Level: HOTS (KBAT)
HOTS (KBAT) Worked Examples: Incomplete Records
Six graded examples that test reasoning: the Comparison Method (opening capital, closing capital, profit/loss) and the Analysis Method (control accounts, cash account, statements with adjustments).
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Example 1: Capital & Profit with Drawings and Additional Capital
Question
Solution plan
Capital = Assets − Liabilities at each date. Closing Capital = Opening Capital + Additional Capital + Net Profit − Drawings. Rearrange to isolate profit: Profit = Closing Capital + Drawings − Opening Capital − Additional Capital. Drawings reduce capital but are unrelated to trading, while additional capital raises capital without being profit; both must be removed so that true profit is not distorted.
| Details | RM | RM |
|---|---|---|
| Assets | ||
| Fittings | 20,000 | |
| Inventory | 8,000 | |
| Trade receivables | 5,000 | |
| Bank | 7,000 | |
| Total Assets | 40,000 | |
| Less: Liabilities | ||
| Trade payables | 6,000 | |
| Opening Capital | 34,000 |
| Details | RM | RM |
|---|---|---|
| Assets | ||
| Fittings | 18,000 | |
| Inventory | 11,000 | |
| Trade receivables | 9,000 | |
| Bank | 12,000 | |
| Total Assets | 50,000 | |
| Less: Liabilities | ||
| Trade payables | 8,000 | |
| Closing Capital | 42,000 |
| Details | RM | RM |
|---|---|---|
| Closing Capital | 42,000 | |
| Add: Drawings | 6,000 | |
| 48,000 | ||
| Less: Opening Capital | 34,000 | |
| Less: Additional Capital | 5,000 | |
| 39,000 | ||
| Net Profit | 9,000 |
Answer
Opening capital is RM34,000 and closing capital is RM42,000. After adding back drawings of RM6,000 and deducting opening capital plus additional capital of RM5,000, the business earned a net profit of RM9,000.
Where marks are usually lost
Example 2: Goods Drawings & Loan in the Comparison Method
Question
Solution plan
Compute opening and closing capital as assets minus liabilities (the loan is a liability). Total drawings = cash (RM400 × 12 = RM4,800) + goods RM1,200 = RM6,000. Profit = Closing Capital + Drawings − Opening Capital (no additional capital). Goods drawings are non-cash drawings; if ignored, less is added back as drawings and profit is understated.
| Details | RM | RM |
|---|---|---|
| Assets | ||
| Kitchen equipment | 15,000 | |
| Inventory | 3,000 | |
| Bank | 4,000 | |
| Total Assets | 22,000 | |
| Less: Loan | 5,000 | |
| Opening Capital | 17,000 |
| Details | RM | RM |
|---|---|---|
| Assets | ||
| Kitchen equipment | 13,500 | |
| Inventory | 4,500 | |
| Bank | 9,000 | |
| Trade receivables | 1,000 | |
| Total Assets | 28,000 | |
| Less: Loan | 3,000 | |
| Closing Capital | 25,000 |
| Details | RM | RM |
|---|---|---|
| Closing Capital | 25,000 | |
| Add: Cash drawings (400 × 12) | 4,800 | |
| Add: Goods drawings | 1,200 | |
| 31,000 | ||
| Less: Opening Capital | 17,000 | |
| Net Profit | 14,000 |
Answer
Opening capital RM17,000, closing capital RM25,000. Adding back total drawings of RM6,000 (cash RM4,800 + goods RM1,200), net profit is RM14,000. If the RM1,200 goods drawings were ignored, profit would be understated by RM1,200 to only RM12,800.
Where marks are usually lost
Example 3: Analysis Method: Deriving Sales via the Debtors Control Account
Question
Solution plan
In the Debtors Control Account, the debit side holds the opening balance and credit sales; the credit side holds cash received, discount allowed, returns inwards, bad debts and the closing balance. Credit sales is the balancing figure. Total sales = credit sales + cash sales.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Balance b/d | 12,000 | Bank | 48,000 |
| Credit sales | 55,300 | Discount allowed | 1,500 |
| Returns inwards | 2,000 | ||
| Bad debts | 800 | ||
| Balance c/d | 15,000 | ||
| 67,300 | 67,300 |
| Details | RM |
|---|---|
| Credit sales (balancing figure) | 55,300 |
| Add: Cash sales | 10,000 |
| Total Sales | 65,300 |
Answer
Credit sales as the balancing figure is RM55,300 (67,300 − 12,000). Adding cash sales of RM10,000, total sales for the year is RM65,300.
Where marks are usually lost
Example 4: Analysis Method: Deriving Purchases via the Creditors Control Account
Question
Solution plan
In the Creditors Control Account, the credit side holds the opening balance and credit purchases; the debit side holds payments, discount received, returns outwards and the closing balance. Credit purchases is the balancing figure. Total purchases = credit purchases + cash purchases.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Bank | 40,000 | Balance b/d | 9,000 |
| Discount received | 1,200 | Credit purchases | 45,000 |
| Returns outwards | 1,800 | ||
| Balance c/d | 11,000 | ||
| 54,000 | 54,000 |
| Details | RM |
|---|---|
| Credit purchases (balancing figure) | 45,000 |
| Add: Cash purchases | 5,000 |
| Total Purchases | 50,000 |
Answer
Credit purchases as the balancing figure is RM45,000 (54,000 − 9,000). Adding cash purchases of RM5,000, total purchases for the year is RM50,000.
Where marks are usually lost
Example 5: Analysis Method: Reconstructing the Cash Account to Derive Cash Sales
Question
Solution plan
Cash Account: the debit side is the opening balance and receipts (cash sales); the credit side is outflows (cash banked, sundry expenses, drawings) and the closing balance. Cash sales is the balancing figure that makes both sides equal. Cash sales = (total payments + closing balance) − opening balance.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Balance b/d | 500 | Bank (banked) | 30,000 |
| Cash sales | 39,300 | Sundry expenses | 3,000 |
| Drawings | 6,000 | ||
| Balance c/d | 800 | ||
| 39,800 | 39,800 |
Answer
Cash sales as the balancing figure is RM39,300, i.e. (30,000 + 3,000 + 6,000 + 800) − 500. This is the total cash sales received during the year.
Where marks are usually lost
Example 6: Full Statements with Adjustments from Incomplete Records
Question
Solution plan
Step 1: Debtors Control Account for credit sales (63,000), add cash sales (15,000) = sales 78,000. Step 2: Creditors Control Account for credit purchases (43,800). Step 3: utilities expense = paid − opening accrued + closing accrued = 3,600 − 300 + 500 = 3,800. Step 4: depreciation 10% × 25,000 = 2,500. Step 5: cost of sales = opening inventory + purchases − closing inventory. Step 6: gross profit + income (discount received) − expenses = net profit. Step 7: closing bank balance and the Statement of Financial Position; fittings net book value = cost − accumulated depreciation.
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Balance b/d | 8,000 | Bank | 60,000 |
| Credit sales | 63,000 | Discount allowed | 1,000 |
| Balance c/d | 10,000 | ||
| 71,000 | 71,000 |
| Particulars | RM | Particulars | RM |
|---|---|---|---|
| Bank | 42,000 | Balance b/d | 5,000 |
| Discount received | 800 | Credit purchases | 43,800 |
| Balance c/d | 6,000 | ||
| 48,800 | 48,800 |
| Details | RM |
|---|---|
| Utilities paid during year | 3,600 |
| Less: Accrued at start of year | 300 |
| 3,300 | |
| Add: Accrued at end of year | 500 |
| Utilities expense for the year | 3,800 |
| Details | RM | RM |
|---|---|---|
| Sales (63,000 + 15,000) | 78,000 | |
| Less: Cost of sales | ||
| Opening inventory | 6,000 | |
| Purchases | 43,800 | |
| 49,800 | ||
| Less: Closing inventory | 7,500 | |
| Cost of sales | 42,300 | |
| Gross profit | 35,700 | |
| Add: Discount received | 800 | |
| 36,500 | ||
| Less: Expenses | ||
| Utilities expense | 3,800 | |
| Discount allowed | 1,000 | |
| Depreciation of fittings | 2,500 | |
| Total expenses | 7,300 | |
| Net profit | 29,200 |
| Details | RM | RM |
|---|---|---|
| Non-current Assets | ||
| Fittings (cost) | 25,000 | |
| Less: Accumulated depreciation | 2,500 | |
| 22,500 | ||
| Current Assets | ||
| Inventory | 7,500 | |
| Trade receivables | 10,000 | |
| Bank | 25,400 | |
| 42,900 | ||
| Total Assets | 65,400 | |
| Less: Current Liabilities | ||
| Trade payables | 6,000 | |
| Accrued utilities | 500 | |
| 6,500 | ||
| Net Assets | 58,900 | |
| Financed by: Owner's Equity | ||
| Opening capital | 37,700 | |
| Add: Net profit | 29,200 | |
| 66,900 | ||
| Less: Drawings | 8,000 | |
| Closing capital | 58,900 |
Answer
Sales RM78,000 (credit RM63,000 + cash RM15,000); credit purchases RM43,800; cost of sales RM42,300; gross profit RM35,700. After adding discount received RM800 and deducting expenses RM7,300 (adjusted utilities RM3,800, discount allowed RM1,000, depreciation RM2,500), net profit is RM29,200. The Statement of Financial Position balances: net assets of RM58,900 equal closing capital of RM58,900 (opening capital RM37,700 + profit RM29,200 − drawings RM8,000).
Where marks are usually lost
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