytical exercise. It may also happen that the | | | | records is to analyse the change in owner's equity |
| double entry accounting records of an enterprise | | | | during any specific period. Obviously, owner's |
| are lost (e.g. as a result of damage by fire) and | | | | equity increases if a profit is made and when the |
| the accountant must reconstruct them from | | | | owner makes additional investments in the |
| incomplete records. Consequently, attention is | | | | undertaking. Conversely, owner's equity decreases |
| given to certain aspects and practical procedures | | | | as a result of losses and drawings by the owner. |
| that arise as a result of keeping incomplete | | | | |