Edexcel IGCSE Accounting: Incomplete records (4AC1) – Revision Notes

These notes condense section 4.3 Incomplete records from Topic 4 of the Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016. Topic 4 is assessed in Paper 2. For full explanations and longer worked examples, read the study guide, then test yourself with the practice questions. Course links: Edexcel IGCSE Accounting hub, the printable checklist and the free diagnostics. All amounts are in dollars.

Specification points

Ref	Skill	Section below
4.3 a)	Profit for the year from opening and closing equity	1
4.3 b)	Revenue and purchases, including control accounts	2
4.3 c)	Income statements and statements of financial position from incomplete information	3

1. Profit from equity (4.3 a)

Key formulas:

Item	Formula
Equity	Assets - liabilities
Change in equity	Closing equity - opening equity
Profit for the year	Change in equity + drawings - capital introduced
Drawings (if profit known)	Opening equity + capital introduced + profit - closing equity

Method:

1. Add up the assets and the liabilities at each date.
2. Find the equity at each date.
3. Apply the profit formula and label a negative answer as a loss.
4. Show each stage of the working, because the final figure depends on all of them.

Reminder: Jocelyn Isaacs runs Seabrook Candles. Opening equity is 21,400. Closing assets are 38,900 and closing liabilities 12,300, so closing equity is 26,600. Drawings were 10,200 and she added 4,000 of capital. Change in equity is 5,200, so profit for the year = 5,200 + 10,200 - 4,000 = 11,400.

2. Revenue and purchases (4.3 b)

Control account rules

Account	Opening balance	Missing figure	Other items
Trade receivables control	Debit	Credit sales on the debit side	Receipts, discount allowed, irrecoverable debts, sales returns on the credit side
Trade payables control	Credit	Credit purchases on the credit side	Payments, discount received, purchases returns on the debit side

Total each side, make the sides equal, and the unknown is the balancing figure.

Reminder: Zamora Tiles. Trade receivables were 9,800 at the start and 8,350 at the end. Customers paid 72,100, discount allowed was 900, irrecoverable debts were 640 and returns were 2,250.

Credit sales = 8,350 + 72,100 + 900 + 640 + 2,250 - 9,800 = 74,440. Both sides total 84,240.

Trade payables were 7,200 at the start and 6,480 at the end. Suppliers were paid 51,300, discount received was 650 and purchases returns were 1,400.

Credit purchases = 6,480 + 51,300 + 650 + 1,400 - 7,200 = 52,630. Both sides total 59,830.

Cash sales and other cash figures

Use a summary of cash:

• Takings = cash banked + cash spent from the till + closing cash - opening cash.
• Revenue = credit sales + cash sales.
• Purchases = credit purchases + cash purchases.
• Cost of sales = opening inventory + purchases - closing inventory.

Reminder: the Zamora till started the year with 100 and ended with 160. Banked 26,400 and paid expenses of 3,120. Takings = 26,400 + 3,120 + 160 - 100 = 29,580.

Mark-up and margin

Measure	Based on	Formula
Mark-up	Cost of sales	Gross profit / cost of sales x 100
Margin	Revenue	Gross profit / revenue x 100

• A 40% mark-up on cost of sales of 18,000 gives gross profit 7,200 and revenue 25,200. The margin is 7,200 / 25,200 = 28.6%.
• A 60% mark-up equals a 37.5% margin, because 60 / 160 = 0.375.
• A 25% margin equals a 33.3% mark-up, because 25 / 75 = 0.333.

If the owner takes goods for private use, take the cost out of purchases and add it to drawings.

3. Statements from incomplete information (4.3 c)

Order of work:

1. Opening equity.
2. Revenue, purchases and cost of sales (section 2).
3. Expenses from payments, then adjust for amounts owing and prepaid.
4. Depreciation, irrecoverable debts, and the provision for irrecoverable debts.
5. Closing bank balance.
6. Both statements, then the check below.

Layout of the income statement:

Line	Notes
Revenue	Credit sales plus cash sales
Cost of sales	Opening inventory + purchases - closing inventory
Gross profit	Revenue - cost of sales
Expenses	Adjusted for accruals and prepayments
Profit for the year	Gross profit - expenses

Layout of the statement of financial position:

Section	Items
Non-current assets	Carrying value after depreciation
Current assets	Inventory, trade receivables less provision, other receivables, bank and cash
Current liabilities	Trade payables, other payables, overdraft
Equity	Opening equity + profit for the year - drawings (+ capital introduced)

Check: equity must equal net assets. Equity comes from the capital route and net assets from the asset route, so agreement shows the working is consistent.

Reminder: finding drawings

If profit is known, rearrange the formula. Opening equity 20,000, capital introduced 3,000, profit 9,000 and closing equity 26,000 give drawings = 20,000 + 3,000 + 9,000 - 26,000 = 6,000.

Reminder: a whole set of figures

Quince Pottery, year to 31 March 2026. Start of year: equipment 5,000, inventory 3,000, trade receivables 1,500, bank 1,000, trade payables 1,200. Bank summary: customers paid 30,000, cash sales banked 8,000, suppliers paid 24,000, expenses 6,500, drawings 4,000. End of year: inventory 3,400, trade receivables 1,800, trade payables 1,500. Depreciation is 600.

Step	Working	Result
Opening equity	5,000 + 3,000 + 1,500 + 1,000 - 1,200	9,300
Credit sales	1,800 + 30,000 - 1,500	30,300
Revenue	30,300 + 8,000	38,300
Credit purchases	1,500 + 24,000 - 1,200	24,300
Cost of sales	3,000 + 24,300 - 3,400	23,900
Gross profit	38,300 - 23,900	14,400
Expenses	6,500 + 600	7,100
Profit for the year	14,400 - 7,100	7,300
Closing bank	1,000 + 38,000 - 34,500	4,500
Net assets	4,400 + 3,400 + 1,800 + 4,500 - 1,500	12,600
Equity	9,300 + 7,300 - 4,000	12,600

The last two lines agree, which is the check.

Which technique for which gap

Missing figure	Tool
Profit, no income statement	Change in equity
Credit sales	Receivables control account
Credit purchases	Payables control account
Cash takings	Summary of cash
Revenue or purchases, with margin or mark-up known	Percentage on cost or revenue

Must-know distinctions

• Profit versus cash: drawings and buying non-current assets use cash but are not expenses.
• Credit sales versus revenue: revenue includes cash sales too.
• Irrecoverable debt versus provision: the first is a specific debt written off, the second is an estimate of future losses.
• Mark-up versus margin: the first is on cost, the second on revenue.
• Other receivables are amounts paid in advance. Other payables are amounts owed for expenses.

Quick self-test

1. A business has assets of 18,000 and liabilities of 6,500. Calculate its equity.
2. Opening equity is 11,500, closing equity 15,200, drawings 7,000 and no capital was introduced. Calculate profit for the year.
3. Opening equity 12,000, closing equity 9,800, drawings 3,500, capital introduced 1,000. Calculate the profit or loss.
4. On which side of the trade receivables control account do credit sales appear?
5. Receivables were 2,000 at the start and 2,600 at the end. Customers paid 18,500, with no other items. Calculate credit sales.
6. Credit purchases were 24,000 and cash purchases 3,500. State total purchases.
7. Cost of sales is 32,000 and the mark-up is 25%. Calculate revenue.
8. Revenue is 80,000 and the margin is 35%. Calculate cost of sales.
9. Rent paid was 3,600, including 300 paid in advance. Calculate the rent expense.
10. The owner takes goods that cost 450 for personal use. State the effect on purchases and on drawings.

Answers

1. 11,500.
2. 15,200 - 11,500 + 7,000 = 10,700.
3. 9,800 - 12,000 + 3,500 - 1,000 = 300 profit.
4. The debit side.
5. 2,600 + 18,500 - 2,000 = 19,100.
6. 27,500.
7. 32,000 x 1.25 = 40,000.
8. 80,000 x 0.65 = 52,000.
9. 3,600 - 300 = 3,300.
10. Purchases fall by 450 and drawings rise by 450.

Where marks are usually lost

• Not adding back drawings, or subtracting capital introduced the wrong way round.
• Placing credit sales or credit purchases on the opposite side of the control account.
• Leaving cash sales or cash purchases out of totals.
• Mixing up margin and mark-up.
• Using cash paid for an expense without an accrual or prepayment adjustment.
• Forgetting the provision for irrecoverable debts when valuing trade receivables.
• Missing the labels, such as the date or the heading, on the statements.
• Skipping the equity versus net assets check.
• Treating drawings taken from the bank as an expense in the income statement.
• Showing a bare answer with no working, so a small slip cannot earn partial credit.
• Writing figures in the wrong place on the statement of financial position, for example putting the provision on the liabilities side.

Frequently asked questions

How do you calculate cash sales from a till summary? Cash sales equal everything that left the till (cash banked, wages, drawings and cash purchases paid from the till), plus the closing cash, minus the opening cash. Revenue is credit sales plus cash sales.

What is the accounting equation used in incomplete records? Assets minus liabilities equals equity (capital). Listing assets and liabilities at two dates gives the equity at each date, and the change is explained by profit, drawings and new capital.

Should the provision for irrecoverable debts be included when valuing trade receivables? Yes. Trade receivables in the statement of financial position are shown less the provision for irrecoverable debts, on the assets side. Forgetting the provision or putting it among liabilities loses marks.

Why should you show workings in an incomplete records answer? Incomplete records questions build each figure from several steps, so clear workings let a small slip still earn partial credit. A bare answer with no working cannot.

Official syllabus

Pearson Edexcel International GCSE in Accounting (4AC1), Specification, Issue 1, October 2016, published by Pearson Education Limited. Topic 4: The preparation of financial statements, section 3 Incomplete records, points a) to c).