>> March 10, 2013
Could you please tell me answer, a businessman has no cash expense records, supporting documents are insufficient. So how we make financial statement?
Muhammad Rafi from Kerala (India) (10/03/2013)
Muhammad Rafi, you have asked good question. We can make financial statement from incomplete records if we have no information of cash expenses record and supporting documents. For this, you have to make the list of all the assets which are in the hand of businessman. For example, there is no record when the building has been bought but we are seeing that businessman is working in his own building. Now, you just calculate its current value and show in the balance sheet as fixed asset. Like this, we will record all the fixed assets.
Now, come to the current assets. So, what is businessman selling? Make the list of all products. Calculate its current value. It will be the inventory and will be shown as current asset. Check the locker of businessman. If you see some cash in the locker, it will be cash in hand and it will be shown as current asset in the balance sheet. In the locker, you will see some passbook. Check the current balance of cash at banks. Show it as current asset.
Now, if you do not have record of fixed and current liabilities. Just publish a simple note in English and local newspaper. Dear friends, we are making the balance sheet of (name of businessman and address) if you have given any money or product without taking money, come to office. You have 7 days, if you will not come, you will not get Rs. 1 because we have no information about who is our creditor. If businessman accepts any liability of outside after coming the creditor within 7 days, you have to record this as the liability side in the balance sheet.
Now, see current year main expenses. Like if businessman is using lighting, it means he has paid the bill, see this record. Make the profit and loss account; show all the current expenses in its debit side. See, what the main sources of earning of businessman are. Show current year estimated earnings in the profit and loss account’s credit side. Compare debit and credit side of profit and loss account and show the net profit as reserve and surplus in the liabilities side of balance sheet. Now, compare assets side of balance sheet with the liabilities side of balance sheet. Assets side will be more than liabilities side. Difference will be the capital which you have to show in the liabilities side of balance sheet as balancing figure.
Related : How to Make Accounts from Incomplete Records
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