Observation

 

Candidates gained reasonable marks in this question as they were able to provide some reasonable answers to the reasoning pattern of the question.

The responses expected from the few candidates who missed few marks were:

 

1. Incomplete records

This refers to a situation in which a business does not keep a full set of double entry records.
OR      This is a system where only one side of a business transaction is recorded in an
account, disregarding the double entry principle.

 (b)       Limitations of keeping Incomplete Records:

(i)         the business cannot extract a trial balance to check the arithmetical accuracy of       ledger entries;
(ii)        the accuracy of any accounts cannot be verified;
(iii)       the business cannot make good business decisions;
(iv)       cost control will be difficult;
(v)        it can lead to the collapse of the business;
(vi)       fraud may easily be committed since there can be no check or proof of transaction;
(vii)      financial statement prepared from incomplete records will not be accepted for tax purpose;
(viii)     it makes it difficult to ascertain profit or loss;
(ix)       it hinders access to credit facilities;
(x)        it makes it difficult to claim insurance when the need arises.

         

   (c)        Reasons for keeping Incomplete Records:
(i)         lack of resources to operate double entry records;
(ii)        lack of qualified personnel to operate the system;
(iii)       the size of the business may not necessitate the implementation of a full set of accounting records;
(iv)       the lack of awareness of the need to operate a double entry system;
(v)        the destruction of some or all financial records as a result of natural disaster;
(vi)       deliberate attempt on the part of accounting personnel to conceal accounting records in order to avoid detection of malpractices;
(vii)      loss of vital documents as a result of burglary and stealing;
(viii)     when there is no legal obligation on the part of the business to maintain proper accounting records;
(ix)       deliberate attempt on the part of management of a business to evade tax;
(x)        when the business just began operations;
(xi)       it is less cumbersome or more convenient to maintain this system;
(xii)      inability to employ qualified accounting staff;
(xiii)     it is less expensive to keep as compared to maintaining double entry system;

(xiv)     where the owner fears embezzlement on the part of accounting staff and therefore keeps few records.