Question 1: Four alternatives are provided for each of the following questions. Choose the correct alternative for each of the questions/statements. Questions 1.1 to 1.5 carry
- mark each. Questions 1.6 to 1.10 carry 2 marks each. Write down the question number and the letter corresponding to your choice next to the question number.
- The components of a complete set of financial statements are the following:
- Statement of financial position, Statement of changes in equity, Statement of comprehensive income and Notes.
- Statement of changes in equity, Statement of financial position, Statement of cash flows and Statement comprehensive income.
- Statement of financial position, Statement of cash flows, Statement of comprehensive income, and Notes.
- Statement of changes in equity, Statement of comprehensive income, Statement of financial position, Statement of cash flows and Notes.
- The elements shown in a set of financial statements are:
- Assets, equity, liabilities, income and expenses.
- Equity, liabilities, income, final accounts and assets.
- Profit, losses, assets, control accounts and liabilities.
- Assets, liabilities, income, expenses and nominal accounts.
- Which one of the following represents the net worth of an entity at any specific point in time:
- Statement of comprehensive income
- Statement of financial position
- Statement of cash flows.
- Statement of changes in equity.
- “A resource under the control of an entity arising from past events from which future economic benefits are expected to flow in to the entity” refers to which one of the following:
- Asset.
- Income.
- Liability.
- Expense.
- “A decrease in economic benefits that results in a decrease in the equity of an entity during a specific accounting period, except for distribution to owners”, describes which one of the following:
- Asset.
- Income.
- Expense.
- Liability.
- Simphiwe, a student, bought 50 memory sticks at R40 each for cash. All the memory sticks were marked to sell at R80 each. The sticks were sold for cash within 10 days, as follows: 40 were sold at R80 each, 6 at R75 each and 4 at R70 each. The gross profit percentage on sales (calculated to the nearest 2 decimal places) is;
A) 48,25%.
B) 49,11%.
C) 96,5%.
D) 100%
- On 3 January 2019 Zandile’s Boutique bought trade goods on credit from Nom’s Wholesalers for R22 000, subject to a trade discount of 10%. A settlement discount of 5% is granted if the account is settled within 30 days from the date of purchase. If payment for this purchase is made on 1 March 2019, which one of
the following is the amount that Zandile should pay Nom’s Wholesalers in terms of the agreement of purchase and sale: (ignore VAT)
A) R19 800.
B) R22 000.
C) R18 810.
D) R20 790.
- Assume that Zandile’s Boutique registered as a VAT vendor effective 1 March 2019. Zandile’s Boutique had a VAT input total amount of R24 760 and a VAT output total amount of R37 860 at 31 March 2019. Which one of the following represents the balance of the VAT control account at 31 March 2019?
- R13 100 debit.
- R13 100 credit.
- R62 620 debit.
- R62 620 credit.
- Construction Boys CC, a registered VAT vendor, purchased equipment for R92 000 (inclusive of 15% VAT) on credit from Jayzi Ltd. Arrangements were made to settle the account over a six month period. Which of the following statements is correct when recording the purchase of the equipment in the accounting records of Construction Boys CC?
- Debit equipment account (R105 800), credit VAT output (R13 800), credit creditors control: Jayzi Ltd (R92 000).
- Debit equipment account (R92 000), debit VAT input (R13 800), credit creditors control: Jayzi Ltd (R105 800).
- Debit equipment account (R80 000), debit VAT input (R12 000), credit creditors control: Jayzi Ltd (R92 000).
- Debit equipment account (R92 000), credit VAT output (R12 000), credit creditors control: Jayzi Ltd (R80 000).
- N Minajo received an electronic funds transfer (EFT) of R4 500 from A Grand, a debtor, in full settlement of her account of R5 000. Both Minajo and Grand are not registered as VAT vendors. Which of the following is the correct option to record the receipt in the accounting records of N Minajo?
- Debit bank account (R5 000), credit debtors’ control (R4 500), and credit settlement discount granted account (R500).
- Debit bank account (R4 500), credit debtors control (R5 000), and debit settlement discount received account (R500).
- Debit debtors’ control (R5 000), credit bank account (R 4 500), and credit settlement discount received account (R500).
- Debit bank account (R4 500), credit debtors’ control account (R5 000),
and debit settlement discount granted account (R500).
Question 2:
Peter Smart used to wash cars in the back yard of his home. He set up a car cleaning business and rented premises, hired 2 staff and moved personal equipment to his business premises where a small office was available. He kept very basic records and after 3 months provided you with the following balances at 1 April 2022:
| Account balances at 1 April 2022 | R |
| Bank balance Equipment Consumables on hand Creditors Capital | 23 000 41 000 5200 3 700 ?? |
| 1. Peter transferred R20 000 from his personal savings into the business bank account. Transferred personal vehicle valued at R66 000 for business use. 2.. Paid rent for April 2022 by stop order arranged with the bank, R3 200. |
The following transactions took place for the month of April 2022: No.
| 3. | Equipment to clean the inside and undercarriage of vehicles was bought on credit from Fast Wash for R42 000. The account is payable in three (3) equal annual instalments. The first instalment is payable on 30 April 2022. |
| 4. | Made an electronic funds transfer (EFT) of R2 000 in favour of A Flash to set up a web page and on-line advertisements. |
| 5. | Paid Creditors a total of R3 400 on account and bought consumables for R5 600 on credit. |
| 6. | Total cleaning fees of R49 000 for the month was deposited into the bank. |
| 7. | Peter Smart paid Fast Wash the first instalment due on 30 April 2022 from his personal bank account. |
Show workings to calculate the Capital at 1 April 2022.
Process the above transactions through the basic accounting equation for the month ended 30 April 2022 using the format shown below:
Example of a transaction processed through the required format.
- Paid R5 400 wages to cleaning staff.
| No | ASSETS R Account | = | EQUITY R Account | + | LIABILITIES R Account |
| A. | (5 400) Bank | (5 400) Wages | 0 —- | ||
- State whether the balance owing to Creditor Fast Wash should be shown in the statement of financial position as a current or a non-current item. Briefly explain why it should be shown as such.
2.4. Define an asset and provide relevant examples for each classification.
Question 3:
The following list of account balances were extracted from the accounting records of Don’s Electrical Services as at 28 February 2021:
| List of accounts | Debit – R | Credit – R |
| Land and buildings at cost | 250 000 | |
| Vehicles at cost | 155 000 | |
| Accumulated depreciation: Vehicles -1 March 2020 | 90 000 | |
| Equipment at cost | 85 000 | |
| Accumulated depreciation: Equipment -1 March 2020 | 40 000 | |
| 12% Fixed deposit: Lock Bank | 30 000 | |
| Inventory: Consumables -1 March 2020 | 21 000 |
| Debtors’ control | 25 000 | |
| Allowance for credit losses | 1 125 | |
| Bank | 80 373 | |
| Long term borrowing: 10% per year | 37 500 | |
| Creditors’ control | 20 835 | |
| Capital: Don Dude | 197 500 | |
| Drawings | 89 327 | |
| Service fees | 524 835 | |
| Interest on fixed deposit | 1 688 | |
| Rent income | 19 180 | |
| Advertising | 9 735 | |
| Credit losses | 2 100 | |
| Communication costs | 5 078 | |
| Consumables purchased | 84 148 | |
| Other operating expenses | 92 902 | |
| Interest on borrowings | 3 000 | |
| 932 663 | 932 663 |
Additional information that needs to be taken into account:
- Stock taking was done on 28 February 2021 and the consumable inventory on hand was valued at R32 700.
- The advertising amount includes a contract for R2 400 that was taken for the period 1 January 2021 to 30 June 2021.
- Don received an amount of R600 from an insolvent debtor which was correctly recorded. However this was only 25% of the total amount owed by the debtor. The outstanding balance must now be written off as irrecoverable.
- The Allowance for credit losses must be increased by R250.
- Communication costs include valid prepaid phone cards to the value of R1 200.
- Investment in the fixed deposit was made 31 March 2020 and matures on 31 May 2022. Record the outstanding interest on the fixed deposit.
- Vehicles and Equipment must be depreciated as follows for the current year;
- Vehicles at 20% on cost, and
- Equipment at 15% using the diminishing balance method. No vehicles or equipment were bought or sold during the year.
- The long term borrowing was taken on 31 July 2019 and the loan was to be settled by 4 equal annual instalments beginning 31 August 2020. Provide for the outstanding interest due for the current year. A statement dated 28 February 2021 from the creditor revealed the following:
9.
| Date | Details | Amount – R |
| 1 March 2020 31 August 2020 | Balance Less: Payment of 1st instalment | 50 000 (12 500) |
| 28 February 2021 | Balance | 37 500 |
10. Rent has been received for the period 1 March 2020 to 31 March 2021. Rent was increased by 10% with effect from 1 September 2020. Adjust the above records for the amount received in advance for March 2021.
Required: Prepare the statement of profit or loss and other comprehensive income (SOCI) for the year ended 28 February 2021 to comply with the requirements of International Financial Reporting Standards (IFRS) appropriate to Don’s Electrical Services.
Round up all calculations to the nearest Rand. Show all workings.
Question 4
Mega Store (Pty) Ltd has a wholesale section that conducts some of their business on credit. Transactions are first recorded in specialised journals and the general journal on a real time basis. The accounting department uses clerks to post transactions recorded in the journals into Debtors accounts and Creditors’ accounts in the subsidiary ledgers on a daily basis. Transactions from the journals are posted into the Debtors’ Control account and the Creditor’s Control account in the general ledger on a monthly basis.
The following information was extracted from the accounting records of Mega Store (Pty) Ltd on 31 December 2021.
Additional Information:
The following has not been taken into account in arriving at the figures above:
- An amount of R5 202 owing by a debtor, F Skelm, must be written off as irrecoverable.
- The allowances for credit losses must be increased by R2 250.
- On 10 December 2021, goods to the value of R6 300 was purchased on credit, but was incorrectly recorded in the sales journal.
- The credit balances in the debtors’ ledger at 1 January 2021 must be transferred to the creditors control account.
Required: Prepare the following as they would appear in the general ledger of Mega Store (Pty) Ltd for the year ended 31 December 2021:
- Debtors control account
- Creditors control account.
NB: – The accounts must be properly balanced or closed off.
- Each entry in the ledger account must reflect the contra account.
- Folio numbers may be omitted.
- Record the dates for transactions.
- Marks will be deducted for recording entries that are unrelated to the control accounts.
QUESTION FIVE
Neil Brown is a businessman who buys packages of goods and wholesales the package for cash. His business is registered as a Vat Vendor. During March 2022 he purchased for cash a package of goods for R28 000 (exclusive of 15% Vat). Neil used a mark-up of 30% on the cost price and sold the package for R41 860 (Inclusive of 15% VAT). Neil uses the perpetual inventory system to keep records of his trading activities.
Required: Record general journal entries for the purchase and sale of the package of goods. You do not have to record the dates but must include a brief narration appropriate for both the purchase and sale of the goods above.
- Mary has a general dealer business and uses the periodic inventory system to keep records of buying and selling goods. The following information was extracted from the accounting records for financial year ended 30 June 2020.
| List of selected accounts at 30 June 2021 | R |
| Trading inventory : 1 July 2020 | 225 000 |
| Purchases | 916 400 |
| Sales | 1 668 800 |
| Purchases returns | 17 300 |
| Sales returns | 20 700 |
| Settlement discounts received | 32 600 |
| Settlement discounts granted | 17 900 |
| Transport inwards (from suppliers) | 45 200 |
| Transport outwards (to customers) | 23 100 |
Additional information:
- Trading inventory at 30 June 2021 was taken and valued at R203 400.
- Neil took inventory worth R18 100 for his personal use. This has not been recorded in the above accounting records.
- Insurance on goods transported from suppliers for R7 400 is also not yet included in the above information.
Required: Prepare only the trading section of the Statement of profit or loss and other comprehensive income for Mary’s General Dealers for the year ended
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