• Incomplete records is the term used for any system of
bookkeeping which does not use full double entry.
• preparing an opening Statement of Affairs;
• preparing the main control accounts;
• preparing the Bank Account;
• calculating gross profit;
• drafting the Profit and Loss Account;
• drafting the Balance Sheet.
Opening Statement of Affairs
The first step is to set out the main headings which are used in a
Balance Sheet. We can then use the available information to obtain the
relevant values. The main headings which are needed are:
• Fixed Assets
• Current Assets
• Cash and Bank
• Current Iiabilities
• Bank overdraft
Make sure you have learned these headings before your exam.
Opening Statement of Affairs
• Your first task is to set out these headings and then review the
question for the relevant information so that you can insert
the values for as many figures as possible.
• Usually there will be two values missing:
• Fixed assets and capital
• As capital is the balancing figure, it is usually necessary to
work out the value for fixed assets.
• Control accounts are needed for :
Opening balance b/d xxxxx Cash received from debtors xxxxx
Sales xxxxx Discount allowed xxxxx
Closing balance c/d xxxxx
Balance b/d xxxxx
bank) xxxxx Opening balance (if over
xxxxx Cheques issued
wn) xxxxx Closing balance c/d (if ca
xxxxx Closing balance b/d (if ov
• Gross profit is calculated by deducting cost of sales from the
value of sales. Questions often require the calculation of
either margin or mark up.
If margin is to be used, the value of sales will already
have been calculated as the total of credit sales
(derived from the Debtors Control Account) and
cash sales (derived from the Cash Account). The gross
profit is found by applying the % margin to the
value of sales.
For example, if sales are £80,000 and the margin is 20%,
the gross profit will be £80,000 x 20% = £16,000.
• Mark Up
• First of all remember that mark up is gross profit expressed as a
percentage of cost of sales. Questions requiring a mark up
calculation will have provided all the figures to calculate cost of
sales. The problem will be that the Debtors Control Account
cannot be completed as two figures are missing — one of which
• In this case calculate the gross profit as follows:
• Cost of sales x mark up % = gross profit
• Therefore, total sales = cost of sales + gross profit and credit sales
= total sales – cash sales.
Profit and Loss Account
When constructing the Profit and Loss Account, there are two
main points to remember. The first is that expenses must include
both cash expenses and expenses paid by cheque. The second is
that depreciation must be included — but remember to include
any assets acquired during the year!
• Preparing the Balance Sheet should be relatively
• Fixed assets
• = value from the statement of affairs
• + new assets
• – depreciation for period
• Current assets
• Stock = Closing stock as calculated in cost of sales
• Debtors = Closing balance on the Debtors Control Account
• Cash = Closing balance on the Cash Account
• Bank = Closing balance on the Bank Account (if cash on hand)
• Current Liabilities
• Creditors = Closing balance on the Creditors Control Account
• Bank = Closing balance on the Bank Account (if overdrawn)
• Capital = Balancing figure which can be confirmed as:
• opening balance from the Statement of Affairs
• + profit from the Profit and Loss Account
• – drawings
• + capital introduced
• Steps in completing incomplete records
• complete the opening statement of affairs;
• set out the standard workings;
• insert the figures from the question;
• calculate the missing figures;
• draft the required accounting statements.