Theory question 103
Incomplete RecordsOse, a sole proprietor, does not keep proper books of account.
(a) Identify and explain the system of bookkeeping Ose operates.
(b) State three advantages and three disadvantages of the bookkeeping system Ose operates.
Show the model answer
(a) Single entry (incomplete records): a system in which transactions are not recorded on the double-entry principle; usually only a cash book and personal accounts of debtors and creditors are kept, and profit is found by comparing capital at two dates.
(b) Advantages (any three): simple and easy to operate; cheap – no trained accountant needed; less time and paperwork; suitable for small businesses.
Disadvantages (any three): no trial balance, so arithmetic accuracy cannot be checked; errors and fraud are hard to detect; true profit or loss and financial position cannot be found accurately; not acceptable to tax authorities or banks; nominal and real accounts are not kept; hard to value the business on sale.
Name it as single entry and balance advantages against disadvantages.