METHODS TO DETERMINE PROFITS

FROM INCOMPLETE RECORDS

COMPARISON METHOD ANALYSIS METHOD
Ouck method to determne
estmated prot wthout preparng
ncome statement
Used when very mted or no
records avaabe (ony have
estmates of assets & abty
baances)
Prot/(osses)
= owners equty at the end -
owners equty at the begnnng
Increase n OE - prot; whe
decrease n OE - osses
To determne OE at the begnnng
and end of the perod:-
OE = ASSETS - LIABILITIES
Ths s done by preparng Statement
of Ahars - equvaent to baance
sheet / SOFP
Used when nfo. Avaabe
conssts of > the estmates of
assets and abty baances.
Detas of cash recepts and
payments may be obtaned
through cash book but not for
saes, purchases, expenses and
revenues. Hence,
Need to reconstruct edger a/c to
obtan the mssng nfo.
Then, statement of
comprehensve ncome w be
prepared n order to nd the net
prot
COMPARISON METHOD
STATEMENT OF AFFAIRS

A statement showng an estmated assets and

abtes of busness at a partcuar date
(2 statements - 1. for the begnnng and 2. for
end of perod)

Owners equty w be the baancng gure

between the tota assets and abtes.

After statement of ahars for both perod have

been prepared, prot or oss for the perod s
ascertaned by preparng Statement of Prot or
Loss (Income Statement @ Statement of
Comprehensve Income)
STATEMENT OF AFFAIRS
Statement of Ahars as at XXX
RF RF
ASSETS (Both NCA & CA)
Land xxx
Budng xxx
Motor vehce (on MV) xxx
Omce Equpment (on MV) xxx
Cash / Bank xxx
A/c Recevabe xxx
Prepad Expenses xxx
Accrued revenues xxx xxx
LIABILITIES (Both NCL & CL)
A/c payabe xxx
Accrued expenses xxx
Prepad revenues xxx
Bank overdraft xxx
Bank oan xxx xxx
CAPITAL / OWNERS EOUITY xxx
STATEMENT OF PROFIT OR LOSS
Mr A
Statement of Prot or Loss for the year ended XXX
RF
Owners e!"t# $t the en% &&
Add: Drawngs durng the year (f any) xx
Less: Addtona capta (f any) (xx)
Ad|usted owners equty at the end xx
Less' Owners e!"t# $t the (e)"nn"n) (&&)
Net *ro+t ,or the #e$r &&
BASIC PRINCIPLE:
OE at the end = OE at the begnnng +/- Prots/(osses) +
Addtona Capta - Drawngs
ANALYSIS METHOD
RECONSTR-CTION OF LED.ER A/C

Reconstruct:

Saes Ledger contro a/c - to nd credt saes &

payment receved durng the year

Purchases Ledger contro a/c - to nd credt

purchases & payment made durng the year

Cash book - to nd cosng baance, cash saes &

purchases, drawngs etc.

Expenses & revenue a/c - to nd expenses ncurred

and revenues earned for the year (both charged and
recognzed n IS)

Non current asset a/c - to nd deprecaton,

acquston & dsposa durng the year
RECONSTR-CTION OF LED.ER A/C
Saes Ledger contro a/c
Ba b/d
xx
*Ct saes
xx
Bank
xx
Dsc aowed
xx
Bad debts
xx
R.Inwards
xx
Ba c/d
xx
Purchases Ledger contro
a/c
Bank xx
Ds rcevd xx
R.Outward xx
Ba c/d xx
Ba b/d
xx
*Ct purchases
xx

Cash book
Ba b/d
xx
*Cash sae
xx
Sae of NCA
xx
Income
Receved
xx
*Cash purchase
xx
Trade payabe
xx
*Cash drawng
xx
Expenses pad
xx
Purchase of NCA
xx
Ba c/d
xx
RECONSTR-CTION OF LED.ER A/C
Expenses a/c
Prepayment b/dxx
Bank xx
Accrua c/d xx
Accrua b/d xx
*IS xx
Prepayment c/dxx
Revenues a/c
Accrua b/d xx
*IS xx
Prepayment c/dxx
Prepayment b/dxx
Bank xx
Accrua c/d xx
NCA a/c (MV/CV)
Ba b/d
xx
Acquston xx
*Deprecaton xx
Ba c/d xx
*Expenses (IS) = prepad b/d + bank + accrued c/d - prepad
c/d - accrued b/d
*Revenues (IS)= prepad b/d + bank + accrued c/d -
prepad c/d - accrued b/d
*If gven cost of the
assets, construct edger
as usua n topc 3
especay when there s
dsposa