Prepare sole-trader statements from incomplete records
Reconstruct missing profit and transactions from capital changes, control-account information and available evidence before preparing statements.
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. These lessons cover objective 1.5.2 only: sole-trader statements from full and incomplete records. Adjustments (1.5.1) have separate lessons; partnerships (1.5.3) and limited companies (1.5.4) remain to be mapped. Practice is self-checked, not an official Cambridge grade.
Before you begin
- Use the Topic 1.2 double-entry system and Topic 1.5.1 period adjustments. Distinguish business profit from owner drawings and capital introduced.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What is the first step to calculate closing capital from a statement of financial position?
What you will learn
- Calculate profit from opening and closing capital
- Reconstruct missing credit sales from receivables records
- Use reconstructed amounts in sole-trader statements
Use capital comparison when full profit records are missing
Where records are incomplete, profit can be found by comparing opening and closing capital after adjusting for owner movements: profit = closing capital + drawings − capital introduced − opening capital. This assumes other capital changes are absent or separately accounted for.
Closing capital can be found from a statement of financial position: assets less liabilities. Verify assets and liabilities from the evidence available and adjust receivables, inventory, depreciation and accruals before using the result.
Reconstruct a missing transaction total from control information
A sales ledger control account can reconstruct credit sales: opening receivables + credit sales − receipts − sales returns − irrecoverable debts − discounts allowed − contra entries = closing receivables. Rearrange using the totals supplied and check that every item is included once.
Combine reconstructed credit sales with cash sales only when supported, then prepare the trading statement. For other missing figures, use the relevant control account and supporting records. State assumptions and show workings.
Pause and explain
Opening capital $20,000; closing capital $29,000; drawings $4,500; capital introduced $1,500. Calculate profit.
Worked example
Opening capital is $34,000, closing capital $45,800, drawings $12,500 and capital introduced $2,000. A sales ledger control account has opening receivables $6,200, receipts $31,000, returns $1,100, irrecoverable debts $300, discounts $400 and closing receivables $7,900. Find profit and credit sales.
Show the worked solution
- Profit = 45,800 + 12,500 − 2,000 − 34,000 = $22,300.
- Credit sales = closing receivables − opening receivables + receipts + returns + debts + discounts.
- Credit sales = 7,900 − 6,200 + 31,000 + 1,100 + 300 + 400 = $34,500.
Answer Profit is $22,300 and reconstructed credit sales are $34,500. Use each result in the relevant statement with other verified records.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Opening receivables $3,600; cash received from credit customers $17,500; returns $650; irrecoverable debts $250; closing receivables $4,900. There are no discounts or contra entries. Find credit sales.
Give me a hint
Rearrange the receivables control equation to solve for credit sales.
Compare my reasoning
- Credit sales = closing − opening + receipts + returns + write-offs.
- Credit sales = 4,900 − 3,600 + 17,500 + 650 + 250.
- Credit sales are $19,700.
Credit sales are $19,700.
Look for these in your work
- Equation rearranged
- All reductions included
- Amount correct
Opening capital $27,000; closing net assets $39,500; drawings $6,200; capital introduced $1,700. Calculate profit and state one assumption.
Give me a hint
Use closing net assets as closing capital if no other liabilities or capital changes are omitted.
Compare my reasoning
- Profit = 39,500 + 6,200 − 1,700 − 27,000.
- Profit = $17,000.
- Assume closing net assets correctly represent closing capital after all liabilities and other adjustments.
Profit is $17,000, assuming closing net assets correctly represent closing capital and there are no other capital changes.
Look for these in your work
- Formula applied
- Amount correct
- Assumption stated
A trader calculates profit from capital comparison but ignores a year-end payable and an inventory shortage. Explain the likely direction of error and what to do before finalising statements.
Give me a hint
Both omitted adjustments affect closing net assets and therefore closing capital.
Compare my reasoning
- An omitted payable understates liabilities and overstates closing net assets and capital.
- Inventory overstated by a shortage overstates assets and closing capital.
- Verify year-end liabilities and inventory, record supported adjustments and recalculate capital and profit.
Profit is likely overstated if the payable is omitted or inventory remains above the verified amount. Record supported year-end adjustments before using closing capital in the profit formula.
Look for these in your work
- Liability effect correct
- Inventory effect correct
- Adjustments before calculation
Common mistakes
- Adding capital introduced to profit
- Forgetting drawings in the capital-comparison formula
- Omitting returns, discounts or write-offs from a receivables control calculation
What can you explain now?
Which owner movement is added back when using capital comparison to find profit?
Compare with the explanation
Drawings
Drawings reduced closing capital but are not an expense in the profit calculation.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Write the capital-comparison profit formula and the credit-sales control-account formula.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.