Incomplete records system is unscientific, incomplete, inaccurate and unsystematic. Explain
Incomplete records system, also known as a single entry system is not a standard practice like double-entry system based on dual aspect concept. The double-entry system is based on scientific dual aspect concept that makes it possible to scientifically locate any error arising due to emission, omission or clerical mistake. Two sides of the trial balance will not tally if there is an error in the double-entry system.
However, there is no such advantage in using the single-entry system or incomplete record system. These records are maintained by accounting novice people or small traders who are not officially required to maintain books of account.
Considering the above differences with the double-entry system, we can observe the following limitations of incomplete record system:
- It is an incomplete and unscientific system.
- Automatic check and reconciliation of accounts are not possible.
- Correct excess or diminution of income over expenditure in non-trading concerns and correct profit or loss in business houses cannot be ascertained.
- As the records of assets and liabilities are not properly maintained, the correct financial position may not be known.
- The system is not reliable, Banks and income tax authorities etc., have no confidence in it.
- As both aspects are not recorded, frauds can more easily be committed.
- Trading results and financial positions of different periods cannot be compared to arrive at useful results for the progress of the business.