Trial Balance
Foundations · Year 1 & 2 · Topic 11 of 11

Incomplete records

Preparing accounts when a business hasn’t kept full books: net assets, control accounts, cash and mark-ups.

ACCA exams this helps with: FA Financial Accounting See the ACCA map

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What it is: Some small businesses do not keep full double-entry records. They may only have bank statements and receipts.

What you do: Work out the missing figures using something that must balance. For example, use the accounting equation, a cash account, or a receivables or payables account. Put in every figure you know. The one amount needed to make it balance is the missing figure.

Common tools: opening and closing net assets, control accounts, and mark-up or margin percentages.

Example. A trader had £500 cash at the start of the week. Takings were £2,000. £1,800 was paid into the bank. £300 was left at the end. £500 + £2,000 − £1,800 − £300 = £400 is missing. So the owner took £400 for personal use (drawings).

Key words

Incomplete records
Accounting records that do not use full double entry, often kept by small businesses. The accountant has to work out the missing figures.Example: A market trader keeps only bank statements and a box of receipts.
Net assets
Total assets minus total liabilities. It equals the owner’s equity.Example: Assets £12,500 − liabilities £900 = net assets £11,600.
Mark-up
Profit as a percentage of the cost.Example: Selling for £125 something that cost £100: profit £25 ÷ cost £100 = 25% mark-up.
Margin
Profit as a percentage of the selling price.Example: Selling for £125 something that cost £100: profit £25 ÷ price £125 = 20% margin.
Balancing figure
A missing number worked out from a total that must be correct. You subtract all the known numbers from the total.Example: Assets are £62,700. Liabilities and share capital are £50,700. Retained earnings must be the balancing figure of £12,000.

Learn

Many small businesses do not keep full double-entry records. They may only have bank statements, invoices and a count of their stock. The accountant works out the missing figures. Each method uses something that must balance, and the one missing number is the amount that makes it balance.

Method 1: Profit from net assets

Use this when you know the net assets (assets minus liabilities) at the start and end of the year.

Profit = Closing net assets − Opening net assets + Drawings − New capital put in

Example: Closing net assets £30,000 − Opening net assets £25,000 + Drawings £12,000 − New capital £0 = Profit £17,000.

Method 2: Missing credit sales or purchases

For money customers owe: Opening receivables + Credit sales − Cash received − Discounts − Irrecoverable debts = Closing receivables. Move the figures round to find credit sales:

Credit sales = Closing receivables + Cash received + Discounts + Irrecoverable debts − Opening receivables

Example: Closing £3,000 + Cash received £40,000 − Opening £2,500 = Credit sales £40,500.

Purchases work the same way, using money owed to suppliers (payables).

Method 3: Missing figures in the cash account

Opening cash + Cash in − Cash out = Closing cash. If drawings or cash sales were not recorded, they are the missing figure.

Method 4: Mark-up and margin

  • Mark-up is profit as a percentage of cost. A 25% mark-up means Sales = Cost × 1.25. Example: Cost £800 → Sales £1,000.
  • Margin is profit as a percentage of sales. A 20% margin means Cost = Sales × 0.80. Example: Sales £1,000 → Cost £800.
A mark-up of m% on cost = a margin of m ÷ (100 + m) on sales

This lets you work out cost of sales from sales. Then you can work out how much inventory there should be. Compare it with the real count to find the value of stock lost in a fire or theft.

Watch it explained

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Videos from YouTube tutors

These videos are made by independent tutors on YouTube, not by Trial Balance. They may use slightly different terms, for example “owner’s equity” instead of “capital”.

Worked example

Profit from net assets. Opening net assets £42,000; closing net assets £55,000; drawings £18,000; capital introduced £5,000.

Profit = 55,000 − 42,000 + 18,000 − 5,000 = £26,000.

Stock lost in a fire. Sales £120,000 at a 25% mark-up. Opening inventory £14,000, purchases £98,000. After the fire, £6,000 of stock was saved.

Working£
Cost of sales = 120,000 × 100/12596,000
Expected closing inventory = 14,000 + 98,000 − 96,00016,000
Less: Stock saved(6,000)
Stock lost in the fire10,000

Practice questions

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