QUESTION ONE [20]
Show how the below transactions affect the financial position of the business as represented by A = E + L. You need to clearly indicate whether the element has increased or decreased and provide the relevant amount and account that would be affected.
EG. The business pays R6 333 per month for the rental of some business premises. All rentals were paid in cash during the year.
No. A = E + L
EG. -75 996 Bank
(6 333 x 12) -75 996 Rent Expense

Please use format of table above for the below transactions
The following transactions occurred in the business during the year ended 31 December 2020:
1. The owner deposited R105 000 cash into the business’s bank account on 1 January 2020.
2. The business bought R450 000 worth of inventory from various suppliers during the year. 80% of these purchases were on credit and the remaining 20% were paid for in cash.
3. During the year the business paid R96 900 cash in operating costs. These costs related to goods and services that had all been used during the year.
4. The employees earned R104 000 in salaries and wages during the year. These were paid in cash by the end of the year.
5. During the year the business paid creditors R400 000.
6. The business received R1 010 000 in payments from debtors during the year.
7. The business made cash sales of R410 400 and credit sales of R957 600 during the year.
8. The cost of the inventory sold during the year was R480 000.
9. A customer had returned goods on the 15 December 2020, selling price of R2
280. The cost price was R912. The original sale had been for cash, and so the customer was refunded R2 280 in cash. The item was returned to inventory.
10. The business rents the land out. The rental is R15 200 per month. All rentals owing by tenants had been received by year-end and no amounts had been paid in advance for 2021.

QUESTION TWO [15]

Hybrid Solutions have many debtors and therefore keep records of transactions with individual debtors in a Debtors’ Subsidiary ledger (DL) while the general ledger houses the Debtors’ Control account. Total of the list of debtors is reconciled at least once a month with the balance of the Debtor’s Control Account.

The following is the summarised list of debtors at 31 August 2021 before any adjustments were made for errors and omissions:

All the totals from the subsidiary journals have been posted to the Debtors’ Control account and a debit balance of R141 500 at 31 August 2021as shown below.

Errors and omissions still to be taken into account for the reconciliation of the list of debtors and the Debtors’Control account at 31 August 2021:

1. Sales of R3 680 to Cindy were incorrectly recorded in the sales journal as a sale to Andy and posted as such.

2. A receipt of R5 000 from Beauty was incorrectly recorded as R4 000 in the cash receipts journal and posted to Beauty’s account.

3. Cindy was granted an allowance of R400 for goods sent to her that were slightly damaged. The allowance was incorrectly recorded in the Sales journal whereas it should have been recorded in the sales returns and allowances journal.

4. Interest of R250 must be charged to the overdue part of Andy’s account. The interest has already been recorded in the Debtors’ control account.

5. Debtor Brad Pot’s account of R1 700 is included with AN Other debtors R94 880. Attorneys have confirmed that Brad has been declared insolvent. The balance of his account of R1 700 must be written-off as irrecoverable. The credit loss has already been recorded in the Debtors control account.

Required :
Take the errors and omissions into account and reconcile the list of debtors to the adjusted balance of the Debtors’ Control account for the period ended 31 August 2021. Present your solutions as follows:

Debtors Control account:

List of debtors:

QUESTION THREE [25]

The trial balance and additional information given below were extracted from the accounting records of Warrior Traders as at 28 February 2021, the end of the financial year.
Warrior Traders
Pre-adjusted trial balance on 28 February 2021

Adjustments and additional information:
1. According to physical stocktaking done on 28 February 2021, trading inventory on hand amounted to R68 000.
2. Consumable stores used during the financial year amounted to R1 800.
3. No entry has been made for a commission of 10% earned bit not received on 500 items that were sold for R60 each.
4. Received a cheque for R600 from an insolvent debtor, J Marsh, who was only able to pay 30% of her debt. The balance of his account must now be written off.
5. The provision for bad debts must be decreased to R1 500.
6. The telephone account for February 2021 has not yet been paid, R700.
7. The rental agreements signed with the lessor were as follows:
• R30 000 for the period 01 January 2020 to 31 December 2020
• R36 000 for the period 01 January 2021 to 31 December 2021
8. The loan from Aries Bank was obtained on 01 September 2020. Provide for the outstanding interest.
9. The insurance total includes an annual premium of R1 800 that was paid for the period 01 June 2020 to 31 May 2021.
10. The bank statement for February 2021 reflected bank charges of R180 that have not yet been recorded.
11. The electricity and water account was debited with an amount of R1 000 for personal electricity account of the proprietor, that was paid with a business cheque
12. Provide for depreciation as follows:
• On equipment at 15% per annum on cost
• On vehicles at 25% per annum on the diminishing balance method
13. An account received from Heidi Motors to replace two tyres on the delivery vehicle of the business R2 000, has not been recorded.

Required:

Prepare the following for Warrior Traders for the financial year ended 28 February 2021
The statement of profit or loss and other comprehensive income; and (20)
The statement of changes in equity. (5)

QUESTION FOUR [20]

The information given below was extracted from the accounting records of Total Limited, a partnership business with Glen and Murry as partners.

Information:

Extract from the ledger of Total Limited on 30 June 2021
R
Capital : Glen 400 000
Capital: Murry 300 000
Current a/c: Glen (01 July 2020) 45 000 CR
Current a/c: Murry (01 July 2020) 42 000 DR
Drawings: Glen 95 000
Drawings: Murry 110 000

The following must be taken into account:
1. On 30 June 2021 the Profit and Loss account reflected a net profit of R940 000.
2. Partners are entitled to interest at 14% p.a. on their capital balances. Note: Glen decreased his capital contribution by R90 000 on 01 July 2020. This capital decrease has been recorded.
3. Partners are entitled to the following monthly salaries:
• Glen R13 000 for the first ten months of the financial year and R15 000
• for the next two months.
• Murry R10 000 per month throughout the year.
4. Partner Murry is entitled to a bonus equal to 10% of the net profit before any of the above appropriations have been taken into account.
5. The remaining profit/shortfall must be shared equally between Glen and Murry.

Required:
Prepare the Statement of Changes in Equity for the year ended 30 June 2021.

QUESTION FIVE [20]
Cheetahs Limited’s Statement of Comprehensive Income for the year ended 31 December 2021 and the Statement of Financial Position as at 31 December 2021 and 2020 are as follows:

Statement of Comprehensive Income

R million (m)

Revenue          723

Less Cost of sales       (453)

Gross profit             270

Less Distribution costs             71

Administrative expenses           30     (101)

Answers to Above Question on Financial Accounting

Answer 1: The element that have been increased or decreased and the amount by which it has been increased or decreased is explained as follows:

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