Net assets should equal closing capital. When they do not, the answer is to find the error, not to add a line that makes the totals match. A balancing figure hides the mistake and loses marks.
This lesson closes sole-trader statements and builds on explaining profit and capital. The routine here also applies to trial balances, which you may have met in trial balance and error limits.
What is a balancing figure, and why is it a problem?
A balancing figure is an invented amount, often labelled “sundry” or “difference”, added to one side to make the totals agree. It looks neat but it is not an asset, a liability or capital. Examiners expect the cause, and in real life the same difference could be a missing sale or a wrong payment.
How do you check, step by step?
- Re-add every column and re-check the subtotals.
- Compare each balance with the trial balance or ledger.
- Recalculate capital: opening capital + profit − drawings (+ capital introduced).
- Measure the difference and look for clues: divisible by 9, equal to one balance, or half the difference equal to a balance (an item on the wrong side).
- Correct the real error and recompute the totals.
Worked example
Nadia’s Florist has these figures (RM) at 31 December 2025: equipment at cost 20,000 and accumulated depreciation 6,000; inventory 3,500; receivables 2,900; bank 4,600; cash 200; payables 3,000. Opening capital was 18,000, profit 9,600 and drawings 5,400.
Nadia’s draft showed bank as 4,060, so net assets did not match the capital.
Step 1, draft net assets: non-current assets 14,000. Current assets 3,500 + 2,900 + 4,060 + 200 = 10,660. Total assets 24,660. Less payables 3,000 gives 21,660.
Step 2, capital working: 18,000 + 9,600 − 5,400 = 22,200.
Step 3, the difference: 22,200 − 21,660 = 540.
Step 4, the clue: 540 ÷ 9 = 60, so a transposition is likely. Compare the bank balance in the draft with the cash book: it says 4,600, not 4,060.
Step 5, the correction:
| Draft (RM) | Corrected (RM) | |
|---|---|---|
| Non-current assets | 14,000 | 14,000 |
| Current assets | 10,660 | 11,200 |
| Total assets | 24,660 | 25,200 |
| Less: Payables | (3,000) | (3,000) |
| Net assets | 21,660 | 22,200 |
| Closing capital | 22,200 | 22,200 |
Check: current assets 3,500 + 2,900 + 4,600 + 200 = 11,200. Then 14,000 + 11,200 = 25,200, and 25,200 − 3,000 = 22,200. The statement now agrees without any invented line.
What mistake catches students here?
A common slip is to add the difference to the statement as a plug.
Mistaken working: add “Sundry 540” to current assets so that net assets become 22,200.
The figures agree, but the bank balance remains wrong, and the statement now includes an asset that does not exist.
The correction is to treat the difference as a clue. A 540 gap that divides by 9 pointed straight at a transposed bank figure. Once the error is corrected, no extra line is needed.
Check yourself
Try these on paper first, then open each answer.
1. Net assets are RM450 lower than capital. Is a transposition possible? Give a pair of figures that would cause it.
Show answer
450 ÷ 9 = 50, so yes, a transposition is possible. For example, 3,720 written as 3,270 gives a difference of 450.
Check: 3,720 − 3,270 = 450.
2. The difference is exactly RM1,200 and the statement lists no prepayment, though the trial balance shows prepaid rent of RM1,200. What is the likely cause?
Show answer
The prepayment was omitted from current assets. Adding it removes the difference without any plug.
3. Net assets are RM800 higher than capital, and the allowance for irrecoverable debts of RM400 was added to receivables instead of deducted. Explain why the difference is 800.
Show answer
An item on the wrong side is out by twice its size: it should be deducted (−400) but was added (+400), a swing of 800. Half of 800 is 400, which matches the allowance.
Where does this lead next?
You have now covered the full route from adjusted data to statements and checks. Test the whole module with the mixed practice set, and keep a note of any slip in your mistake log so that you can retest it. If you want to see more of the subject, the IGCSE Accounting guide lists the other topics.
If a checking routine is the part that feels hardest to build on your own, our teachers can practise it with you in online one-to-one Accounting tuition.