- The detection of errors is difficult and fraudulent entries are easier to make. The financial records being incomplete make it impossible to extract a Trial Balance to check the arithmetical accuracy of the entries.
- Comparison with last years very difficult because of the unreliability of the results extracted from such incomplete records.
- Due to incomplete capturing of all gains, incomes and expenses which are unavailable, it is difficulty to ascertain the gain or loss in the Income statement.
- Financial position of the entity is difficult to ascertain as some assets, liabilities, incomes or expenses might have been omitted. Let’s take the example of a payment of machinery for the amount of $10,000, bank is credited but the fixed asset machinery a/c is omitted which are means that the depreciation has also been omitted. The result is the balance sheet does not show the fixed asset machinery and the income statement does not show the depreciation account.