Question

State the differences between double entry system and incomplete records.

Answer 1

Basis of distinction	Double entry system	Incomplete records
1. Recording of transactions	Both debit and credit aspects of all the transactions are recorded.	Debit and credit aspects of all the transactions are not recorded completely. For some transactions both aspects are entered, some transactions are partially recorded and some transactions are omitted to be entered.
2. Types of accounts maintained	Personal, Real and Nominal accounts are maintained fully.	In general, only personal and cash accounts are maintained fully. Real and Nominal accounts are not maintained fully.
3. Preparation of trial balance	Trial balance can be prepared to check the arithmetical accuracy of the entries made in the books of accounts	It is difficult to prepare the trial balance to check the arithmetical accuracy of the entries made in the books of accounts as the accounts are incomplete.
4. Determination of true profit or loss	Trading and profit and loss accounts can be prepared to find out the true profit and loss.	Trading and profit and loss accounts cannot be prepared with accuracy as complete information is not available and hence profit or loss found out may not be accurate.
5. Determination of financial position	Balance sheet can be prepared to know the true financial position.	Balance sheet cannot be prepared with accuracy and true financial position cannot be ascertained, as the asset and liabilities are just estimates and incomplete.