Question

‘Is it possible to prepare the profit and loss account and the balance sheet
from the incomplete book of accounts kept by a trader’? Do you agree? Explain.

Answer 1

no it is not possible to prepare a profit & loss account & balance sheet.

Broadly speaking, unless a systematic approach to maintenance of records is followed, reliable financial statements cannot be prepared. The limitations of incomplete records are as follows : (a) As double entry system is not followed, a trial balance cannot be prepared and accuracy of accounts cannot be ensured.

Answer 2

Yes, it is possible to prepare the profit and loss account and the balance sheet

• For preparing the balance sheet from the incomplete book of accounts we can use the conversion method.
• By using this method first we will convert all the incomplete records to double-entry records.
• As some details are easily available like sales, cash purchase, creditor, debtors.
• There is a number of transactions that are still missing but we can get these details by logically.

To Know more:

Can anyone prepare the profit and loss account and balance sheet for the above trial balance

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From the following trial balance prepare profit and loss account and balance sheet of bhanu for the year ended 31st march 2018

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