What are the features of incomplete records?
Solution
1. Nature:
- It is an unscientific and unsystematic way of recording transactions.
- Accounting principles and accounting standards are not followed properly.
2. Types of accounts maintained: In general only cash and personal accounts are maintained fully. Real accounts and nominal accounts are not maintained properly. Some transactions are correctly omitted.
3. Lack of uniformity: There is no uniformity in recording the transactions among different organizations. Different organizations record their transactions according to their needs and conveniences.
4. Financial statements may not represent true and fair view: Due to the incomplete information and inaccurate records of accounts, the profit or loss calculated from these records cannot be relied upon. It may not represent true profitability. Assets and liabilities may not represent a true and fair view of financial position.
5. Suitability: Only the business concerns which have no legal obligation to maintain books of accounts under the double-entry system may maintain incomplete records. Hence, it may be maintained by small-sized sole traders and partnership firms.
6. Mixing up of personal and business transactions: Generally, personal transactions of the owners are mixed up with business transactions. For example, the purchase of goods for their own use may be mixed up along with business purchases.
