AQA A-Level Accounting: Accounting for organisations with incomplete records (7127) – Revision Notes

For full explanations and five worked examples, read the study guide first.

These notes cover section 3.14, Accounting for organisations with incomplete records, of the AQA A-level Accounting (7127) specification (version 1.1, October 2026, A-level exams June 2019 onwards). The qualification is not tiered, and the specification assesses section 3.14 on Paper 1. Test yourself with the practice questions, and use the AQA A-level Accounting hub, the 7127 checklist and the free diagnostics. Related notes: sole trader financial statements and verification of accounting records.

3.14 at a glance

• Calculate profit when records are too poor for an income statement: use statements of affairs.
• Find missing figures with control/total accounts, cash accounts, bank accounts, ratios, depreciation, profit or loss on disposal, and the financial statements themselves.
• Evaluate single entry against double entry record keeping.

Key terms

• Incomplete records: records that do not follow the full double entry system, so no trial balance can be extracted.
• Single entry: each transaction recorded once, usually only in a cash book or bank statement.
• Statement of affairs: a list of assets and liabilities at a date, set out like a statement of financial position; the balancing figure is capital.
• Total account: a control account built from totals (receivables or payables) to find a missing figure such as credit sales.
• Capital introduced: money or assets the owner puts into the business during the year.

Formulae to know

Purpose	Formula
Capital	Assets - Liabilities
Profit from capital	Closing capital - Opening capital + Drawings - Capital introduced
Credit sales	Receipts from customers + Irrecoverable debts + Closing receivables - Opening receivables (adjust for any other items in the account)
Credit purchases	Payments to suppliers + Discounts received + Closing payables - Opening payables
Cost of sales	Opening inventory + Purchases - Closing inventory
Mark-up	Gross profit / Cost of sales x 100
Gross profit margin	Gross profit / Revenue x 100
Rate of inventory turnover	Cost of sales / Average inventory
Profit in relation to revenue	Profit for the year / Revenue x 100
Expense for the year	Paid + Closing accrual - Opening accrual - Closing prepayment + Opening prepayment

The four ratio formulae are listed in the specification’s appendix of accounting ratios, which states that you must know them.

Method in steps

Profit by the capital method

1. Opening statement of affairs -> opening capital
2. Closing statement of affairs -> closing capital
3. Change in capital = closing - opening
4. + drawings (cash, goods and any personal bills paid by the business)
5. - capital introduced
6. = profit (negative = loss)

Missing figure from an account

1. Write the account with both sides.
2. Enter every known figure on the correct side.
3. The difference between the two sides is the missing figure.
4. Label it "(bal)" or "(missing figure)" so the examiner can follow.

Small reminder: payables of £3,000 at the start and £3,600 at the end, payments £30,000, discounts received £250 and a contra of £400 give credit purchases of 30,000 + 250 + 400 + 3,600 - 3,000 = £31,250. All three reductions in payables (payments, discounts, contra) sit on the debit side with the closing balance.

Mark-up and margin

Build from 100 on the base:
  mark-up -> cost = 100       margin -> revenue = 100
Mark-up m%: margin = m / (100 + m)
Margin g%:  mark-up = g / (100 - g)

Small reminder: mark-up 50% gives revenue 150 on cost 100, so the margin is 50/150 = 33.33%.

Inventory lost (fire, flood or theft)

Cost of sales from sales and the ratio
Expected closing inventory = opening + purchases - cost of sales
                             (- goods taken by owner, if any)
Loss = expected closing - inventory saved (at cost)

Depreciation and disposals

Carrying amount of asset sold = cost - accumulated depreciation on it
Profit (loss) on disposal     = proceeds - carrying amount
Missing cost of new asset     = closing cost - (opening cost - cost of asset sold)
Closing accumulated depreciation
   = opening - depreciation on asset sold + charge for the year
Reducing balance, working back:
   carrying amount before charge = carrying amount after / (1 - rate)

Read the policy every time: is the charge on cost or carrying amount, and is there a charge in the year of purchase or disposal? A profit on disposal is added to gross profit as other income; a loss is listed with the expenses.

Which tool finds which figure?

Missing figure	Where to find it
Opening capital	Opening statement of affairs
Credit sales	Total trade receivables account
Credit purchases	Total trade payables account
Cash takings, or drawings from the till	Cash account
Closing bank balance, or a missing payment	Bank summary
Cost of sales, revenue or gross profit	Mark-up or gross profit margin
Opening or closing inventory	Rate of inventory turnover, or the cost of sales calculation
Total expenses	Profit in relation to revenue, then gross profit - profit
Cost of a new non-current asset	Non-current asset account at cost
Closing capital	Opening capital + profit - drawings (+ capital introduced)

Full statements from incomplete records

1. Opening statement of affairs   -> opening capital
2. Cash account and bank summary  -> missing takings, drawings or balance
3. Total accounts                 -> credit sales, credit purchases
4. Accruals and prepayments       -> expense for the year
5. Depreciation and disposals
6. Income statement, then statement of financial position

Must-know distinctions

Mark-up vs margin	Mark-up is on cost	Margin is on revenue; for the same goods margin is always the smaller %
Statement of affairs vs statement of financial position	Built from lists and valuations	Built from ledger balances under double entry
Capital method vs full statements	Gives one profit figure only	Gives revenue, gross profit and each expense
Total account vs ledger account	Uses totals for the year	Records each transaction
Drawings vs capital introduced	Added back to the change in capital	Subtracted from the change in capital

Single entry vs double entry

• Benefits of single entry: cheap, quick, simple; may suit a tiny cash business with few assets.
• Limitations of single entry: no trial balance check; errors and theft go unnoticed; profit may be a single total; weak basis for ratio analysis, budgeting, tax returns or a loan application; the accountant must rebuild the records each year.
• Benefits of double entry: an arithmetic check; full statements; control over receivables, payables and inventory.
• Limitations of double entry: more time, skill and cost; some errors (omission, compensating errors) still pass the trial balance.

A good evaluation links the choice to the business: size, credit trading, staff, borrowing and the owner’s skill.

Quick self-test

1. Opening capital £24,000, closing capital £31,500, drawings £15,600, capital introduced £2,000. Calculate profit.
2. Mark-up is 25%. State the gross profit margin.
3. Gross profit margin is 40%. Calculate the mark-up.
4. Cost of sales £45,000; mark-up 50%. Calculate revenue.
5. Revenue £72,000; gross profit margin 30%. Calculate cost of sales.
6. Trade receivables: opening £2,500, closing £3,100; receipts £28,700; irrecoverable debts £200. Calculate credit sales.
7. Trade payables: opening £4,200, closing £3,800; payments £36,900; discounts received £300. Calculate credit purchases.
8. Cash in hand: opening £120, closing £90. Banked £18,400; wages paid in cash £5,200; drawings from the till £3,000. Calculate cash takings.
9. Cost of sales £54,000; rate of inventory turnover 9 times; opening inventory £5,400. Calculate closing inventory.
10. An asset cost £12,000 with accumulated depreciation of £7,500. It is sold for £5,000. Calculate the profit or loss on disposal.
11. Assets £18,400 and liabilities £3,900. Calculate capital.
12. Revenue £60,000; gross profit £21,000; profit in relation to revenue 15%. Calculate total expenses.

Answers

1. 31,500 - 24,000 + 15,600 - 2,000 = £21,100
2. 25 / 125 = 20%
3. 40 / 60 = 66.67%
4. 45,000 x 150/100 = £67,500
5. 72,000 x 70% = £50,400
6. 28,700 + 200 + 3,100 - 2,500 = £29,500
7. 36,900 + 300 + 3,800 - 4,200 = £36,800
8. 18,400 + 5,200 + 3,000 + 90 - 120 = £26,570
9. Average = 54,000 / 9 = 6,000; closing = 12,000 - 5,400 = £6,600
10. Carrying amount 4,500; 5,000 - 4,500 = £500 profit
11. 18,400 - 3,900 = £14,500
12. Profit = 60,000 x 15% = 9,000; expenses = 21,000 - 9,000 = £12,000

Where marks are usually lost

• Leaving drawings out of the capital method, or adding capital introduced instead of subtracting it.
• Missing drawings in kind: goods taken by the owner, or private bills paid from the business bank account.
• Applying a mark-up % to sales, which treats it as a margin.
• Leaving out cash spent from takings before banking, so cash sales are too low.
• Using closing inventory, not average inventory, in the inventory turnover ratio.
• Posting a contra or dishonoured cheque on the wrong side of the total receivables account.
• Taking the cash paid for an expense as the expense, without the accrual and prepayment adjustments.
• Not labelling a balancing figure, so the method is hard to credit if the answer is wrong.
• Writing generic evaluation of single entry that is not linked to the business in the question.

Official syllabus

AQA, A-level Accounting (7127) specification, version 1.1, October 2026, for A-level exams from June 2019 onwards: section 3.14, Accounting for organisations with incomplete records.