Back

Incomplete Records | O Level Accounting 7707 & IGCSE Accounting 0452 | Detailed Free Notes To Score An A Star (A*)

Views 0
  • Basically, it means that the proper books and records of accounting are not kept by the person.
  • As a result, information is not properly set.
  • We need to get this information sorted to ensure that proper books, records and statements of accounting can be maintained.
  • Incomplete records will mislead investors
  • Can result in creditors not being paid.
  • Can result in debtor’s payments being delayed
  • It can result in damage to the reputation of the company.
  • Legal battles and legal issues can damage the company’s reputation further.

Statement of Affairs

  • First, we need to calculate the profit for the year.
  • We can use the following equation here:
    • Closing capital+ drawings – opening capital
    • It results in net profit for the year.
  • Then, we create a special statement of financial position called the statement of affairs
  • Basically, we would be given information in note form, and we will use it to calculate the balance sheet.
  • No rocket science here, it will help calculate profit as a missing figure.
  • Remember, not everything mentioned in notes may be of the balance sheet, it could be from the income statement as well.

Other Calculations

  • We can calculate credit sales by using the sales ledger control account. It can also be called the total receivables account.
    • Separately covered in another chapter
  • Total sales is cash sales + Credit sales
  • We can calculate credit purchases by using purchase ledger control account also called the creditors control account or account payable control account.
  • We calculate total purchases by adding credit purchases and cash purchases
  • Expense and Income accounts are made to ensure that prepayments and accruals can be accounted for.
  • Cash and cash in bank figures are calculated as well, to ensure that the payments received or paid to debtors or creditors respectively.
  • Margin to markup conversion
    • Margin= markup/ (Markup+100)
  • Use the margin to find the sales and cost of sales
  • In these questions, depreciation is usually found through revaluation
  • Depreciation= Opening Long term asset + Purchase of non current asset – closing asset – sale of non current asset at net book value.
  • A key aspect here is that many things are not directly mentioned in the question, but you still need to see if it has to be found based on the numerical values given – such as depreciation or interest charge.
  • Final Accounts
    • Once all this information has been gained, we can simply create the income statement and balance sheet for the business.
  • Markup
    • We need to know the conversion between markup and margin to find missing figures
    • Margin = Markup/ (1+ Markup)
  • Similarly, we can use the equation for inventory turnover as well to find any missing figures.
  • In our exams, incomplete records for only sole traders will be asked.
Hunain Zia

Hunain Zia has previously achieved considerable success in the high-school educational stream, gaining a massive 154 Total A Grades and 7 Major Distinctions, a process in which he broke/ set 11 different world records, including the most A grades ever achieved, most subjects ever appeared in, most distinctions, gaining distinctions across two separate boards (Pearson Edexcel and CAIE) within the same year/ ever, and even 19 hours of constant examination. All records stand intact today. Hunain pursued his Honors Accounting Degree from the prestigious Bentley University, and then completed an LLB (in Honors) from University of London. Currently, he manages multiple social and commercial projects, has founded digital streams and works tirelessly in the education sector.

Educate A Change focuses on truly bringing change in the educational sector worldwide. All our courses are designed to ensure success, and provide complete preparation without requiring any other external material. Therefore, it takes away the expense of academies, books, past paper compilations and other miscellaneous items. Instead, by just the courses we offer, the student can prepare fully for the best grades in their CAIEs, Edexcel and other high-school exams. The earnings from our course-sales are invested in social projects and growing the free educational activities of Educate A Change.