Set out two circumstances in which it may be necessary to complete financial statements from incomplete...

Set out two circumstances in which it may be necessary to complete financial statements from incomplete records and discuss the risks involved in preparing these financial statements.

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Answer:

Incomplete records- In Accounting, financial records that are not kept strictly according to double entry system, are the incomplete records. Incomplete records are also found in the companies which do not have double entry system for example shopkeepers and vendors. In large organization , incomplete records may arise due to fire, natural calamity, lost etc.

Necessity to complete the financial statements from incomplete records-

When the accounting year or financial year is going to end and company needs to show its financial statements.
When there is audit happens and company has incomplete records so for completing the financial statements.

Preparation of financial statements using incomplete records-

Opening capital- If opening assets and liabilities are known then opening capital can be known.

Missing figures for sales- If we know the opening and closing account receivables and cash that has been received from customers then we can calculate the sales.

We can calculate some other missing figures also based on other given figures.

Risk involved in preparing these financial statements- There is alwasy a risk of accuracy in completing the financial statements with incomplete records. Financial statements do not show true and fair picture of the company's financial position.

ekkarill92 answered 2 years ago

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