Question 1 [22 Marks]
Read the below statement and answer the question that follows:
The objective of accounting is to convert financial data into meaningful information for its users by recording, estimating, and summarising data. There are two main branches of accounting, namely, managerial accounting and financial accounting.
Required:
Provide a summary comparison between managerial accounting and financial accounting. [12 Marks]
Study the below table and answer the question that follows.
| Column A | Column B |
| i. Non-profit company | A. Relevance and faithful presentation |
| ii. Financial Accounting | B. May not offer securities to the general public |
| iii. Fundamental qualitative
characteristics |
C. Institute of Directors |
| iv. Materiality | D. Owners are called shareholders |
| v. IFRS | E. The maximum marginal tax rate |
| vi. Luca Pacioli | F. Components of relevance |
| vii. Sole proprietorship | G. Incorporated for public benefit |
| viii. Private Company | H. International Financial Reporting Standards |
| ix. 45 percent (%) | I. The precision of information is required |
| x. Companies | J. Accounting equation |
| K. Owner bears all the financial risks involved with
the business |
|
| L. The Father of Accounting | |
| M. May offer securities to the general public | |
| N. Data must be relevant and flexible |
Required:
Match items listed in Column A with those listed in Column B. Write down only the letter of your choice next to the corresponding number. For example: (i). B
(ii). L (10 Marks)
Question 2 [28 Marks]
Read the below scenario and answer the question that follows.
You are provided with the following list of assets and liabilities that appeared in the books of Craig Wholesalers for the financial ending 28 February 2023.
| R | |
| Petty cash | 1 500 |
| Mortgage loan | 300 000 |
| Vehicles | 125 000 |
| Overdraft facility | 28 000 |
| Trading stock | 50 000 |
| Equipment | 33 000 |
| A loan from Boston City Bank (R60 000 repayable by 29
February 2024) |
200 000 |
| Land and buildings | 250 000 |
| Cash float | 2 000 |
| Accounts receivable | 45 000 |
| Accounts payable | 93 000 |
Required:
Calculate the following values of Craig Wholesalers as of 28 February 2023:
I. The total of the non-current assets (2 marks)
II. The total of the current assets (2.5 marks)
III. The total of the non-current liabilities (2.5 marks)
IV. The total of the current liabilities (2 marks)
V. The owner’s wealth (equity) (3 marks)
Craig Wholesalers specialises in the trade of Cell phones. On 01 June 2023, the accounting equation of the business was as follows:
Assets = Equity + Liabilities
R300 000 R75 000 R225 000
Craig Wholesalers entered into the following transactions during June 2023.
| Date | Details |
| 02 | The owner, Mr Craig, made a capital contribution of R50 000 into the business. This was done through a cash deposit into the business’s bank
account by Mr Craig. |
| 04 | Bought trading inventory on credit for R12 000. |
| 06 | Paid R800 for fuel of the delivery vehicle from petty cash |
| 07 | Received a payment of R6 000 from a debtor as payment of his account |
| 10 | Sold trading stock for R10 000 cash. The trading stock was initially
bought at the cost of R3 000 |
| 11 | Mr Craig took a cell phone and gave it to his niece as a gift on her 16th
birthday. The cell phone was initially bought for R7 000 |
| 15 | Purchasing packing material on credit for R2 000 |
| 18 | Made an EFT payment of R3 000 to the local municipality for rates and
taxes. |
| 22 | Paid for repairs and maintenance of R4 000 from petty cash. |
| 23 | Purchased office refreshments by EFT for R500 |
| 26 | Sold a cell phone for R15 000 on credit. The cell phone was initially
bought for R10 000. |
| 29 | Paid casual wages of R2 500 from petty cash. |
Required:
Calculate Mr Craig’s equity in his business on 30 June 2023 by showing the effect of each individual transaction on the accounting equation. (16 marks)
Example:
| Day | Assets (R) | Owner’s equity (R) | Liabilities (R) |
| 01
(Balance) |
300 000 | 75 000 | 225 000 |
| e.g. 02 | +50 000 | +50 000 |
Question 3 [14 Marks]
Gibson Eateries is a registered VAT vendor and only deals with VAT-registered parties. Assume that the business acquires the following considerations and that the VAT Act has been adhered to in all instances. Complete the following table for Gibson Eateries by marking the correct block at each supply listed. (14 Marks)
| Considerations | Standard- rated
supply |
Zero- rated
supply |
Exempt supply | Non- allowable
item |
| E.g., Petrol | X | |||
| E.g., Trading stock | X | |||
| E.g., White bread for staff lunches | X | |||
| E.g., Life insurance premiums | X | |||
| Telephone bill | ||||
| Stationery | ||||
| Brown bread purchased by a
restaurant to make sandwiches for resale |
||||
| Water and electricity bill | ||||
| Diesel for use in the delivery vehicle | ||||
| Staff lunches | ||||
| Sale of a portion of a business as a
going concern |
||||
| Tables and chairs for the restaurant | ||||
| A delivery vehicle that does not fit the
description of a passenger vehicle |
||||
| Advertising | ||||
| Short-term insurance premiums | ||||
| A double cab vehicle | ||||
| Interest on bank overdraft | ||||
| Stove for use in the primary activities
of the business |
Question 4 [36 Marks]
Liz Botha Wholesalers is a newly established business that specialises in the furniture trade, and the business is registered as a VAT vendor. Liz Botha Wholesalers has a trading policy of buying and selling only on a cash basis and buying only from suppliers who are registered VAT vendors. The business started trading on March 2023. The bookkeeper has supplied you with the below information for the month of March 2023:
List of duplicate receipts and cash invoices issued.
| Day | Details | Doc no. | Additional information | Total amount
received (R) |
| 03 | Cash sales | 001 | Cost of goods sold, exclusive of
VAT = R7 000 |
11 000 |
| 06 | Liz Botha | RC001 | Capital contribution by the owner | 54 000 |
| 08 | All-Star
Bank |
B/S | Direct deposit – Bank loan | 150 000 |
| 15 | Cash sales | 002 | Mark-up on cost = 25% | 8 000 |
| 20 | Cash sales | 003 | Cost of goods sold, exclusive of
VAT = R5 500 |
9 000 |
| 24 | Cash sales | 004 | Mark-up on cost = 33.33% | 21 000 |
| 31 | All-Star
Bank |
B/S | Interest received on a fixed
savings account |
900 |
List of EFTCs and bank statement debits.
| Day | Details | Doc no. | Additional information | The total amount paid
(R) |
| 01 | Petty cash | B/S | Cash for the petty cash box | 3 000 |
| 02 | Sweet
Dealers |
EFTC | Trading stock bought. The amount
includes freight costs for R4 000 |
22 000 |
| 05 | Levy’s Food | EFTC | Lunch with clients | 1 000 |
| 11 | Gab’s Wholesalers | EFTC | Merchandise bought | 8 000 |
| 14 | BCC
Appliances |
EFTC | Bought coffee machine for staff
use |
1 400 |
| 17 | UNICEF | EFTC | Donation to UNICEF | 2 500 |
| 25 | S. Zulu | EFTC | Salary of the store admin | 9 500 |
| 30 | Buffalo City
Metropolitan |
EFTC | Monthly rates and taxes (assessed
rates portion = R800) |
2 000 |
| 31 | King’s
Estate |
B/S | Monthly business rent debit order
on the bank statement |
15 000 |
| 31 | All-Start
Bank |
B/S | Bank charges on the bank
statement |
250 |
Required:
Prepare the following for Liza Botha Wholesalers for March 2023:
I. Cash Receipts Journal (18 marks)
Use the below Cash Receipts Journal table format to record the transactions:
| Doc
no. |
Day | Details | Analysis of
receipts |
Bank | VAT
Output |
Sales | Sundry accounts | Cost of
sales |
|
| Amount | Details | ||||||||
II. Cash Payments (18 marks)
Use the below Cash Payments Journal table format to record the transactions:
| Doc
no. |
Day | Details | Bank | VAT
Input |
Trading
stock |
Sundry Accounts | |
| Amount | Details | ||||||
Answers to Above Questions on Accounting
Answer 1: Managerial accounting and financial accounting are important concepts of accounting and there exist significant differences between both these concepts. The main purpose of managerial accounting is to provide sufficient information to the managers, with the objective of allowing them to take relevant decisions within the organisation. Financial accounting is all about providing financial information to the external stakeholders such as investors, creditors in order to allow them to take important decisions about the organisation.
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