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Financial Accounting · Incomplete records

Missing Figures: Inventory Loss, Theft and Drawings in Incomplete Records

Updated 11 October 2026 · Fact-checked

When inventory is lost in a fire or theft, rebuild the trading account. Work out expected cost of sales from sales and margin or mark-up, then use opening inventory + purchases − cost of sales to find the inventory that should exist. That figure is the loss. Goods taken for own use are a separate drawings deduction.

Understand Missing Figures: Inventory Loss, Theft and Drawings

In incomplete records you often have no inventory count at the date of a fire or theft. You cannot count what has gone. So you work backwards from figures you do know: opening inventory, purchases, sales and the gross profit percentage.

The trading account is a set of relationships. Opening inventory plus purchases gives goods available for sale. Take away closing inventory and you get cost of sales. If you know cost of sales, you can find closing inventory. In a loss question, that closing inventory is what should have been on hand just before the event.

You find cost of sales from sales. If you know the margin (gross profit ÷ sales), cost of sales = sales × (100% − margin). If you know the mark-up (gross profit ÷ cost), cost of sales = sales × 100 ÷ (100 + mark-up). Check which one the question gives.

The loss is the calculated inventory less any inventory saved or recovered, or any amount left. Only the part not saved is lost. An insurance claim would usually be at cost, so cost is the figure to use.

Drawings of goods are goods the owner takes for personal use. They were bought as purchases but are not sold to customers. So they must be removed from purchases (credit purchases, debit drawings) at cost. If you forget this, cost of sales is overstated and your calculated inventory is too low.

Key formulas to remember

Cost of sales (trading account)
Cost of sales = Opening inventory + Purchases − Drawings of goods − Closing inventory
Rearrange to find any one missing item. Purchases means net of returns and including carriage inwards.
Cost of sales from margin
Cost of sales = Sales × (100% − margin %)
Margin is a percentage of sales.
Cost of sales from mark-up
Cost of sales = Sales × 100 ÷ (100 + mark-up %)
Mark-up is a percentage of cost.
Inventory that should be on hand
Expected inventory = Opening inventory + Purchases − Drawings of goods − Cost of sales
Use cost of sales at the date of the loss, from sales up to that date.
Inventory lost
Loss = Expected inventory − Inventory saved or remaining
Insurance claims are normally based on cost.
Goods taken as drawings
Dr Drawings, Cr Purchases (at cost)
This is not a sale, so no profit is added.

How to solve Missing Figures: Inventory Loss, Theft and Drawings questions

Use this order for any fire, theft or goods-for-own-use question.

  1. 1Read the question and note the date of the loss. Only use sales and purchases up to that date.
  2. 2Find out whether the percentage given is margin or mark-up.
  3. 3Calculate sales up to the date of loss and work out cost of sales using the correct percentage.
  4. 4Set up a short trading account: opening inventory, add purchases, deduct any goods taken as drawings.
  5. 5Insert cost of sales and balance to find the inventory that should have been on hand.
  6. 6Deduct any inventory saved, salvaged or still held, to find the loss.
  7. 7Check that the answer is positive and at cost, not at selling price.
  8. 8If asked, show the accounting entries or the effect on profit and drawings.

Quickest way: Four-line inventory loss working

When to use it: Use in objective tests when you have sales, a margin or mark-up, and need the lost inventory fast.

  1. Write: Opening inventory + Purchases − Drawings = goods available.
  2. Convert sales to cost: sales × (100 − margin)% or sales × 100 ÷ (100 + mark-up).
  3. Subtract cost of sales from goods available. That is expected inventory.
  4. Subtract salvaged inventory. The result is the loss. Check the answer is at cost.

Common mistakes in Missing Figures: Inventory Loss, Theft and Drawings

  • Confusing margin with mark-up

    Both are gross profit percentages and they look similar.

    Fix: Margin is on sales, mark-up is on cost. A 25% mark-up equals a 20% margin. Underline the word in the question.

  • Leaving the loss at selling price

    Students forget the answer is inventory, which is held at cost.

    Fix: Convert sales to cost of sales first. Every inventory figure must be at cost.

  • Ignoring goods taken as drawings

    The goods are in purchases, so they seem to be part of normal trading.

    Fix: Deduct drawings of goods from purchases at cost before finding expected inventory.

  • Forgetting inventory saved or salvaged

    Students stop once they have expected inventory.

    Fix: Loss = expected inventory − inventory saved. Reread the last sentence of the question.

  • Using full-year sales for a mid-year loss

    Students grab the largest sales figure.

    Fix: Use sales up to the date of the fire or theft only, and opening inventory from the last year end.

  • Adding profit to drawings of goods

    Students treat drawings like a sale.

    Fix: Record drawings at cost, as stated in the question, unless told to use selling price. If given at selling price, convert to cost.

Worked examples

Example 1

A trader's inventory was destroyed by fire on 30 June. Opening inventory on 1 January was $40,000. Purchases from 1 January to 30 June were $190,000. Sales for the same period were $240,000. The trader earns a gross margin of 25% on sales. No inventory was saved. What is the cost of inventory destroyed?

Show the solution
  1. Cost of sales = $240,000 × (100% − 25%) = $240,000 × 75% = $180,000.
  2. Goods available = $40,000 + $190,000 = $230,000.
  3. Expected inventory = $230,000 − $180,000 = $50,000.
  4. No inventory was saved, so the whole amount is lost.

Answer: $50,000

Example 2

A shop is burgled on 31 March. Opening inventory was $30,000. Purchases to 31 March were $125,000. Sales to 31 March were $165,000. The shop uses a mark-up of 50% on cost. The owner took goods costing $5,000 for personal use. Inventory costing $8,000 remained after the theft. What is the cost of inventory stolen?

Show the solution
  1. Cost of sales = $165,000 × 100 ÷ 150 = $110,000.
  2. Goods available = $30,000 + $125,000 − $5,000 drawings = $150,000.
  3. Expected inventory = $150,000 − $110,000 = $40,000.
  4. Inventory stolen = $40,000 − $8,000 remaining = $32,000.

Answer: $32,000

Exam tips

  • Circle the words margin or mark-up before you do any calculation. The two give different cost of sales figures.
  • In multiple choice, expect distractors made by using the wrong percentage or forgetting drawings. Check these two points before choosing.
  • Write the trading account as a short column. It is faster and safer than doing it in your head.
  • If the question asks for the effect on profit, remember that drawings of goods are not an expense. A loss by fire or theft is an expense unless insured.
  • For number entry, give the answer at cost and check the units and rounding requested.

Practice questions from Incomplete records

Missing Figures: Inventory Loss, Theft and Drawings: frequently asked questions

How do I calculate inventory lost in a fire in incomplete records?

Find cost of sales from sales using the margin or mark-up. Then calculate opening inventory plus purchases less cost of sales. That is the inventory that should have existed. Deduct any inventory saved to get the loss.

What is the difference between margin and mark-up?

Margin is gross profit as a percentage of sales. Mark-up is gross profit as a percentage of cost. A 25% mark-up gives a 20% margin, so using the wrong one gives a wrong cost of sales.

How are goods taken by the owner recorded?

Debit drawings and credit purchases, at cost. This removes the goods from the trading account because they were not sold. Do not add any profit.

Is the loss from theft shown at cost or selling price?

At cost. Inventory is held at cost, so the calculated loss is at cost. Insurance claims are also normally based on cost.