OxfordAQA IGCSE Accounting: Sole traders and other organisations (9215) – Revision Notes

These notes condense section 3.4 of the OxfordAQA International GCSE Accounting (9215) specification, version 1.2, for exams from May/June 2026 onwards (first teaching 2024, first examined 2026). They cover the concepts used in preparing financial statements, comparing sole traders, partnerships and limited companies, and sole traders’ statements. For full explanations and long worked examples, read the study guide. Then try the practice questions. Other links: subject hub, checklist, free diagnostics and the verification notes. All amounts are in dollars.

Formulas and rules

Item	Rule
Expense charged	Paid + owing at end - paid in advance at end (and adjust for opening balances)
Income earned	Received + income due - income received in advance
Straight line depreciation	(Cost - residual value) / years of use
Reducing balance	Percentage x net book value at start of year
Provision for doubtful debts	Percentage x receivables after irrecoverable debts; charge only the change
Net book value	Cost - provision for depreciation
Profit or loss on disposal	Proceeds - net book value
Inventory	Lower of cost and net realisable value
Goods taken for own use	Debit drawings, credit purchases, at cost
Closing capital	Opening capital + net profit - drawings
Gross profit	Revenue - cost of sales
Net profit	Gross profit + other income - expenses

FIFO, AVCO and LIFO inventory valuation are stated as not examined.

Where each adjustment goes

Adjustment	Income statement	Statement of financial position
Other payables	Increases the expense	Current liabilities
Other receivables	Reduces the expense	Current assets
Income due	Increases income	Current assets (other receivables)
Income received in advance	Reduces income	Current liabilities
Depreciation	Expense	Reduces non-current assets to net book value
Irrecoverable debt	Expense	Reduces trade receivables
Provision change	Expense (or reduction of expense if the provision falls)	Trade receivables shown net
Closing inventory	Deducted in cost of sales	Current assets
Own goods	Reduces purchases	Increases drawings, reduces capital

Method in steps

1. Underline each adjustment and note the accounts affected.
2. Calculate each adjusted figure separately.
3. Build the income statement: revenue, cost of sales (trading business only), gross profit, other income, expenses, net profit.
4. Build the statement of financial position with sub-headings: non-current assets, current assets, current liabilities, non-current liabilities, then capital.
5. Check that net assets equal closing capital.

A service business has no inventory and no cost of sales. Its income statement runs from revenue to expenses.

Worked reminders (new figures)

Rent paid is 7,800 and 650 relates to next year, so the charge is 7,150. Commission received is 3,100 and 240 is due, so income is 3,340.

An asset cost 12,000 with residual value 2,000 and four years of life: straight line gives 2,500 a year. Reducing balance at 25% gives 3,000 in year 1 and 2,250 in year 2, leaving net book value 6,750.

Trade receivables are 9,000 and 250 is irrecoverable. The remaining 8,750 at 2% gives a provision of 175. If the old provision was 120, charge 55. If it was 220, the provision falls by 45 and this is a reduction in expenses.

A machine cost 9,000 and has provision for depreciation of 6,300, so net book value is 2,700. Sold for 2,100, it makes a loss on disposal of 600.

Must-know distinctions

• Irrecoverable debt (a debt that will not be paid, an expense) versus provision for doubtful debts (an estimate against remaining receivables).
• Drawings (owner takes value out, reduces capital) versus expenses (running costs of the business).
• Capital expenditure (non-current assets, spread through depreciation) versus revenue expenditure (day-to-day costs, charged in full).
• Other payables (owed) versus other receivables (paid early).
• Income due (earned, not yet received) versus income received in advance (received, not yet earned).

Business types compared

	Sole trader	Partnership	Limited company
Owners	One	Two or more	Shareholders
Liability	Unlimited	Usually unlimited	Limited
Capital	Owner’s funds and borrowing	Partners’ funds, more than one source	Shares and loans, can be large
Control	Owner alone	Shared	Directors act for shareholders
Strength	Full profit and quick decisions	Shared skills and workload	Limited liability, continuity
Weakness	Risk and limited capital	Disputes, shared risk	Rules, cost, loss of control

Distinguish share capital from loan capital for companies: shareholders own a company and share in its profit, while lenders are owed repayment and interest.

Layout to learn

Income statement for the year ended ...
Revenue
Less cost of sales: opening inventory + purchases (less own use)
   + carriage inwards - closing inventory
Gross profit
Add other income (income due, income received in advance adjusted)
Less expenses (each adjusted for payables, receivables, depreciation,
   irrecoverable debts, change in provision)
Net profit

Statement of financial position at ...
Non-current assets (cost, depreciation, net book value)
Current assets (inventory, trade receivables net, other receivables, bank)
Current liabilities (trade payables, other payables, income in advance)
Non-current liabilities (loans repayable later)
Capital: opening + net profit - drawings

A second full reminder: Penmore Trading

Revenue is 40,000. Opening inventory is 3,000, purchases are 26,000 (including 500 of goods the owner took), carriage inwards is 400 and closing inventory is 4,200. Wages are 6,000, rent is 2,400 with 200 still owing, depreciation is 800, and insurance paid is 900 with 150 relating to next year.

Line	Working	Result
Cost of sales	3,000 + 25,500 + 400 - 4,200	24,700
Gross profit	40,000 - 24,700	15,300
Rent charge	2,400 + 200	2,600
Insurance charge	900 - 150	750
Total expenses	6,000 + 2,600 + 800 + 750	10,150
Net profit	15,300 - 10,150	5,150

Gross profit is 38.25% of revenue and net profit is about 12.9%. On the statement of financial position, 200 appears in current liabilities and 150 in current assets. The 500 of own goods does not appear as an expense: it is in drawings.

Comment starters

• “Net profit rose, but drawings were higher still, so capital fell.”
• “Gross profit as a share of revenue fell, which may suggest lower selling prices or higher purchase costs.”
• “Net current assets are positive, so the business can cover short-term debts, although much of the total is inventory.”
• “Depreciation reduces profit but not cash, so profit and bank balance can move differently.”

Quick self-test

1. Which concept explains deducting an expense paid in advance?
2. Electricity paid in the year is 2,640. 310 is owing at the end and 250 was owing at the start. What is the charge?
3. An asset has cost 14,000 and provision for depreciation of 3,500. Calculate depreciation at 20% reducing balance.
4. Receivables after writing off a debt are 8,750, the provision is 2% and the old provision is 120. What is charged?
5. Goods cost 2,400 and could be sold for 1,900 net. At what value are they included in inventory?
6. The owner takes goods that cost 280. State the double entry.
7. Opening capital is 15,000, net profit 9,800 and drawings 7,200. Find closing capital.
8. Revenue is 58,000 and cost of sales 39,500. Find gross profit and the gross profit percentage to 1 decimal place.
9. Give two disadvantages of being a sole trader.
10. An asset cost 9,000, has provision for depreciation of 6,300 and is sold for 2,100. State the profit or loss.
11. Fees of 240 are earned but unpaid. Where does this appear in the statement of financial position?
12. Give one advantage of a limited company over a partnership.

Answers

1. Accruals.
2. 2,640 + 310 - 250 = 2,700.
3. Net book value is 10,500, so 20% gives 2,100.
4. 175 - 120 = 55 charged.
5. 1,900, the lower figure.
6. Debit drawings 280, credit purchases 280.
7. 15,000 + 9,800 - 7,200 = 17,600.
8. 18,500; 18,500 / 58,000 = 31.9%.
9. Unlimited liability; capital limited to what the owner can raise.
10. Net book value 2,700, proceeds 2,100, loss of 600.
11. Other receivables, in current assets.
12. Limited liability for shareholders (or easier to raise capital from shares).

Where marks are usually lost

• Using the whole provision as the charge instead of the change.
• Adding a prepaid expense instead of deducting it.
• Leaving goods for own use in purchases, or treating them as an expense.
• Showing inventory at selling price or ignoring a lower net realisable value.
• Applying the reducing balance percentage to cost every year instead of net book value.
• Putting income received in advance among assets.
• Showing profit on disposal as a deduction, or loss as income.
• Giving a list of features with no link to the business in the question.
• Stating a figure when asked to comment, without saying what it means.

Frequently asked questions

What adjustments are made to a sole trader’s final accounts? The usual adjustments are accruals and prepayments of expenses and income, depreciation of non-current assets, irrecoverable debts, the provision for doubtful debts, closing inventory and goods taken for own use. Each one changes a figure in the income statement and a matching figure in the statement of financial position.

What is the difference between an irrecoverable debt and a provision for doubtful debts? An irrecoverable debt is one that will not be paid, so it is written off as an expense and removed from trade receivables. A provision for doubtful debts is an estimate of debts that may not be paid; only the increase or decrease in the provision is charged or credited to the income statement.

Are FIFO, AVCO and LIFO examined in OxfordAQA IGCSE Accounting 9215? No. The specification states that FIFO, AVCO and LIFO inventory valuation methods are not examined, so closing inventory is valued at the lower of cost and net realisable value using the figures given.

How does a service business’s income statement differ from a trading business’s? A service business sells services rather than goods, so it has no inventory, no cost of sales and no gross profit. Its income statement starts with fees or revenue and deducts expenses directly to find the profit for the year.

Official syllabus

OxfordAQA International GCSE Accounting (9215), specification version 1.2, section 3.4, for exams from May/June 2026 onwards. Published by OxfordAQA.