Accounting for Incomplete Record

Incomplete record is the accounting record in which the company using a single-entry method to record business transactions. As the name suggests, the Single entry method records only one entry into the log whether on a hard copy or electronic file. It usually uses for the newly established company that moves from family own and does not have proper control over recording.

Single-entry system record the date, description, and amount of the transaction as income, expense, and balance sheet items. In balance sheet, accountant will focus on the cash reconciliation to ensure the corrected balance. The expense and income will follow the cash basic, they only record expense and income when there is cash in and out.

As result, the single entry system is able to generate a list of income, expense, cash book, and some fixed assets list if they are aware. Some assets may reclass as the expense when purchase. There will be no accounts payable as they will not record until payment made.

Incomplete record can result from the missing transaction from the recording or the mix between the double-entry system and the single entry system. Some transactions are omitted from the record due to mistakes or fraud.

Reasons for Incomplete Records

The company financial statements are incomplete due following reasons:

• Fraud: the accountant may commit fraud and try to remove some transactions from the recording, so nobody will be able to identify it.
• Small business: some small businesses record the sale and purchase transaction use a single system as it is easy and straightforward. Normal people without training can record the transaction base on the cash flow.
• Loss record: some businesses already have proper records, but part of them were lost due to various reasons. The company does not make proper data back up so it lost during the accident.
• Incompetence: employee or business owner does not have enough competence to prepare the financial statement. They just record base on experience which lead to incomplete record.
• Lack of system: The company does not use proper accounting software to record the data. They just use a simple spreadsheet such as Excel to record, it will end up missing some information.
• Lack of resources: The company does not recruit competent accountants to prepare financial statements.

Advantages of Single Entry System

Advantages
Easy & Time Saving	It is very easy as everyone can do it without proper training or accounting skill. They just keep a list of income, expense and few other categories. Profit can be generated from income less expense.
Cost-effective	Company can save costs from purchasing accounting software. Only Excel is enough to record the single entry. Moreover, we will not need to hire professional accountants to prepare financial statements.
Flexible	Management can change anything base on his need as the system does not follow any rule or policy.

Disadvantages of Single Entry System

Disadvantages
Cannot check & reconcile	Mathematical accuracy is hard to check as the record only keep in one side. Tria balance cannot be prepared and reconciliation.
Not reliable	Income and Expenses are not completed as they depend on the cash movement. There will be no accounts receivable and accounts payable. cash out is not always the expense. As the result, the profit/loss is not reliable.
Fraud and error	The management will not be able to detect any fraud and errors made by employees. As we cannot double-check and reconcile, these errors will be undetected.
Hard to analyze	The report does not reflect actual business performance. We cannot use such a report to make any decision.