Definition and Types of Incomplete Records


Definition and Types of Incomplete Records

Incomplete records is a term associated with bookkeeping systems which do not encompass maintenance of a full set of books of prime entry or do not employ the double entry concept in its totality.  Incompleteness of records takes varying degrees.  In extreme cases it may be considerable lack of records.  In other cases, it may be minor failure to keep double entry records for only some few items.

For most sole traders, the size of their operations and the extent of owner's involvement in controlling daily operations make it affordable for such entities not to maintain elaborate double entry bookkeeping systems.  Moreover, they may have neither the expertise to operate double entry bookkeeping system nor the resources to employ appropriate assistants.  Therefore, incomplete records may be necessitated by realities of economic life, although sheer neglect is often the reason.  There are two types of incomplete record situations, one is where virtually no written records are kept by a business and the other is where partial records are kept.

Where no written records are kept

Sometimes a sole owner doing business may not find a need to keep routine written records.  Take a shoe shiner at a street corner for example; all his services are paid for immediately in cash.  Supplies for his operations (shoe polish and brushes) are bought over the counter in cash.  Normally there would be no assets of major value in the business.  If shoe shining is his only means of livelihood, performance of his business can be estimated and measured by observing the change in his net worth or equity (total personal assets minus total personal liabilities) over a time period.


Where partially written records are kept

If all transactions are recorded but without employing the double entry system, such recording is termed "Single entry" recording.  From such records every information relevant for preparation of financial statements can be retrieved and financial statements can be prepared with little difficulty.  Where single entry is in use and not all transactions have been recorded, one first has to establish all missing information before financial statements can be prepared.  This process requires more efforts.  There is no standard approach to preparation of financial statements where there is missing information.  From whatever information available, one needs to assemble all the information necessary for preparation of financial statements.  In these situations, usually there will be copies of bank statements, some record of cash collections and payments, a pile of invoices from suppliers both paid and unpaid and a few other things

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