ExpertIncomplete Records
Learning outcomes
- Apply techniques used in incomplete record situations: accounting equation, ledger accounts to calculate missing figures, cash/bank summaries, profit percentages
Objective A: Incomplete Records Techniques
In practice, some businesses (especially sole traders) do not maintain complete accounting records. When preparing financial statements from incomplete records, accountants use several techniques to calculate missing figures.
1. The Accounting Equation
If opening and closing assets and liabilities are known, profit can be calculated:
Profit = Closing net assets − Opening net assets + Drawings − Capital introduced
Where net assets = Assets − Liabilities
2. Ledger Account Reconstruction
Missing figures can be found by reconstructing T-accounts. For example, to find credit sales:
Trade Receivables Account
Opening balance X | Cash received X
Credit sales (bal) ? | Returns X
| Closing balance X
The missing credit sales figure is the balancing figure.
3. Cash/Bank Summaries
A summary of all cash receipts and payments can be used to identify missing figures:
Opening cash balance + Total receipts − Total payments = Closing cash balance
4. Profit Percentages
Markup = Profit ÷ Cost × 100
Margin = Profit ÷ Revenue × 100
If the markup or margin is known, missing revenue, cost of sales, or profit figures can be calculated.
Example: Cost of sales = £80,000, markup = 25%
Profit = £80,000 × 25% = £20,000
Revenue = £80,000 + £20,000 = £100,000
Markup vs. Margin
Markup is profit as a percentage of cost: Profit/Cost × 100
Margin is profit as a percentage of selling price: Profit/Revenue × 100
A 25% markup on cost of £100 = profit of £25, revenue of £125.
A 25% margin on revenue of £100 = profit of £25, cost of £75.
These give DIFFERENT results — read the question carefully!
A business has opening net assets of £50,000 and closing net assets of £68,000. During the year, the owner introduced £5,000 capital and withdrew £12,000 in drawings. What is the profit for the year?
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ACCA FA — Financial Accounting Practice Exam 3
A complete mock exam replication for ACCA FA, mirroring live computer-based testing parameters. Covers double-entry accounting, ledger adjustments, group consolidations, and financial statement production. Features unique scenarios including heavy manufacturing, tech startups, NGOs, agriculture, service firms, public utilities, and cross-border multinationals.