QUESTION 1 (36 marks)(43 minutes)

On 1 July 2022 Ringo Wright obtained a loan to the amount of R200 000 in his personal capacity from Star Bank to start a computer training business, to trade as Literate Training.

Transactions during July 2022:
Jul 2 Mr Wright opened a bank account for the business and transferred the cash obtained from the above-mentioned loan to the bank account of the business.
3 Paid a deposit for rent, R3 000 and the monthly rental fee of R1 500 to Rent-a-Shop with the business cheque card.
4 Purchased furniture and equipment with a cost price of R55 000 on credit from XYZ Suppliers.
R5 000 of this amount was for a painting that he purchased for his wife as an anniversary gift.
5 Withdrew R5 000 from the bank account of the business as petty cash.
Paid Dream Deli for refreshments to be delivered during July, R1 000, from the petty cash.

7 Purchased stationery from PC Suppliers and paid by the business cheque card, R1 500. Mr Wright later received notifications per SMS of two withdrawals pertaining to this transaction. On checking the electronic bank statement of the business, it was confirmed that a deduction was made twice.
9 Notified PC Suppliers of the deduction error and received a cash repayment of R1 500.

16 Invoiced VIP Personnel for services rendered to them on credit, R6 000.

20 Presented a course to IQ Limited for R10 000, on credit, and received a cheque for R2 000 from
VIP Personnel in partial payment of their account.
26 Paid for cleaning services, R1 450, from the petty cash.

27 VIP Personnel made an electronic deposit into the bank account of Literate Training, in full settlement of their account.
28 Mr Wright made an electronic transfer from his personal bank account to Chatpro LTD to pay the telephone account of the business, R1 350.
30 Made a partial repayment from the bank account of the business in respect of the personal loan of
Mr Wright as obtained on 1 July 2022, R5 000.
31 Paid Advert Success for the marketing of Literate Training, R2 500.

QUESTION 1 (continued)

REQUIRED:

The analysis of abovementioned transactions in tabular format as follows:

Question 2:

The following trial balance of All Hours Renting Services was drawn up by an inexperienced bookkeeper.

Trial balance for the year ended 30 June 2023

Apart from the fact that the bank account balance is omitted, an investigation revealed the following errors:

1. Some balances of the correctly recorded ledger accounts were disclosed on the wrong side of the trial balance. Certain transactions were unaccounted for or erroneously recorded/disclosed (see paragraph 2 below). These errors must be rectified.

2. Unaccounted transactions/erroneous recordings/disclosures:

• R2 000 cash received from a client for champagne glasses rented after hours were entered into the books by debiting the fees/income earned account and crediting the bank account.

• Cash received from a client who was billed for repairs to damaged rented goods, R550, was not recorded. (Prior to the receipt of this payment, the debtors control account was debited and the repair expenses billed account credited with this amount.)

• Goods rented to a client on credit for R1 000 was not recorded.

• The transport expenses were erroneously disclosed in the trial balance at an overcast of R300.

REQUIRED:

Prepare the correct trial balance of All Hours Renting Services as at 30 June 2023.

Question 3:

The following information pertains to Art Frames and Restorers.

1. List of general ledger accounts and balances on 1 May 2023:

2. Transactions for May 2023:

REQUIRED:

Open the general ledger accounts in the general ledger of Art Frames and Restorers according to the given list on 1
May 2023 and then record the transactions for May 2023 in these accounts. In the event of transactions to be recorded in accounts that are not disclosed in the list of balances, new accounts must be opened. All the accounts must be properly balanced at the end of May 2023. (Revise Study Unit 6 in respect of the correct balancing methodology).

The following balances were obtained from the general ledger of AA Cleaning Services at 30 April 2023:

REQUIRED:

Prepare the following financial statements for AA Cleaning Services to comply with the requirements of IFRS (International Financial Reporting Standards), appropriate to the business of the sole proprietorship:

4.1 The statement of profit or loss and other comprehensive income for the year ended 30 April 2023. (10)

4.2 The statement of changes in equity for the year ended 30 April 2023. (3)

4.3 The statement of financial position as at 30 April 2023. (11)

NB: Notes to the financial statements are not required.
Show an item indicated as used as an expense, and an item indicated as inventory, as a current asset.
Use proper headings and terminology.

Assignment 2

QUESTION 1 (45 marks)(54 minutes)

Trueman Traders applies the periodic inventory recording system and is registered as a VAT vendor. VAT invoices are received and supplied in respect of all transactions. The VAT period of the business ends on equal months (Feb, Apr, Jun, Aug, etc). The owner of Trueman Traders is T Trueman.

Trueman Traders entered into the following transactions for July 2022 (Where VAT is applicable to a transaction, a
15% VAT inclusive amount is given, except where it is specifically indicated that a VAT exclusive amount is given):

QUESTION 1 (continued)

REQUIRED:

Prepare the following subsidiary journals of Trueman Traders, properly totalled for July 2022:

1.1 Cash receipts journal (with analysis columns for bank, sales, debtors control, settlement discount
granted, VAT input, VAT output and sundry accounts) (12)

1.2 Cash payments journal (with analysis columns for bank, purchases, creditors control, settlement
discount received, VAT input, VAT output and sundry accounts) (16½)

1.3 Sales journal (with analysis columns for debtors control, VAT output and sales) (4½)

1.4 Purchases journal (with analysis columns for creditors control, VAT input and purchases) (4½)

1.5 Sales returns journal (with analysis columns for debtors control, VAT output and sales returns) (1½)

1.6 General journal (6) [45]

Round all amounts to the nearest Rand, where applicable.

You may do the following for additional practice, but must not submit it for marking:

• Post the entries recorded in (1.1 – 1.6) above to the relevant accounts in the general ledger of Trueman Traders. All the accounts must be properly balanced/totalled on 31 July 2022.

NB: The first word(s) of each entry must indicate the contra ledger account.

• The trial balance of Trueman Traders as at 31 July 2022.

The general ledger and trial balance will be included in the solution.

QUESTION 2 (25 marks)(30 minutes)

Consider the following:

1. Alpine Traders
Pre-adjustment trial balance as at 30 June 2023

2. Additional information:

2.1 Alpine Traders records trading inventory related transactions according to the perpetual inventory system. A
sales return of undamaged trading inventory to the amount of R450 on 30 June 2023, pertaining to a previous credit sales transaction, was not recorded. The cost price of the sales return amounted to R300.

2.2 A trade debtor, H Laya was declared insolvent. Only R160, comprising 5% of his debt at Alpine Traders, was received from the insolvency administrator. The receipt of the cash was correctly recorded. The outstanding amount on his account must still be written off.

2.3 Year-end adjustments have to be recorded in respect of the following:

2.3.1 The unrecorded advertising expenses, payable for June 2023, R400.

2.3.2 Wages prepaid for July 2023, R560. (The payment was debited to the salaries and wages account, and the bank account was credited.)

2.3.3 The unrecorded commission income (outstanding/receivable for June 2022), R750.

2.3.4 Depreciation on the vehicles for the financial year, R28 100.

QUESTION 2 (continued)

REQUIRED:

Prepare the following financial statements of Alpine Traders, to comply with the requirements of International Financial
Reporting Standards, appropriate to the business of this sole proprietorship:

2.1 The statement of profit or loss and other comprehensive income for the year ended
30 June 2023. (13)

2.2 The statement of changes in equity for the year ended 30 June 2023. (2)

2.3 The statement of financial position as at 30 June 2023. (10)

NB: Notes to the financial statements are not required.
Use proper headings and terminology. Show all calculations.
Question 3

Choose the correct answer. Write only the question number and the selected answer next to it. Show calculations, if any, immediately thereafter.

For example: 3.7 a (and then calculations, if any)

3.1 Drawings of trading inventory (recorded according to the perpetual inventory system) by the owner of a business entity for personal use always

(a) increases expenses and decreases equity. (b) increases bank and decreases equity.
(c) decreases both trading inventory and equity.

(d) increases both trading inventory and equity.
(2)

3.2 On the financial year-end of Box Traders, dated 31 July 2022, the accounts payable by trading clients to Box
Traders within its next financial year are

(a) disclosed as trade and other receivables under current assets in the statement of financial position as at 31 July
2022.

(b) disclosed as debtors control under current assets in the statement of financial position as at 31 July 2022.
(c) disclosed as creditors control under current liabilities in the statement of financial position as at 31 July 2022. (d) disclosed as trade and other payables under current liabilities in the statement of financial position as at 31 July
2022.

3.3 Which one of the following general ledger accounts always has a debit balance? (a) bank
(b) settlement discount granted

(c) VAT control

(d) purchases returns

3.4 A business entity has cash and cash equivalents of R500, property, plant and equipment with a carrying amount of R50 300, trade creditors of R800, trade debtors of R850, prepaid expenses of R200, a bank overdraft of R1
000, trading inventory of R700, and a long-term loan of R25 000. Which one of the following amounts equals the equity of the entity?

(a) R26 800 (b) R25 350 (c) R25 750
(d) None of the above.
(4) [10]

Question 4:

Anna Mabena started Wash and Wear Services on 1 September 2021 and prepared the following trial balance from the books of the entity on 31 August 2022:

WASH AND WEAR SERVICES, Trial balance – 1 September 2021 to 31 August 2022

Anna could not balance the trial balance and requested your assistance. Apart from the obvious errors that you have detected in the above trial balance, you have noted the following:

1. The amounts credited to the bank account in the general ledger totalled R7 625, and the amounts debited to the bank account totalled R5 125.

2. An amount of R200 received from a debtor in payment of his account, was debited to the bank account and credited to the services rendered account.

3. With the recording of the balance of the creditors control account in the above trial balance, Anna by mistake transposed (switched) the first two figures.

4. A cash payment of R1 000 to a creditor was made from Anna’s personal bank account. She forgot to record this transaction in the books of Wash and Wear Services.

5. The washing powder inventory on hand at 31 August 2022 amounted to R8 500. This washing powder is included in the washing powder (purchased) of R12 000. Apart from 50kg of washing powder to the value of R300 that was taken for personal use by Anna during the financial year, the remainder of the purchased washing powder was consumed during the year.

6. The balance of the repairs and maintenance account of the entity’s equipment in the general ledger, R1 200, was added to the balance of the rental expenses account, and this total is disclosed as rental expenses in the above trial balance.

REQUIRED:

Prepare the correct trial balance for Wash and Wear Services as at 31 August 2022.

Answers to Above Accounting Questions

Answer 1: An analysis of all the transactions of Ringo Wright in the tabular format is performed as follows:

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