QUESTION ONE [85]
Maria Jacobs owns a stationery shop, Polka Dots, trading in stationery. The following information needs to be taken into account for the financial year ended 31 December 2022. Polka-Dots uses the Perpetual Inventory Method to record trading stock and is not registered as a VAT vendor.
| No | Transactions that need to be taken into account for the 2022 financial year |
| 1 | Posters were sold for R550 in cash to a primary school. Cost price of the goods is R360. |
| 2 | Mrs Strong returned unwanted goods charged to her account at R800.The cost of the goods is R500. |
| 3. | Mr. Prince applied to open an account at Polka-Dots. A limit of R2 000 was approved. |
| 4 | Stationery of R1 750 was sold to Mr Prince on credit. Cost price of the goods is R950. |
| 5 | Bank charges of R45 was charged to the bank account but not yet recorded. |
| 6 | Electricity and water account of R850 was received but not yet paid nor recorded. |
| 7 | A long-outstanding dispute with a cell-phone company was finally resolved whereby they recorded a debit of R140 to our account that must be recorded and paid by Polka- Dots. |
| 8 | To replenish stocks, goods to the value of R5 000 were bought on credit from Great Ltd. |
| 9 | January 2023 rental of R600 was paid as per the lease agreement. |
| 10 | Cash sales of R750 were made to Mrs. Strong. The cost of the goods is R400. |
| 11 | Fuel of R800 for the delivery truck was posted to the salaries and wages account. |
| 12 | Mr. Plan’s son was accepted to study at a university. Stationery needs are not yet finalised. Mr Plan paid R4 000 to Polka-Dot to apply to his son’s stationery needs. Mr |
| Plan’s son will purchase stationery to the value of R4 000 in January 2023. | |
| 13 | B Sick, a debtor, passed away and his estate does not have sufficient funds to settle his account of R3 500. The liquidators paid 60 cents in the rand which must be recorded.
The balance of the account must be written off as irrecoverable. |
| 14 | Depreciation on the Delivery Vehicle is calculated on the straight line method at 25% per year. The vehicle cost R350 000 in 2020. Depreciation for 2022 must be recorded. |
| 15 | At 31 December 2022 the “Trading Inventory Account” reflected a balance of R7 850. Physical stock-take at year end revealed that Trading inventory on hand was R7 550. |
| 16 | Maria Jacobs paid R5 600 from her personal bank account to settle the outstanding Balance of the loan on the business vehicle. |
Required:
Question 1.1: Record transactions (1-16) in the accounting format provided.
Format to be used:
| Asset | Equity | Liability | |||
| Financial impact (R) |
Account |
Financial impact (R) |
Account |
Financial impact (R) |
Account |
|
+500 |
Bank |
0 |
+ 500 |
Accounts payable |
|
NB: The accounting equation is sensitive to +/-/brackets and to general ledger accounts.(40)
Question 1.2: Record transactions (1-16) via general journal entries for the financial year ended 31 December 2022. (35)
Question 1.3: Prepare the Debtor’s control account in the general ledger of Polka- Dots. The account has a balance of R5 000 before taking transactions (1–16) into account. Balance the account at year-end (6)
Question 1.4: Prepare the Fuel expense account (R5 000) and Salaries and wages account (R6 000) in the general ledger of Polka-Dots. The accounts have balances as shown in brackets, before taking transactions (1-16) into account. Include closing entries for both accounts. (4)
QUESTION TWO [15]
Dan Steel has a plumbing business that is growing in reputation. He has 2 qualified plumbers that work with him. He approached you to update his financial reports as he is planning to expand his business and quoting for more work. D Steel Plumbers has a financial year-end of 31 August. The trial balance at this date is provided as follows:
|
Trial balance for year ended 31 August 2022; |
Debit – R |
Credit – R |
|
Motor vehicles at cost |
95 000 |
|
|
Accumulated depreciation: motor vehicles |
10 000 |
|
|
Debtors control |
11 050 |
|
|
Bank: ABSA |
18 500 |
|
|
Bank: FNB |
1 200 |
|
|
Allowance for credit loss |
2 105 |
|
|
Equipment at cost |
82 000 |
|
|
Accumulated depreciation: equipment |
2 100 |
|
|
Creditors control |
8 000 |
|
|
Accrued expenses |
1 500 |
|
|
Capital – D Steel |
34 800 |
|
|
Rental income |
5 250 |
|
|
Income received in advance |
3 200 |
|
|
Consumable expense |
59 300 |
|
|
Water and electricity |
13 200 |
|
|
Cleaning |
4 100 |
|
|
Services rendered |
308 000 |
|
|
Credit loss |
7 305 |
|
|
Settlement discounts allowed |
3 500 |
|
|
Salaries and wages |
65 250 |
|
|
Printing and stationery |
16 950 |
|
|
376 155 |
376 155 |
Additional Information: The following transactions have not been recorded:
1. A debtor was refunded R1 000 for overpayment of his account.
2. The municipality emailed the August 2022 electricity account amounting to R2 300 on 4 September 2022.
3. A Settlement discount received of R2 100 received on purchases of consumables was posted incorrectly to the debit side of the Settlement discount allowed account.
4. Stationery of R1 750 is on hand at year-end.
5. Physical stock of consumables at 31 August 2022 was valued at R23 800.
6. Provide for depreciation for the year as follows: Motor vehicles: R4 750; and
Equipment: R4 100.
REQUIRED:
You are required to prepare the Statement of Profit or Loss and other comprehensive income for the year ended 31 August 2022 for D Steel Plumbers in compliance with International Financial Reporting Standards in as much as the information allows. (15)
Get Answers on Questions on Financial Management
Answer 1: The transactions are recorded below in the format provided considering their proper classification into assets, liabilities and equity
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