Accounting Equation
Also written as: Capital = Assets − Liabilities. Must always balance.
Assets = Capital + Liabilities Cambridge O Level 7707
📒 O Level Accounting Formula Sheet 2026
All key formulas for Cambridge O Level Accounting (7707) — accounting equation, income statement, balance sheet, ratio analysis and depreciation.
Accounting Equation Income Statement Balance Sheet Ratios Depreciation
Our formula sheets are free to download — save this one as PDF for offline revision.
Aligned with the latest 2026 syllabus and board specifications. This sheet is prepared to match your exam board’s official specifications for the 2026 exam series.
Every O Level Accounting Formula You Need
Cambridge O Level Accounting (7707) requires accurate use of formulas and accounting structures in every paper. This sheet covers all key relationships from the syllabus — from the fundamental accounting equation through to ratio analysis — with examiner notes on presentation.
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Accounting equation and double entry
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Income statement and profit formulas
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Balance sheet structure
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Ratio analysis: profitability, liquidity, efficiency
The Accounting Equation and Double Entry
Extended Accounting Equation
Capital introduced + net profit − drawings = closing capital.
Assets = Capital + Retained Profit + Liabilities Double Entry Rule
Every transaction has an equal and opposite debit and credit entry.
Debit: Assets ↑, Expenses ↑, Drawings ↑
Credit: Liabilities ↑, Capital ↑, Revenue ↑
Capital Calculation
Or: Opening Capital + Additional Capital + Net Profit − Drawings
Closing Capital = Opening Capital + Net Profit − Drawings Income Statement (Trading and Profit & Loss Account)
Cost of Sales
Also: Cost of Sales = Opening Inventory + Net Purchases (after returns and carriage) − Closing Inventory
Cost of Sales = Opening Inventory + Purchases − Closing Inventory Gross Profit
Gross Profit = Revenue − Cost of Sales Net Profit
Other income: rent received, commission received, discount received.
Net Profit = Gross Profit + Other Income − Expenses Net Purchases
Net Purchases = Purchases + Carriage Inwards − Returns Outwards Net Sales (Revenue)
Net Sales = Sales − Returns Inwards (Sales Returns) Balance Sheet
Balance Sheet Structure
Non-current assets: land, buildings, machinery, vehicles, equipment
Current assets: inventory, trade receivables, bank, cash
Current liabilities: trade payables, bank overdraft, accruals
Non-current liabilities: long-term loans, mortgages
Working Capital
Working Capital = Current Assets − Current Liabilities Net Assets
Net assets must equal total equity (capital).
Net Assets = Total Assets − Total Liabilities Depreciation
Straight-Line Method
Residual value = estimated scrap value at end of useful life. Same amount every year.
Annual Depreciation = (Cost − Residual Value) / Useful Life (years) Reducing Balance Method
Net Book Value (NBV) = Cost − Accumulated Depreciation. Higher depreciation in early years.
Depreciation = Net Book Value × Rate (%) Net Book Value
NBV = Cost − Accumulated Depreciation Profit/Loss on Disposal
Positive = profit on disposal. Negative = loss on disposal.
Profit/Loss = Proceeds from sale − Net Book Value at date of disposal Ratio Analysis
Always state the formula, calculate, and interpret — one mark for each.
Gross Profit Margin
Higher = better. Shows profit after cost of sales only.
Gross Profit Margin = (Gross Profit / Revenue) × 100% Net Profit Margin
Higher = better. Includes all expenses.
Net Profit Margin = (Net Profit / Revenue) × 100% Return on Capital Employed (ROCE)
Capital Employed = Total Assets − Current Liabilities (or Equity + Non-current Liabilities).
ROCE = (Net Profit / Capital Employed) × 100% Current Ratio (Liquidity)
Ideal: approximately 2:1. Above 1 = able to meet short-term obligations.
Current Ratio = Current Assets / Current Liabilities Quick Ratio (Acid Test)
Ideal: approximately 1:1. Excludes inventory as it may not convert quickly to cash.
Quick Ratio = (Current Assets − Inventory) / Current Liabilities Trade Receivables Days
Lower = faster collection. Compare over time or to industry average.
Trade Receivables Days = (Trade Receivables / Revenue) × 365 Trade Payables Days
Higher = longer to pay suppliers (may strain relationships).
Trade Payables Days = (Trade Payables / Cost of Sales) × 365 Inventory Turnover
Higher = inventory selling faster. Average Inventory = (Opening + Closing) / 2.
Inventory Turnover = Cost of Sales / Average Inventory Control Accounts and Bank Reconciliation
Trade Receivables Control Account
Opening balance + Credit sales + Dishonoured cheques
− Cash received − Discounts allowed − Returns inwards − Bad debts = Closing balance
Trade Payables Control Account
Opening balance + Credit purchases
− Cash paid − Discounts received − Returns outwards = Closing balance
Bank Reconciliation
Balance per bank statement ± Timing differences = Adjusted bank balance
+ Outstanding deposits − Unpresented cheques
How to Use This Formula Sheet
Boost your Cambridge exam confidence with these proven study strategies from our tutoring experts.
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Always balance the accounting equation
Every journal entry affects two accounts. Check that Assets = Capital + Liabilities after every transaction.
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Ratios: formula → calculate → interpret
Three marks for a ratio question: state the formula (1 mark), correct calculation (1 mark), meaningful interpretation (1 mark). Don't skip the interpretation.
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Depreciation: check your method
Straight-line: same amount every year. Reducing balance: same percentage but decreasing amount. Know which method the question specifies.
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Income statement order matters
Revenue → Cost of Sales → Gross Profit → Other Income → Expenses → Net Profit. Examiners deduct marks for wrong order or missing lines.
Formula Sheet FAQ
Quick answers about this free PDF and how to use it for exam revision and active recall.
Is the Cambridge O Level Accounting Formula Sheet 2026 free to download as a PDF?
Yes. This Tutopiya formula sheet is free to use and you can download it as a PDF from this page for offline revision. There is no payment or account required for the PDF download.
What Accounting topics and equations does this formula sheet cover?
This page groups key Accounting formulas in one place for revision. Complete formula reference for Cambridge O Level Accounting (7707). Key formulas for the accounting equation, income statement, balance sheet, ratio analysis and depreciation with O Level exam tips. Always cross-check with your official syllabus and past papers for your exam session.
Can I use this instead of the official exam formula booklet in the exam?
No. In the exam you must follow only what your exam board allows in the hall—usually the official formula booklet or data sheet where provided. This page is a revision and teaching aid, not a replacement for board-issued materials.
Who is this formula sheet for (Secondary)?
It is written for students preparing for assessments at Secondary in Accounting, including classroom revision, homework support, and independent study. Teachers and tutors can also share it as a quick reference.
How should I revise with this formula sheet?
Work through past paper questions, quote the correct formula before substituting values, and check units and notation every time. Pair this sheet with timed practice and mark schemes so you see how examiners expect working to be set out.
Where can I get more help with Accounting revision?
Explore Tutopiya’s study tools, past paper finder, and revision checklists linked from our tools hub, or book a trial lesson with a subject specialist for personalised support alongside this formula reference.
Need Help with O Level Accounting?
Work through double entry, financial statements and ratio analysis with a specialist O Level Accounting tutor.
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This formula sheet aligns with Cambridge O Level Accounting (7707) syllabus content.
Ratio formulas may have minor variations in different textbooks — always use the formula as presented in the Cambridge 7707 mark scheme.