Q.1.1 Other than investors and management, who else would be interested in the financial information of a business?
List 4 other users and explain why they would be interested in the financial information.
Q.1.2 List 2 questions you think investors would be asking themselves prior to deciding
whether or not to invest in a business.
Q.1.3 Management accounting is one branch of accounting. In your own words discuss
the other branch of accounting.
Q1.4 Starlight Traders is a gift shop in Johannesburg. Starlight Traders uses the perpetual inventory system to record inventory transactions
VAT can be ignored on all transactions.
The following transactions took place in the month of January 2022:
|1||Owner contributed cash R200 000|
|2||Purchased goods for cash R10 000|
|3||Sold goods with a selling price of R1 000 cash|
Cost price of goods R500
|4||Paid R300 for an advert in the local newspaper|
|5||The owner took goods for personal use. The selling price|
of the goods is R500. The goods are marked up by 100%.
Analyse each of the above transactions and complete the table as follows: Example: Paid R200 for Telephone Account.
Note ‐ Show the double entry (debit and credit general ledger names), as well as the effect on the accounting equation, for each transaction, in the columns provided. Ensure that you use the + and – signs to show the effect on the equation as marks will be allocated for these.
Q.2.1 Below is a list of balances/totals and their element identification.
Copy the table below in your answer and complete the table by indicating if the identification is correct or incorrect and if it is incorrect provide the correct element.
For each element you may only tick the “correct” or “incorrect” column. If both columns are ticked no marks will be awarded.
|Cost of sales||Income/revenue|
Q.2.2 Below you have been provided with an extract from the cashbook receipts for February 2022. You may ignore the “Doc no” “Analysis of receipts and “Cost of sales” columns.
|8||Cash||1 380||180||1 200|
|9||Mr Marmer||1 300||1300|
|12||Robyn Peters||16 100||16 100||Capital|
|14||Premier Bank||805||805||Interest on|
|31||Miss Pluto||20 000||20 000||Rent|
Draw up the table below in your answer and provide a brief description of each of the 5 transactions, the source document as well as if the source document is an original or duplicate:
|Day||Transaction description||Source document||Original/Duplicate|
Topaz Traders is a wholesaler that purchases and sells goods for cash and on credit. Topaz Traders is a registered VAT Vendor and only transacts with other VAT Vendors. The applicable VAT rate is 15%.
You have been provided with the following list of transactions of Topaz Traders relating to the purchase and sale of good for the month of May 2022:
|1||Original credit invoice from Ruby Wholesalers (CI203)||R17 250 (including|
|3||Original credit note from Ruby Wholesalers (CN13)||R2 300 (including VAT)|
|5||Duplicate credit invoice to Diamond Traders (IN45)||R10 000 (excluding|
|9||Original credit invoice from Sapphire Dealers (RE33)||R20 000 (excluding|
|20||EFT Confirmation to Ruby Wholesalers in full settlement of|
• Topaz Traders uses the perpetual inventory system.
• All goods are sold with a mark‐up of 15% on cost.
• Topaz Traders received a 10% settlement discount on the 20th of May from Ruby Wholesalers.
Answer the following questions:
Q.3.1 Debit notes and credit notes are source documents used for transactions with debtors and creditors. (4)
In your own words explain how these documents are used in the accounting system. Include in your answer the VAT information required on each of the
Q.3.2 What is the difference between a trade discount and a settlement discount, and
how will these two discounts be accounted for? (4)
Q.3.3 Use the relevant transactions from those given above to complete 3.3.1 and 3.3.2
for Topaz Traders for the month of May 2022.
Q.3.3.1 Creditors Journal (10)
Q.3.3.2 Creditors allowances Journal (5)
Q.3.4 In which journal will the transaction on the 20th of May be recorded? (1)
Q.3.5 In which journal will the settlement discount received be recorded? (1)
Question 4 (Marks: 25)
Q.4.1 In your own words explain the 3 reasons why inventory is classified as an asset. (3)
Q.4.2 There are 2 different inventory systems available for a business to use in order to
control their trading inventory flows. What are these 2 systems? (2)
Q.4.3 Argon Traders is a business located in Centurion.
Argon Traders is a registered VAT vendor and trades only with registered VAT vendors that can provide tax invoices. The business charges 15% VAT on all its sales. All amounts are inclusive of VAT, unless VAT is not applicable.
Argon Traders sells good for cash and on credit.
Transaction 1: On the 1st of March 2022 Argon Traders sold goods for R15 000 excluding VAT) on credit to Mr Neon.
Goods are marked up 20% on cost (15)
Record transaction 1 in the applicable general ledger accounts using the perpetual inventory system.
You do not need to balance these accounts
Q.4.4 The owner took goods with a cost price of R5 000 (excluding VAT) on the 1st of March 2022.
Record this transaction in the general journal using the periodic inventory system.
A journal narration is not required. You may ignore the folio column. (5)
Answers to Above Questions on Accounting
Answer 1: A business has many stakeholders and each and everyone is interested in the financial performance of the business. Apart from investors and management, the other important stakeholders that are interested in the financial information of a business includes government, employees, community and society, competitors etc.
Get completed answers on all the above questions from the accounting assignment experts of Student Life Saviour in South Africa.
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