Accounts from incomplete records (single entry system)

Many small traders keep only a cash book and a note of who owes whom. Profit can still be found, by comparing what the owner was worth at the start and at the end.

What incomplete records are

Books that do not follow the double entry system fully are called incomplete records, or loosely the single entry system. Typically the trader keeps a cash book and personal accounts of debtors and creditors, but no accounts for sales, purchases, expenses or assets.

Limitations

No trial balance can be prepared, so arithmetical accuracy cannot be checked.
True profit and financial position are hard to find; much depends on estimates.
Errors and fraud are harder to detect.
Banks and tax authorities place less trust in such accounts.

Method 1: statement of affairs (net worth method)

Profit increases the owner's capital. So if we know capital at the beginning and at the end, the increase, after allowing for money the owner put in or took out, is the profit.

Profit = Closing capital + Drawings − Additional capital − Opening capital

Capital on any date is found from a statement of affairs: a list of assets and liabilities like a balance sheet, but built from estimates and whatever records exist.

Example. Farida runs a boutique and keeps incomplete records.

Item	1 April 2025	31 March 2026
Cash and bank	30,000	55,000
Stock	1,20,000	1,50,000
Debtors	60,000	75,000
Furniture	1,00,000	1,00,000
Sewing machines		45,000
Creditors	70,000	85,000
Loan from sister	20,000	20,000

During the year she withdrew ₹5,000 a month for household expenses and brought in ₹20,000 of additional capital in October. Find the profit.

Statement of Affairs as at 1 April 2025
Liabilities	₹	Assets	₹
Creditors	70,000	Cash and bank	30,000
Loan from sister	20,000	Stock	1,20,000
Capital (balancing figure)	2,20,000	Debtors	60,000
		Furniture	1,00,000
	3,10,000		3,10,000

Statement of Affairs as at 31 March 2026
Liabilities	₹	Assets	₹
Creditors	85,000	Cash and bank	55,000
Loan from sister	20,000	Stock	1,50,000
Capital (balancing figure)	3,20,000	Debtors	75,000
		Furniture	1,00,000
		Sewing machines	45,000
	4,25,000		4,25,000

Statement of Profit or Loss for the year ended 31 March 2026
Particulars	₹	₹
Capital at the end of the year		3,20,000
Add: Drawings (₹5,000 × 12)		60,000
		3,80,000
Less: Additional capital introduced		20,000
Adjusted closing capital		3,60,000
Less: Capital at the beginning of the year		2,20,000
Profit for the year		1,40,000

Drawings are added back because they reduced closing capital without being a loss. Additional capital is deducted because it increased closing capital without being a profit.

Adjustments under this method

If the question asks for depreciation, provision for doubtful debts or outstanding expenses, apply them to the closing statement of affairs before finding closing capital. For example, 10% depreciation on furniture would reduce closing furniture to ₹90,000, closing capital to ₹3,10,000 and profit to ₹1,30,000.

Method 2: conversion to double entry

The statement of affairs gives one figure of profit and no detail. For a proper Trading and Profit and Loss Account, the missing figures (credit sales, credit purchases, opening capital, cash balances) are worked out by preparing summary accounts.

Missing figure	Found from
Credit sales	Total Debtors Account
Credit purchases	Total Creditors Account
Cash sales, cash purchases, drawings or closing cash	Cash book summary
Opening capital	Opening statement of affairs
Bills received or accepted	Bills Receivable / Bills Payable Account

Finding credit sales

Farida's records show: opening debtors ₹60,000; cash received from debtors ₹3,40,000; discount allowed ₹5,000; bad debts ₹3,000; goods returned by customers ₹7,000; closing debtors ₹75,000.

Dr. Total Debtors A/c Cr.
Particulars	₹	Particulars	₹
To Balance b/d	60,000	By Cash received	3,40,000
To Credit sales (balancing figure)	3,70,000	By Discount allowed	5,000
		By Bad debts	3,000
		By Sales return	7,000
		By Balance c/d	75,000
	4,30,000		4,30,000

Credit sales are ₹3,70,000. If cash sales from the cash book are ₹1,10,000, total sales are ₹4,80,000.

Finding credit purchases

Opening creditors ₹70,000; cash paid to creditors ₹2,60,000; discount received ₹4,000; purchases returned ₹6,000; closing creditors ₹85,000.

Dr. Total Creditors A/c Cr.
Particulars	₹	Particulars	₹
To Cash paid	2,60,000	By Balance b/d	70,000
To Discount received	4,000	By Credit purchases (balancing figure)	2,85,000
To Purchases return	6,000
To Balance c/d	85,000
	3,55,000		3,55,000

Credit purchases are ₹2,85,000. With these figures, opening and closing stock, and expenses from the cash book, the Trading and Profit and Loss Account and Balance Sheet are prepared in the usual way.

Statement of affairs and balance sheet compared

Basis	Statement of affairs	Balance sheet
Source	Partly ledger balances, partly estimates and memory	Ledger balances from double entry books
Reliability	Lower	Higher
Capital	Balancing figure	Taken from the Capital Account
Purpose	To find capital, and from it the profit	To show financial position
Missing items	Hard to detect	A missing item stops the two sides agreeing

Questions students ask

How is profit calculated under the single entry system?

Profit = Closing capital + Drawings − Additional capital − Opening capital. Opening and closing capital are found from statements of affairs.

Why are drawings added back?

Drawings reduced the closing capital although they are not a business loss. Adding them back shows what capital would have been without them.

How are credit sales found from incomplete records?

By preparing a Total Debtors Account with opening and closing debtors, cash received, discount, bad debts and returns. Credit sales are the balancing figure on the debit side.