Correct Option: D. Prepare an opening statement of affairs Explanation of the Correct Answer: When dealing with incomplete records in financial accounting, the first step is to prepare an opening statement of affairs. This statement serves as a snapshot of the business's financial position at a specific point in time, typically at the beginning of the accounting period. It lists all assets, liabilities, and the owner's equity, providing a foundation for further financial analysis and record-keeping.

1. Understanding the Opening Statement of Affairs:
2. The opening statement of affairs is similar to a balance sheet. It includes:
   • Assets: What the business owns (e.g., cash, inventory, equipment).
   • Liabilities: What the business owes (e.g., loans, accounts payable).
   • Owner's Equity: The residual interest in the assets after deducting liabilities.
3. This statement helps to establish the starting point for the accounting records, allowing the accountant to determine the net worth of the business at the beginning of the period.
4. Importance of the Opening Statement:
5. It provides a basis for calculating profits or losses during the period by comparing the opening and closing balances.
6. It helps in identifying discrepancies in records and aids in the reconstruction of missing financial data.

Why the Other Options Are Incorrect or Weaker: A. Ascertain the total sales: - While knowing total sales is important for understanding revenue, it is not the starting point for preparing accounts from incomplete records. Sales figures alone do not provide a complete picture of the financial position, as they do not account for expenses, liabilities, or assets. B. Compute the opening stock of goods sold: - Computing the opening stock is a crucial part of the accounting process, especially for businesses that deal with inventory. However, it cannot be done effectively without first establishing the overall financial position through the opening statement of affairs. The opening stock is just one component of the broader financial picture. C. Verify the total purchase: - Similar to sales, verifying total purchases is important for understanding expenses and inventory levels. However, it does not provide a comprehensive view of the business's financial health. Without the context of assets and liabilities, knowing total purchases alone is insufficient for preparing accounts. Summary of Key Points:

• The opening statement of affairs is essential for establishing the financial position of a business at the start of an accounting period.
• It includes assets, liabilities, and owner's equity, providing a foundation for further financial analysis.
• Other options (total sales, opening stock, total purchases) are important but do not serve as the starting point for preparing accounts from incomplete records.
• Understanding the complete financial picture is crucial for accurate accounting and reporting.

This thorough understanding of the opening statement of affairs will help you effectively tackle questions related to incomplete records in financial accounting.