DEPARTMENT OF ACCOUNTING
MAIN ASSIGNMENT 2020
DUE DATE: 24 August 2020
SUBJECT: Financial Accounting 1 CODE: REK11CB
NQF LEVEL: 4
MARKS: 100 marks
EXAMINER: Mrs. A. Coetzee
Ms. D. Mkhize
MODERATOR Ms. V. Koma
INSTRUCTIONS:
1. ANSWER ALL QUESTIONS.
2. THIS IS AN OPEN BOOK ASSIGNMENT BUT YOUR OWN WORK.
3. THIS ASSIGNMENT COVERS CHAPTER 1 - 12.
4. ALL ANSWERS TO QUESTIONS NEED TO BE COMPLETED ON PROVIDED TEMPLATE.
5. NO HANDWRITTEN ASSIGNMENTS WILL BE ACCEPTED.
6. NO EMAILED ASSIGNMENTS WIL BE ACCEPTED.
7. A RUBRIC WILL BE PROVIDED TO INDICATE COMPETENCY.
8. AFTER COMPLETION THE ASSIGNMENT NEED TO BE UPLOADED ON eTHUTO USING THE PROVIDED LINK (THIS ASSIGNMENT WILL BE SUBMITTED THROUGH SafeAssign TO CHECK FOR PLAGARISIM).
9. PLEASE READ CAREFULLY THROUGH THE SECTION ON “ACADEMIC DISHONESTY” ON PAGE 2.
ACADEMIC DISHONESTY
Please refer to the learning guide 2020 and the official CUT Calendar for information regarding the CUT Rules on academic dishonesty and plagiarism. Students should take the responsibility to ensure that they understand what is meant by plagiarism (in all its various forms) as well as academic dishonesty. Should a student be suspected of committing plagiarism and be summoned for a disciplinary hearing, stating that he/she was unaware/ignorant of what plagiarism entails, is neither an acceptable excuse nor an adequate defence.
SafeAssign
You will be required to upload your assignment onto eThuto via the SafeAssign tool. This is a Blackboard/eThuto-based program that finds parts of an assignment that match other student papers, websites, and various published sources. SafeAssign provides students and instructors/lecturers with a report indicating areas where possible plagiarised matches were found and allocates a percentage to the match.
SafeAssign is not a fool-proof program. Thus, if SafeAssign did not indicate plagiarism in a submission it does not mean that there is no plagiarism in the submission and simply because SafeAssign did indicate a high percentage of possible plagiarism, it does not necessarily mean that plagiarism is present in a piece of writing. SafeAssign is a computer programme and access to it is provided to students as a courtesy. It is useful for alerting instructors to possible plagiarism. SafeAssign however must be used in combination with human professional judgment substantiated with supporting evidence to come to proper, thorough conclusions regarding the presence/absence of plagiarism.
QUESTION 1 (10 Marks)
Molly sold 1 000 bags at R350 per bag during the year. All sales were on credit. Molly received payment for these bags only on 04 February 2018. The financial statement for the year ended 31 December 2017 are prepared on the cash basis.
1.1 What will the sales income be in the profit calculation prepared on the cash basis approach, for the year ended 31 December 2017, if the expenses for the year amounts to R200 000? (3)
1.2 What will the sales income be in the profit calculation prepared on the accrual basis approach, for the year ended 31 December 2017, if the expenses for the year amounts to R200 000? (3)
1.3 Looking at above questions 1.1 and 1.2, how can you differentiate the cash basis approach from the accrual basis approach? (4)
QUESTION 2 (8 Marks)
Mathew’s Sky World began business operations on the 1st January 2017. Summarised financial information for the year ending 31 December 2017 and 2018 is provided below:
31 December 2017 31 December 2018
R R
Assets 46 000 C
Liabilities 8 000 40 000
Owner’s equity A D
Profit for the period 20 000 32 000
Capital investment 24 000 20 000
Distribution B 14 000
You are required to: Fill in the missing figures (A, B, C and D) (8) QUESTION 3 (25 Marks)
Delight Landscaping is a sole proprietor offering landscaping services, mainly in industrial areas. The following balances appeared in the General Ledger on 01 April 2019:
Capital R10 000 Bank R9 500 (Dr)
Vehicles R24 600 Telephone R2 680
Fuel R560 Machinery R11 300
Stationery R100 Petty cash R300
Service rendered R23 400 Wages R2 590
Loan 18%p.a. R25 000 Repairs R680
Interest on loan R2 500 Consumable stores R2 890
Advertising R700
The following transactions took place in April:
1. Paid the telephone account, R60 cash.
3. A cheque of R1 670 was received for service rendered.
4. Bought a lawn mower from Lawns Unlimited and paid by cheque R4 830.
7. Green Grow delivered fertilizer, the business made out a cheque of R250, use the consumable stores account to record this transaction.
9. Paid R20 cash to the Constantia Bulleting for an advertisement.
11. Linen Ltd employed the firm to landscape its premises. Delight Landscaping received a cheque of R8 500 for the work done.
15. Sent a cheque to Garage Motors to pay for repairs to the firms’ bakkie, R730.
17. Cashed a cheque to pay wages of R2 500.
20. Paid R150 cash for fuel.
24. Cash received from clients for gardening services completed, R2 800.
25. Deposited R2 000 from the cashbox into the current bank account, from customers.
27. Bought a computer from Office Supplies Ltd, R5 900.
28. Sent a cheque to Standard Bank to repay an instalment of R2 000 and interest outstanding for the past 6 months.
29. Paid rent by cheque, for April R1 500.
You are required to:
3.1 Record the transactions for April 2019 to the general ledger accounts. (16)
3.2 Extract a trial balance for April 2019. (9)
QUESTION 4 (14
MW Traders uses periodic system to record inventory. The business is a registered VAT vendor. The following amounts, among others, appeared in the trial balance as at 28 February 2018:
R
SARS (VAT) (Cr) 3 945 Purchases 180 500
Rates and taxes 8 760
Stationery on hand 1 520
Salaries and wages 57 860
Electricity and water 3 640
Sales 310 700
Return inwards 2 000
The following transactions occurred during March 2018:
1. Paid SARS the balance outstanding as at 01 March 2018.
2. MW Traders purchased inventory costing R3 135 from Steady Suppliers for cash.
3. MW Traders paid March wages amounting R7 752 by cheque.
4. Purchased stationery from Waltons, paid by cheque R570.
5. Sold inventory on credit for R7 809.
The inventory on hand as at 31 March 2018 amounted to R75 000. There was no stationery on hand at the end of the March 2018.
You are required to:
4.1 Prepare general journal for all 5 transactions above (show narratives). Round off to the nearest rand. (7)
4.2 Prepare VAT control account in the general ledger and indicate how much is payable or
receivable to SARS. (Use the correct contra account) (7) QUESTION 5 (16
Dalem and Sons is a firm in the wholesaler trade which deals exclusively in high-quality portable radios and tape recorders. The firm accounts for inventory using a perpetual recording system and always uses first-in-first-out (FIFO) basis of valuation. At 1 January 2019, the firm’s entire inventory consisted of 100 radios valued at R400 each.
The following are the firm’s trading transactions, in chronological order, for 2019:
1. Sold 80 of the radios on hand at the beginning of the period for R64 000 on credit.
2. Purchased 50 radios priced at R400 each and 80 tape recorders priced at R500 each. The transaction was on credit and a trade discount of 20% on the above prices was allowed by the supplier.
3. Sold 50 of the radios for R30 000 and 10 of the tape recorders for R8 000 on credit, to a customer.
4. Received a cheque for R38 000 from a customer.
5. Bought 40 radios for R340 each for cash and paid an extra R400 for railage inwards.
6. Paid the supplier an amount of R38 000
7. Four of the radios and one of the tape recorders sold under point 3, above, were returned by the customer who was given a credit note. Two of the radios had defects and were returned to the supplier for credit, two radios were returned to inventory, and Mr. Dalem kept the tape recorder for his own personal use. All the radios returned had been part of the opening inventory.
8. The cheque from the customer was returned unpaid from the bank.
A physical count on 31 December 2019 revealed that 61 radios and 70 tape recorders were on hand.
You are required to:
Show the analysis of Dalem and Sons inventory, to see whether their records of inventory on hand do balance with your record. If it does not balance, indicate the shortage or surplus of inventory and show all values as well. (Show all your workings)
QUESTION 6 (12
The following figures relating to the year ending 31 December 2017, have been extracted from the books of B. Richardson:
Balance on the account receivable control account, 1 January 2017 R5 082
Credit sales for the year, as per sales journal R61 318
Cash received on account from customers R60 383
The total of the list of accounts receivable extracted by the bookkeeper from the account receivable ledger on 31 December 2017 was R5 502.
After the above list had been revealed, the following errors were discovered:
1. The sales journal had been overcast by R90.
2. The debit side of B. Lara’s account in the account receivable ledger had been undercast by R209.
3. Goods invoiced to R. Jones at R16 had been returned by her. The return of these goods had not been recorded in the accounting records.
4. A sales invoice of R132, entered in the sales journal, had not been posted to W. Carla’s account in the account receivable ledger.
5. A debit balance of R36 on T. Bosch’s account had been omitted from the list of balances extracted from the account receivable ledger.
You are required to:
Reconcile the account receivable control account and the account receivable list. (12)
Question 7 (15 Marks)
Julie is reconciling her bank account with the bank statement as at 28 February 2020. She has the bank reconciliation statement for January, the bank account and the bank statement for February, as follows:
Bank Reconciliation statement for January 2020 Debit Credit
R R
Balance according to bank statement 5 740
Deposits not yet recorded 1 161
Unpresented cheques: no. 002 950
005 300
008 200
010 420
011 150
012 150
013 1 000
Error on the bank statement (150-105) 45
Balance as per bank account 3 686
6 901 6 901
Bank Account in General ledger for February 2020 Bank Account
1 Balance 3 686 1 Inventory (chq no. 014) 1 100
5 Sales 2 000 7 Wages (chq no. 015) 150
8 Sales 600 8 Inventory (chq no. 016) 2 400
15 Sales 60 10 Petrol (chq no. 017) 400
28 Sales 1 200 14 Wages (chq no. 018) 150
19 Talk-time (chq no. 019) 300
21 Wages (chq no. 020) 150
28 Wages (chq no. 021) 150
28 Balance c/d 2 746
7 546 7 546
1 Balance b/d 2 746
Bank statement for February 2020
Details Date Debit R Credit R Balance R
Balance 26/01 5 740
Deposit 28/01 1 161 6 901
Correction of error 01/02 45 6 856
Cheque no. 002 01/02 950 5 906
Cheque no. 005 01/02 300 5 606
Cheque no. 008 05/02 200 5 406
Deposit 05/02 2 000 7 406
Payment to third party – Telkom 05/02 150 7 256
Cheque no. 013 06/02 1 000 6 256
Cheque no. 014 06/02 1 100 5 156
Cheque no. 011 07/02 150 5 006
Deposit 08/02 600 5 606
Deposit 15/02 60 5 666
Cheque no. 015 16/02 150 5 516
Cheque no. 016 20/02 2 400 3 116
Deposit 21/02 450 3 566
Cheque no. 018 22/02 150 3 416
Cheque no. 020 26/02 150 3 266
Omutual 85246 (Insurance) 26/02 299 2 967
Service fees 26/02 70 2 897
Commission on stop orders 26/02 6 2 891
Interest 26/02 15 2 906
The deposit made on 21 February was a direct deposit by a debtor who repaid his account.
You are required to:
7.1. Update the bank account in the general ledger for February 2020. (7)
7.2. Provide the bank reconciliation statement for February 2020. (8)
END OF THE ASSIGNMENT