Find profit from opening and closing statements of affairs
Use incomplete records to calculate capital at two dates and derive the owner's period profit after drawings and capital introduced.
Section 5.6 · Incomplete records
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Does additional capital introduced count as profit?
What you will learn
- Explain why a business may keep incomplete accounting records
- Prepare opening and closing statements of affairs
- Calculate profit from the change in capital
Use statements of affairs to estimate capital
A business may lack a complete double-entry system because of cost, limited expertise, lost records or informal record keeping. Incomplete records may be simpler but make errors, missing balances and performance harder to detect.
At each date, calculate capital as assets less liabilities. A statement of affairs resembles a statement of financial position but is reconstructed from available evidence and may not be complete or fully verified.
Adjust the capital movement
When reliable records are incomplete, profit for the year = closing capital + drawings − additional capital introduced − opening capital, before any further adjustments specified in the question.
Drawings are added back because they reduce closing capital but are not expenses. Additional capital is deducted because it increases capital without being profit. Explain the method's limitations when source evidence is uncertain.
Pause and explain
Opening capital is $12,000, closing capital $18,500, drawings $2,000 and no new capital. Find estimated profit.
Worked example
An opening statement of affairs lists non-current assets $40,000, inventory $6,000, receivables $8,000, cash $1,000, payables $6,000 and a loan $5,000. At year-end the balances are non-current assets $45,000, inventory $7,500, receivables $9,200, cash $2,300, payables $7,000 and loan $6,000. Drawings were $7,000 and additional capital $3,000. Calculate opening and closing capital and profit.
Show the worked solution
- Opening assets = 40,000 + 6,000 + 8,000 + 1,000 = $55,000; opening liabilities = 6,000 + 5,000 = $11,000; opening capital = $44,000.
- Closing assets = 45,000 + 7,500 + 9,200 + 2,300 = $64,000; closing liabilities = 7,000 + 6,000 = $13,000; closing capital = $51,000.
- Profit = closing capital 51,000 + drawings 7,000 − additional capital 3,000 − opening capital 44,000 = $11,000.
Answer Opening statement of affairs capital $44,000; closing capital $51,000; estimated profit for the year $11,000.
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 assets are $54,000 and liabilities $19,000. Closing assets are $68,000 and liabilities $24,000. Drawings were $7,000 and new capital $3,000. Calculate profit.
Give me a hint
Find opening and closing net assets, then adjust for owner movements.
Compare my reasoning
- Opening capital = 54,000 − 19,000 = $35,000.
- Closing capital = 68,000 − 24,000 = $44,000.
- Profit = 44,000 + 7,000 − 3,000 − 35,000 = $13,000.
Estimated profit for the year is $13,000.
Look for these in your work
- Opening capital correct
- Closing capital correct
- Profit adjustment correct
Explain one advantage and two limitations of calculating profit from incomplete records.
Give me a hint
Consider practical cost and the reliability or detail of the evidence.
Compare my reasoning
- It can provide an estimate when a full double-entry system is unavailable.
- Missing or inaccurate balances can make capital and profit unreliable.
- The method gives less detail for checking transactions and may not identify the cause of a change.
The method can estimate performance from limited records, but weak source evidence may make it unreliable and it gives less transaction detail for verification or explanation.
Look for these in your work
- Advantage relevant
- Reliability limitation
- Detail limitation
Opening capital is $26,000; closing capital is $38,500; drawings $5,200 and additional capital $2,500. Recalculate profit and explain the treatment of the two owner movements.
Give me a hint
Add drawings and deduct capital introduced from the capital increase.
Compare my reasoning
- Profit = 38,500 + 5,200 − 2,500 − 26,000.
- Profit = $15,200.
- Drawings are added back; additional capital is deducted because it is financing, not income.
Estimated profit is $15,200. Add drawings back and deduct additional capital introduced.
Look for these in your work
- Formula applied
- Calculation correct
- Owner movements explained
Common mistakes
- Forgetting to add drawings back
- Treating capital introduced as income
- Calling reconstructed capital fully verified when records are incomplete
- Using closing capital minus opening capital alone as profit
What can you explain now?
Why are drawings added back when calculating profit from capital movement?
Compare with the explanation
They reduce capital but are not business expenses
The calculation reverses the owner's withdrawals before finding the period result.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Why does the capital-comparison method need drawings and additional capital information?
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.