2.

1 Incomplete Records
2.2 Non Profit Organisation
Learning Objective
1. To describe and explain how to determine incomplete
records.

2. To determine sales and accounts receivable amount and

purchase and accounts payable amount.

3. To be able to draw up income and expenditure accounts and

statement of financial position for non-profit organizations.

4. To be able to calculate profit and losses from special

activities and incorporate them into the final accounts.
 Chapter 2.1
Incomplete Records
INCOMPLETE RECORDS
• Incomplete records are, as suggested, accounting records that are
incomplete.

• They used single-entry system to record transactions (which effect

only one-side of the entry

• For example: as a result of a fire or flood where the records are

kept or having simply just not been kept by the business proprietor
perhaps through a lack of bookkeeping knowledge.
INCOMPLETE RECORDS

Incomplete records are not double-entry

01 system

Is known as single entry system, where only

02 parts of accounting records are recorded
completely

03 Not recorded anywhere at all

INCOMPLETE RECORDS
Why organizations do not keep double-entry
records?

01 Inexperienced and unknowledgeable staff

02 Natural disaster (flood, fire etc…)

Unaware of the importance of complete

03 records ( for loan, tax purposes etc…)

Cost of maintaining complete records might be higher

04 compared to business income
INCOMPLETE RECORDS
Who encounter incomplete records?

SMALL STREET
RETAILERS HAWKERS /
STALL

SMALL
BUSINESSES However, these businesses will need to have
financial statements prepared annually (for tax
purposes)
 INCOMPLETE RECORDS
How to handle incomplete records?
by using the following 5 steps

PREPARE ANY ACCRUALS

PREPARE CASH AND OR PREPAYMENTS
BANK SUMMARY To identify missing figure as
Usually is given expenses to be charged for the
accounting period.

2 4

1 3 5 PREPARE STATEMENT OF
PROFIT OR LOSS &
PREPARE STATEMENT PREPARE SALES LEDGER & STATEMENT OF FINANCIAL
OF AFFAIRS PURCHASES LEDGER POSITION.
Construction of CONTROL ACCOUNTS
opening capital To identify total sales and
purchases figures.
INCOMPLETE RECORDS
The construction of Beginning Capital and Ending Capital to
calculate Net Profit

Four reasons why capital might change:

1.Introduction of extra capital (+)
2.Withdrawal of capital (-)
3.Profit earned by the business (+)
4.Loss suffered by the business (-)
 BASIC ACCOUNTING EQUATION
ASSET = LIABILITY + OWNER’S EQUITY

EXPANDED ACCOUNTING EQUATION

ASSET = LIABILITIES + CAPITAL – DRAWINGS + REVENUE - EXPENSES

NET PROFIT

(Beg capital + additional capital) - drawings + net profit = Ending Capital

INCOMPLETE RECORDS
Profit as an increase in capital
Example of calculating net profit using the equation

Mr. Hilton is a self employed plumber. His financial details for the years
ended 31st December 2019 and 2020 showed:
2019 2020
Assets: RM RM
Motor vehicle 6,500 5,500
Equipment 2,500 2,000
Inventories 750 1,650
Cash at bank 900 1,300
10,650 10,450
Less: Accounts payable 750 650
Capital 9,900 9,800

Mr. Hilton’s drawings for the year were RM 10,650. He had sold some
shares for RM 1,050, the proceeds of which he had paid into his business bank
account. Calculate the net profit for Mr Hilton for 2020.
INCOMPLETE RECORDS
Example of calculating net profit using the equation
1st Step: Determination of Capital

Beginning Beginning - Beginning

= Liabilities
Capital Assets

Ending = Ending - Ending

Capital Assets Liabilities
INCOMPLETE RECORDS
Example of calculating net profit using the equation
2nd Step: Determination of Net Profit/Loss

Solution:

Thus, profit for the year can be calculated as:

RM
Capital at the start of the period 9,900
Add : Capital introduced (sale of shares) 1,050
10,950
Less : Drawings for period (10,650)
300
Add : Net profit (missing figure: by balance) 9,500
Capital at the end of the period 9,800
INCOMPLETE RECORDS
At times, more information is available in a small firms, other
than assets and liabilities such as:

Cash Cash
receipts Other
payments
record Records
record

The revenue and expense items can be derived from these

information, therefore, the profit or loss for the business
can be determined.
INCOMPLETE RECORDS
Preparing the 5 steps of incomplete records: An example
Mr. John Stanley is a self employed retailer. He maintains a cash book to
record his business receipts and payments. The following is a summary of
the cash book for the year ended 31 December 2020:

Cash Book

Balance b/d 1,500 Drawings 14,100

Cash received from AR 39,300 Payments to AP 17,300
Sale of own car for business 4,000 Motor Van insurance expense 4,100
Wages, trainee 5,100
Admin 250
Tools and consumables 600
General expenses 350
Balance c/d 3,000

44,800 44,800
INCOMPLETE RECORDS
Other information of Mr. John Stanley’s business:
Assets and liabilities at 31 December 2019 and 2020 were:

2019 2020
RM RM
Motor van 7,500 5,000
Inventory 1,350 1,450
Acc. receivable for goods sold 3,400 3,750
Acc. payable for good purchased 1,250 1,450
Motor Van insurance prepaid 160 170

The motor van had been purchased second hand on 1 January 2019 for RM 10,000
and is subject to depreciation at 25% per annum, straight line, that it is being written
off over four years.

Instruction:
Prepare Statement of Profit or Loss and Statement of Financial Position for the year
ended 31 December 2020.
INCOMPLETE RECORDS
1 Prepare Statement of Affairs

• Objective – to calculate beginning capital.

• Prepared on the closing date of the earlier accounting period.

• Use the beginning balances of assets & liabilities.
• Same format as Statement of Financial Position.

• Total Assets – Total Liabilities = Net Assets (Beginning Capital)

INCOMPLETE RECORDS
1 Prepare Statement of Affairs

Statement of Affairs as at 31.12.2019

Assets: RM
Motor van (Net book value)* 7,500
Inventories 1,350
Accounts receivable 3,400
Cash at bank 1,500
Prepayments 160
13,910
(-) Liability:
Accounts payable (1,250)
Net Assets 12,660

Beginning Capital at 31.12.2019 12,660

* Depreciation for 2019 = 25% x 10,000 = RM 2,500
INCOMPLETE RECORDS
2 Prepare Cash and Bank Summary

Cash receipts and payments as well as other records will help to calculate
missing figures of total sales, total purchases, drawings, operating expenses
and other revenues.
 Prepare Sales Ledger & Purchases
3 Ledger Control Accounts
1) PREPARE SALES LEDGER CONTROL ACCOUNT

FINDING MISSING FIGURES – CREDIT SALES

Cash sales: from cash receipts record (Cash Book)
S
+
A Credit sales: calculated in the Sales Ledger Control Account
(Account Receivable) after considering:
L Beginning & ending balances
Cash receipts / collection
E
Sales discount
S Sales returns & allowances

Bad debts / Interest charged on overdue

 Prepare Sales Ledger & Purchases
3 Ledger Control Accounts
1) PREPARE SALES LEDGER CONTROL ACCOUNT

FINDING MISSING FIGURES – CREDIT SALES

Sales Ledger Control Account (Account Receivable)

Sales Ledger Control Account

Beginning balance RM xxxCash receipts RM xxx

Interest charged Sales returns & allowances xxx
on overdue accounts xxx Sales discounts xxx
Credit sales ### Bad debts xxx
(difference) Ending balance xxx
xxx xxx
=== ===
 Prepare Sales Ledger & Purchases
3 Ledger Control Accounts
1) PREPARE SALES LEDGER CONTROL ACCOUNT
Solution

Sales Ledger Control a/c

Balance b/d-1/1/2020 3,400 Receipts from AR 39,300
Credit sales 39,650 Balance c/d-31/12/2020 3,750

43,050 43,050

John Stanley’s business does not have cash sales, therefore only credit are
calculated as total Sales.
 Prepare Sales Ledger & Purchases
3 Ledger Control Accounts
2) PREPARE PURCHASE LEDGER CONTROL ACCOUNT

FINDING MISSING FIGURES – CREDIT PURCHASE

P Cash purchases: from cash payments record (Cash Book)
U
R
+
Credit purchases: calculated in the Purchases Ledger Control
C Account (Account Payable) after considering:
H Beginning & ending balances
A Cash payments
S
Purchases discount
E
Purchases returns & allowances
S
 Prepare Sales Ledger & Purchases
3 Ledger Control Accounts
2) PREPARE PURCHASE LEDGER CONTROL ACCOUNT

FINDING MISSING FIGURES – CREDIT PURCHASE

Purchases Ledger Control Account (Account Payable)

Purchases Ledger Control

Cash payments RM xxx Beginning balance RM xxx

Purchase discounts xxx
Purchase returns & allowances xxx
Ending balance xxx Credit purchases ###
(difference)
xxx xxx
=== ===
 Prepare Sales Ledger & Purchases
3 Ledger Control Accounts
2) PREPARE PURCHASE LEDGER CONTROL ACCOUNT
Solution

Purchases Ledger Control a/c

Payments to AP 17,300 Balance b/d-1/1/2020 1,250
Balance c/d-31/12/2020 1,450 Credit purchases
17,500
18,750 18,750

John Stanley’s business does not have cash purchases, therefore only credit
purchases are calculated as total Purchases.
INCOMPLETE RECORDS
4 Prepare any Accruals or Prepayments

Determination of Operating Expenses

Regardless of when it is paid within the accounting period
after considering:

 Total accrued at the beginning and the ending of

accounting period
 Total prepaid at the beginning and the ending of
accounting period
 Total payments made
INCOMPLETE RECORDS
Determination of Operating Expenses
Compute Operating Expenses

Salary

Cash payment RM xxx Beginning balance (Accrued) RM xxx

Ending balance (Accrued) xxx SOPL (Salary expense) ###
(difference) ___
xxx xxx
=== ===

Insurance

Beginning bal. (Prepayment) RM xxx SOPL (Insurance Expense) RM ###

Cash payment xxx (difference)
____ Ending bal. (Prepayment) xxx
xxx xxx
=== ===
INCOMPLETE RECORDS
Determination of Operating Expenses

Solution

Motor Van Insurance Expense

Balance b/d -1/1/2020 160 SOPL 4,090

Cash payments 4,100 Balance c/d-31/12/2020 170

4,260 4,260
INCOMPLETE RECORDS
4 Prepare any Accruals or Prepayments

Determination of Other Revenues

Regardless of when it is received within the accounting
period after considering:

• Unearned revenue at the beginning and ending of

accounting period
• Revenue receivable at the beginning and ending of
accounting period
• Total receipts
INCOMPLETE RECORDS
Solution
John Stanley’s
Statement of Profit or Loss for year ended 31 December 2020

Sales 39,650
Less Cost of Good Sold:
Beginning inventory 1,350
Add: Purchases 17,500
18 850
Less: Ending inventory 1,450
Cost of Goods Sold 17,400
Gross profit 22,250
Less: Expenses
Wages 5,100
Motor van insurance expense 4,090
Administration 250
Tools and consumable 600
General expenses 350
Depreciation motor van 2,500 12,890
Net profit for year 9,360
INCOMPLETE RECORDS
Solution
John Stanley’s
Statement of Financial Position as at 31 December 2020
Property, Plant and Equipment:
Motor van 10,000
Less: Accumulated depreciation (5,000) 5,000
Current Assets:
Inventories 1,450
Account receivable 3,750
Motor van insurance prepaid 170
Cash at bank 3000

Total Asset 13,370

Financed by:
Beginning capital – 1.1.2020 12,660
Add: Capital introduced 4,000
Net profit for year 9,360
26,020
Less: Drawings (14,100)
Ending capital – 31.12.2020 11,920
Current liabilities:
Account payable 1,450
Total Equities and Liabilities 13,370
 Chapter 2.2
Non Profit-Organisation (NPO)
NON-PROFIT ORGANISATION
• There are certain organizations that are not engaged in
business activities or non profit making.
• Their objective is not to make profit but to serve and
provide facilities to members.
• Example of such organizations:
• Schools, Hospitals, Charitable Institutions, Welfare
Societies, Sports Clubhouse n etc.
NON-PROFIT ORGANISATION
The Similarities & Differences between Profit and
Non-profit Organizations
(Terms Differences)

Profit-Oriented Organisation   Non-Profit-Oriented Organisation

1) Statement of Profit and Loss   1) Income and Expenditure Account

2) Net Profit   2) Surplus of Income over Expenditure

3) Net Loss   3) Deficit of Income over Expenditure

4) Cash book   4) Receipts and Payments Account

5) Statement of Financial Position   5) Statement of Financial Position

6) Capital = Assets - Liabilities   6) Accumulated Fund = Assets - Liabilities

NON-PROFIT ORGANISATION
4 Main Financial Statements

Statement of Affairs
1 (Accumulated Fund– Capital)

Receipts & Payments Account

2 (Cash Account)

Income & Expenditure Account

3 (Statement of Profit and Loss)
.

Statement of Financial Position

4
NON-PROFIT ORGANISATION

Statement of Affairs
1 (Accumulated Fund – Capital)

• Same as Capital or Common Stock.

• Accounting Equation:

Accumulated fund = Assets – Liabilities

NON-PROFIT ORGANISATION
Receipts & Payments Account
2 (Cash Account)

• Summary of Cash Book for the period.

• Is used for organization with no assets (other than cash) and no
liabilities.
• Contains only that part of the income actually received and the
expenditure actually paid in the period.
• Both capital and revenue expenditure received or paid is also
included.
• The balance on account represents the cash on hand.
• The account reveal everything about what has happened
financially during a period.
NON-PROFIT ORGANISATION
RECEIPTS & PAYMENTS ACCOUNTS (Cont.)
Example: Receipts and Payments Account

The Sports Club

Receipts and Payments Account for the year ended 31 December 2020

Receipts (RM) Payments (RM)

Bank balance 1.1.2020 2,360 Groundsman's wages 7,280
Subscriptions received in 2020 11,480 Sports ground rental 2,960
Rent received 1,160 Committee expenses 580
Printing and stationery 330
Bank balance 31.12.2020 3,850
Groundsman Job
15,000   15,000
NON-PROFIT ORGANISATION
Income and Expenditure Account
3 (Statement of Profit or Loss)

• When assets are owned and/or there are liabilities, the receipts
and payments account is not sufficient.
• Because the account only shows the cash received, cash paid
out and the cash balances.
• The other assets and liabilities are not shown at all.
• Thus, it is required to have:
1. an Income & Expenditure Accounts, and
2. a Statement of Financial Position.
NON-PROFIT ORGANISATION

Statement of Financial Position

4

• Preparation is the same format as normal Statement

of Financial Position.
NON-PROFIT ORGANISATION
PREPARE FINANCIAL STATEMENTS

• In the next example, a separate trading account is to

be prepared for a bar, called, Bar Trading Account,
where refreshments are sold to make a profit in the
organization.
• Example: Sports Clubhouse sells drinks and
refreshments to the members, café that sell food &
beverages.
NON-PROFIT ORGANISATION
PREPARE FINANCIAL STATEMENTS

Example:
• The treasurer of the Pedro Football Club has prepared a
receipts and payments account, but members have complained
about the inadequacy of such an account.
• Thus, she asks an accountant to prepare:
1. Bar Trading Account,
2. Income and Expenditure Account and
3. Statement of Financial Position.
• The treasurer gives a copy of receipts and payments accounts
together with assets and liabilities at the beginning and end of
the year.
NON-PROFIT ORGANISATION

Prepayments & Accruals

PREPAYMENTS ACCRUALS

Prepaid Expense Accrued Revenue ASSET

Ie: Prepaid rent, Ie: Account receivable,
prepaid insurance subscription owing by
members
Unearned Revenue Accrued Expense LIABILITY
Ie: Payment in Ie: Account payable,
advance expenses owing
• The Receipts and Payments Account for the year ended 31 December 2020
for Pedro Football Club is as follows:

Pedro Football Club

Receipts and Payments Account for the year ended 31 December 2020
Receipts RM   Payments RM
Bank balance 1.1.2020 524   Payment for bar supplies*** 38,620
Subscriptions received for:   Wages:
2019* 1,400   Groundsman 19,939
2020 14,350   Barman 8,624
2021** 1,200   Bar expenses 234
Bar sales 61,280   Repairs football stands 740
Donations received 800   Ground upkeep 1,829
  Secretarial expenses 938
  Transport costs 2,420
  Bank balance 31.12.2020 6,210
79,554   79,554
*accrued revenue in 2019, but paid in 2020 ***bar supplies purchases
**unearned revenue 2021, but paid in 2020
Additional Information:

1. 31.12.2019 31.12.2020
RM RM
Inventory of bar supplies – at cost 4,496 5,558
Owing for bar supplies (purchases unpaid) 3,294 4,340
Bar expenses owing (accrued expense) 225 336
Transport costs (accrued expense) - 265
Subscriptions owing by members 1,400 1,750
(members not yet paid)

2. The land and football stands were valued at 31.12.2019 at: Land
RM40,000; Football stands RM20,000. The stands are to be depreciated
by 10% per annum.
3. The equipment at 31.12.2019 was valued at RM2,500, and is to be
depreciated at 20% per annum.
• From the information give, use the following THREE (3)
Stages, to prepare the accounts and statements:
Stage Prepare Statement of Affairs to identify
1 accumulated fund brought forward to 2020.

Stage Prepare the Bar Trading Account

2
Stage Prepare the Financial Statements
3 (Income & Expenditure Account and
Statement of Financial Position).
STAGE 1: Prepare Statement of Affairs
Pedro Football Club
Statement of Affairs
As at 31 December 2019
(RM) (RM)
Property, Plant and Equipment
Land 40,000
Stands 20,000
Equipment 2,500 62,500

Current Assets
Inventory of Bar Supplies 4,496
Account Receivables for Subscriptions 1,400
Cash at hand 524 6,420
Total Assets 68,920

Accumulated Fund 65,401

Current Liabilities
Accounts Payable 3,294
Bar Expense Owing 225 3,519
Total accumulated fund and liabilities 68,920
STAGE 2: Prepare Bar Trading Account
Pedro Football Club
Bar Trading Account
For the Year Ended 31 December 2020
(RM) (RM)
Sales 61,280
Less:Cost of Goods Sold
Beginning Inventory 4,496
Add:Purchases* 39,666
44,162
Less:Ending Inventory 5,558
Cost of Goods Sold 38,604
Gross Profit 22,676

Less:Expenses
Barman's Wages 8,624
Bar Expense** 345 8,969
Net Profit to Income & Expenditure Account 13,707

Refer to next notes * & **

 NOTES:
Note: *
Purchases Control Account
RM RM
Dec 31 Cash 38,620 Jan 1 Balance b/f 3,294
Balance c/f 4,340 Dec 31 Trading account (difference) 39,666
42,960 42,960
Jan 1 Balance b/f 4,340

Note: **
Bar Expenses
RM RM
Dec 31 Cash 234 Jan 1 Balance b/f 225
Balance c/f 336 Dec 31 Trading account (difference) 345
570 570
Jan 1 Balance b/f 336

(Take note that the adjustments were made by combining paid & unpaid balances into the accounts)
STAGE 3: Prepare Income & Expenditure Account & SOFP
1) Income & Expenditure Account:
Pedro Football Club
Income and Expenditure Accounts
For the Year Ended 31 December 2020
(RM) (RM)
Income
Subscription for 2020* 16,100
Profit from the bar 13,707
Donations received 800 30,607

Less:Expenditure
Wages - Groundsman and assistant 19,939
Repairs to stands 740
Ground upkeep 1,829
Secretary expenses 938
Transport cost ** 2,685
Depreciation expense - Stands 2,000
Depreciation expense - Equipment 500
28,631
Surplus of income over expenditure 1,976
 NOTES:

Note: *
Subscription Received
RM RM
Jan 1 Balance (accounts receivable) b/f 1,400 Dec 31 Cash - 2019 1,400
Dec 31 Income & Expenditure (difference) 16,100 -2020 14,350
Balance (in advance) c/f 1,200 -2021 1,200
Balance (accounts receivable) c/f 1,750
18,700 18,700
Jan 1 Balance (accounts receivable) b/f 1,750 Jan 1 Balance b/f 1,200
Note: **
Transport Cost
RM RM
Dec 31 Cash 2,420 Dec 31 Income & Expenditure (difference) 2,685
Accrued c/f 265
2,685 2,685
Jan 1 Accrued b/f 265

(Take note that the adjustments were made by combining paid & unpaid balances into the accounts)
 Pedro Football Club
Statement of Financial Position
As at 31 December 2020
(RM) (RM) (RM)
2) Statement of
Non Current Assets
Financial Position: Land 40,000
Football Stands 20,000
Equipment 2,500
Less:Accumulated Depreciation (2,000+500) 2,500 20,000
60,000
Current Assets
Inventory of Bar Supplies 5,558
Accounts Receivable for Subscriptions 1,750
Cash at bank 6,210 13,518
Total Assets 73,518

Accumulated Fund
Beginning balance 65,401
Add: Surplus of Income over Expenditure 1,976
67,377
Current Liabilities
Accounts Payable for Bar Supplies 4,340
Bar Expenses Owing 336
Transport Costs Owing 265
Subscription Received in Advance 1,200 6,141
Total Accumulated Fund and Liabilities 73,518
NON-PROFIT ORGANISATION
Preparing Subscription Account
Example:
• The MMU badminton club charges its members an annual
subscription of RM20 each member. It accrues for subscription
owing at the end of each year and also adjust for subscription
received in advance.

1. On 1 Jan 2017, 18 members had not yet paid their

subscription for the year 2016. RM360 (A/R)
2. In Dec 2016, 4 members paid RM80 for the year 2017.
RM80 (U/R)
3. During the year 2017 it received RM7,420 in cash for
subscriptions:
NON-PROFIT ORGANISATION
Preparing Subscription Account
continued:
For 2016 RM360
For 2017 RM6,920
For 2018 RM140
Total RM7,420

4. At 31 Dec 2017, 11 members had not paid their 2017

subscriptions. RM220 (A/R)
NON-PROFIT ORGANISATION
Preparing Subscription Account

Subscriptions
2017 RM 2017 RM
Jan 1 Owing b/d (A/R) (A) 360 Jan 1 Prepaid b/d (U/R) (B) 80
Dec 31 Income & Expenditure* 7,220 Dec 31 Bank (C) 7,420
31 Prepaid c/d (U/R) (C) 140 31 Owing c/d (A/R) (D) 220
7,720 7,720
2018 2018
Jan 1 Owing b/d (A/R) (D) 220 Jan 1 Prepaid b/d (U/R) (C) 140

* This is the difference between the two sides of the account.

(The adjustments were made by combining paid & unpaid balances into the accounts)