Accounts from Incomplete Records for CA Foundation
Finding profit and preparing accounts when records are incomplete (single entry): the statement of affairs method and the conversion method using total debtors and creditors accounts and gross profit ratios.
AccountingPaper 112 MCQs2 lessons2 flashcards3 memory tricks
Practise Accounts from Incomplete Records free
What you'll learn
- Statement of affairs method
Find profit or loss from opening and closing capital. - Finding missing figures
Use total debtors and creditors accounts and gross profit ratios.
Key formulas
| Capital | Assets − liabilities (statement of affairs) |
|---|---|
| Profit | Closing capital − opening capital + drawings − additional capital |
| Loss | Negative result of the same formula |
| Credit sales | Closing debtors + cash received + returns + bad debts + discount − opening debtors |
| Credit purchases | Closing creditors + payments + returns + discount − opening creditors |
| GP on sales x% | Cost = sales × (100 − x)% |
| GP on cost x% | GP on sales = x/(100 + x) |
Concepts explained
Statement of affairs method
When books are incomplete, find capital at the start and end (assets − liabilities), then work out profit from the change in capital.
What it means
- Statement of affairs = rough balance sheet from available records and estimates.
- Profit = closing capital − opening capital + drawings − additional capital.
- A negative answer is a loss.
- Single entry can't produce a trial balance, so errors are hard to find.
- Closing 1,50,000; opening 1,20,000; drawings 20,000; fresh 10,000
Answer: ₹40,000
- Capital 80,000 → 70,000, no drawings
Answer: Loss ₹10,000
Related terms
- Single entry: incomplete double entry
- Net worth method: another name for the statement of affairs method
Exam tip: Drawings are added back; new capital is taken out.
Total debtors and creditors accounts
Missing credit sales and purchases are found as balancing figures in total debtors and total creditors accounts.
What it means
- Debtors A/c: opening + credit sales = cash received + returns + bad debts + discount + closing.
- Creditors A/c: payments + returns + discount + closing = opening + credit purchases.
- Total sales = cash + credit sales.
- Bills receivable/payable also pass through these accounts.
- Opening 20,000; received 80,000; closing 25,000
Answer: ₹85,000
- Opening 15,000; paid 60,000; closing 18,000
Answer: ₹63,000
Related terms
- Conversion method: turning single entry into double entry
- Cash book: balanced to find missing cash figures
Exam tip: Closing + received − opening gives credit sales (when nothing else moves).
Using gross profit ratios
A known gross profit ratio lets you find missing sales, cost of goods sold or closing stock.
What it means
- GP x% on sales: cost = (100 − x)% of sales.
- GP x% on cost: GP on sales = x/(100 + x).
- Closing stock = opening stock + purchases − COGS.
- 25% on cost = 20% on sales; 20% on cost = 1/6 of sales.
- COGS 60,000; GP 25% on sales
Answer: ₹80,000
- Opening 20,000; purchases 80,000; sales 1,20,000; GP 25% on sales
Answer: ₹10,000
Related terms
- Mark-up: GP on cost
- Margin: GP on sales
Exam tip: Convert 'on cost' to 'on sales' before you use it with a sales figure.
Memory tricks
Profit = closing capital − opening capital + drawings − additional capital.
Credit sales = balancing figure of Total Debtors A/c; purchases of Total Creditors A/c.
GP on cost x% = GP on sales x/(100 + x).
Try 3 CA Foundation-style questions
Q1. Opening debtors ₹20,000; cash received from debtors ₹80,000; closing debtors ₹25,000 (no returns, bad debts or discount). Credit sales are
- ₹75,000
- ₹1,25,000
- ₹85,000
- ₹80,000
Show answer
Answer: (3) ₹85,000
Credit sales = closing debtors + cash received − opening debtors = 25,000 + 80,000 − 20,000 = ₹85,000.
Q2. A statement of affairs is
- another name for the Profit and Loss Account
- a list of cash receipts
- a statement of assets and liabilities prepared from incomplete records to find capital
- a statement prepared only by companies
Show answer
Answer: (3) a statement of assets and liabilities prepared from incomplete records to find capital
Under single entry, capital is found as the excess of assets over liabilities shown in a statement of affairs, which is built from estimates and available records.
Q3. Under the statement of affairs method, opening capital is found by
- preparing a statement of affairs at the beginning of the year
- taking the balance of the cash book
- deducting drawings from closing capital
- adding all incomes
Show answer
Answer: (1) preparing a statement of affairs at the beginning of the year
Opening capital = assets − liabilities at the beginning, shown in an opening statement of affairs.
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