Financial Accounting · Financial Statements from Incomplete Records

Missing Figures, Margin and Markup in Incomplete Records

Updated 10 October 2026 · Fact-checked

Margin is gross profit as a percentage of sales. Markup is gross profit as a percentage of cost. To find a missing figure, rebuild the trading account with the known items, convert the given percentage into sales and cost, then put the missing figure (stock lost, cash stolen, sales) in as the balancing item.

Understand Missing Figures, Margin and Markup Methods

In incomplete records you often cannot see a figure because the books were lost, burnt or never kept. Stock destroyed by fire is the classic case. You cannot count it, so you work it out from other numbers you do know.

The tool is the trading account. It always balances: Opening stock + Purchases + Direct expenses = Cost of goods sold + Closing stock. If you know the gross profit rate, you can find sales or cost of goods sold. Then closing stock becomes the only unknown, and you find it by balancing.

The key idea is the base. Gross profit margin is based on sales. Markup is based on cost. A margin of 20% means GP is 20% of sales. A markup of 20% means GP is 20% of cost. These are different, and mixing them up is the most common loss of marks.

The same logic finds other missing items. Sales can be found from cost of goods sold. Credit sales can be found from a debtors account or a ratio such as the debtors turnover ratio. Cash embezzled is the difference between the cash that should be there and the cash actually counted.

The answer is an estimate. It assumes the rate of gross profit stayed the same as in earlier years, and that the stock was valued at cost.

Key rules to remember

Gross profit margin: GP margin = Gross profit ÷ Sales × 100; Base is sales. Cost of goods sold = Sales × (100 − margin%) ÷ 100.
Markup: Markup = Gross profit ÷ Cost of goods sold × 100; Base is cost. Sales = Cost × (100 + markup%) ÷ 100.
Margin to markup: Markup = Margin ÷ (100 − Margin) × 100; Example: margin 20% gives markup 20 ÷ 80 × 100 = 25%.
Markup to margin: Margin = Markup ÷ (100 + Markup) × 100; Example: markup 25% gives margin 25 ÷ 125 × 100 = 20%.
Cost of goods sold: COGS = Opening stock + Purchases (net of returns) + Direct expenses − Closing stock; Use this to find closing stock once COGS is known from sales and the rate.
Credit sales from debtors: Credit sales = Closing debtors + Cash received + Discount allowed + Bad debts + Sales returns − Opening debtors; This is the total debtors account balanced for the missing credit sales figure. Use sales returns (goods returned by customers), not purchase returns. Bills receivable are also adjusted if given.
Debtors turnover ratio: Credit sales = Debtors turnover ratio × Average debtors; Use only when the ratio is defined on average debtors in the question.

How to solve Missing Figures, Margin and Markup Methods questions

Use this order for any missing-figure question. It works whether the unknown is stock, sales, purchases or cash.

1Read the question and mark what is missing: closing stock, sales, purchases, or cash.
2Identify whether the given percentage is on sales (margin) or on cost (markup). Write the base next to it.
3Convert the percentage into a pair, such as Sales 100, GP 20, Cost 80, or Cost 100, GP 25, Sales 125.
4Find the known side of the trading account first. Usually this means finding sales, then cost of goods sold.
5Prepare the trading account up to the date of loss. Opening stock, purchases and direct expenses go in. Use only the period from the last stock-taking to the date of loss.
6Balance the account to get the missing closing stock. Closing stock = Opening stock + Purchases + Direct expenses − COGS.
7If an insurance claim or a loss is asked, adjust for salvage and any stock saved before stating the net loss.
8Write the answer with the label, such as 'Stock lost by fire' and show the working in a neat statement.

Quickest way: Hundred-base shortcut

When to use it: Use it when the question gives a margin or markup and asks for stock lost, sales or COGS in the MCQ section or a short written part.

Write the relation on a 100 base: margin 20% means Sales 100, Cost 80. Markup 25% means Cost 100, Sales 125.
Compute sales or cost from the known figure in the question using simple proportion.
Compute COGS = Opening stock + Purchases − Closing stock and rearrange to get the unknown.
Check: the answer must not be negative, and it must be smaller than opening stock plus purchases.

Common mistakes in Missing Figures, Margin and Markup Methods

Applying the markup percentage to sales.
The words 'profit of 25%' sound like a share of sales.
Fix: Read the base. 'On cost' or 'markup' means cost is 100. 'On sales' or 'margin' means sales is 100.
Including purchases or sales before the last stock date or after the fire date.
Students use the full year's figures by habit.
Fix: Use only transactions from the last known stock date up to the date of loss.
Ignoring purchase returns, sales returns and direct expenses in the trading account.
Students copy only the main items.
Fix: Use net purchases and net sales. Add carriage inwards and wages to the cost side.
Deducting gross profit from sales twice.
COGS is found and then the margin is applied again.
Fix: Once you have COGS, only use the trading account equation to find stock.
Reporting the full stock as the insurance loss.
Salvage and goods saved are overlooked.
Fix: Deduct salvage value from the stock lost before stating the claim, as the question directs.
Taking credit sales equal to total sales.
Cash sales are not separated.
Fix: Find credit sales from the debtors account, then add cash sales to get total sales.

Worked examples

Example 1

Ravi Traders lost stock in a fire on 15 March 2027. Stock on 1 April 2026 was ₹1,20,000. From 1 April 2026 to 15 March 2027 purchases were ₹8,40,000, purchase returns ₹40,000, and sales ₹10,50,000. Gross profit margin is 20% on sales. Find the stock destroyed.

Show the solution

Margin is on sales: Sales 100, GP 20, COGS 80.
COGS = 10,50,000 × 80 ÷ 100 = ₹8,40,000.
Net purchases = 8,40,000 − 40,000 = ₹8,00,000.
Goods available for sale = 1,20,000 + 8,00,000 = ₹9,20,000.
Closing stock = Goods available − COGS = 9,20,000 − 8,40,000 = ₹80,000.

Answer: Stock destroyed by fire is ₹80,000 at cost.

Example 2

Meera Stores sells goods at a markup of 25% on cost. Opening debtors were ₹60,000, closing debtors ₹90,000. Cash received from debtors was ₹4,20,000 (this whole amount came from debtors), discount allowed ₹10,000 and bad debts ₹5,000. Opening stock ₹70,000, closing stock ₹1,10,000. Cash sales were ₹1,00,000. Find the purchases, assuming all sales are as per debtors and cash sales.

Show the solution

Credit sales = Closing debtors + Cash received + Discount + Bad debts − Opening debtors = 90,000 + 4,20,000 + 10,000 + 5,000 − 60,000 = ₹4,65,000.
Total sales = 4,65,000 + 1,00,000 = ₹5,65,000.
Markup 25% on cost: Cost 100, Sales 125. COGS = 5,65,000 × 100 ÷ 125 = ₹4,52,000.
Purchases = COGS + Closing stock − Opening stock = 4,52,000 + 1,10,000 − 70,000 = ₹4,92,000.

Answer: Credit sales ₹4,65,000, total sales ₹5,65,000 and purchases ₹4,92,000.

Exam tips

Underline the words 'on sales', 'on cost', 'margin' and 'markup' before you start. Most mistakes come from the base.
In MCQs, check which of the options is the result of the wrong base. The wrong-base answer is usually one of the options.
In written answers, present a neat trading account up to the date of loss and a short working note for sales and COGS. This earns step marks even if the final figure slips.
State your assumption in one line, such as 'Rate of gross profit is assumed constant', since the method is an estimate.
For cash embezzled, show the cash book summary and then the difference with the cash actually found.

Practice questions from Financial Statements from Incomplete Records

Missing Figures, Margin and Markup Methods: frequently asked questions

What is the difference between margin and markup in incomplete records?

Margin is gross profit as a percentage of sales. Markup is gross profit as a percentage of cost. For the same profit, markup is always the larger percentage.

How do I find closing stock lost by fire using the gross profit ratio?

Find sales up to the date of fire. Use the ratio to get COGS. Then add opening stock and net purchases and deduct COGS. The balance is the stock destroyed.

How do I calculate credit sales using ratios?

If the debtors turnover ratio and average debtors are given, credit sales equal the ratio times average debtors. Otherwise, balance the total debtors account for the missing credit sales.

Should I use the full year's figures for the fire problem?

No. Use the period from the last stock-taking date to the date of the fire. Figures outside that period give a wrong stock estimate.