Question 1:

Wisdom Paine, a qualified dentist, decided to set up his own practice Paine-free Dentistry. The following are transactions for March 2020, the first month of business activities.






W Paine, the owner, deposited R100 000 as his opening capital.



















W Paine transferred personal equipment valued at R80 000 to the practice. Purchased additional equipment on credit from Dentoquip for R38 000. The account will have to be settled within 90 days from date of the invoice.

Rendered services to I Smile for R12 000 on credit.

Paid the practice’s March rent of R10 000 by electric funds transfer (EFT). Paid an additional R15 000 as a refundable deposit for the premises rented. W Paine drew R13 000 in cash for personal use.

An EFT payment of R9 500 was used to buy consumables (Treat as asset). Made an EFT payment of R3 300 for electricity and water.

A part payment of R18 000 was made to Dentoquip. The balance will be paid in two equal monthly installments at the end of April and May 2020.

A total of R127 000 was deposited into the practice’s bank account for services rendered to clients.

Direct transfers were made to pay total salaries of R23 000.

Process Paine-free Dentistry’s above transactions through a table such as the one shown below:

Date Accounting equation   Ledger accounts


Assets = Equity + Liabilities   Account







+100 000




+100 000









The above example records the very first transaction on 1 March 2020 whereby the owner deposited R100 000 into the business bank account.
Use + to indicate an increase; – OR brackets (00) to indicate a decrease and 0 for no effect. Show the effect on both the accounting equation and the effect on specific ledger accounts.

Refer to the transaction on the 3 March 2020, and calculate the amount of the instalment to be paid at the end of April 2020 to Dentoquip. (1)
State whether the “equipment” purchased from Dentoquip will be categorized as a “non-current” or “current” item. Provide a brief motivation for the choice you have made. (2)

The following information was extracted from the accounting records of Celestial Enterprises. The business operates and maintains a general ledger as well as subsidiary ledgers for Debtors and Creditors. At 30 April 2020, the total of the list of debtors was R224 640 which did not reconcile with the balance of R202 500 in the Debtors Control account. Details follow:

1. Celestial Enterprises: General ledger for April 2020.

DR                                                  Debtors Control account                                       CR
1.4 Balance b/d 101 520   30.4 Bank & discount 352 080
30.4 Sales 457 200   Sales returns 3 780
  Interest income 1 260   Bad debts 1 620
        Balance c/d 202 500
    559 980     559 980



Balance b/d


202 500


2. Celestial Enterprises: Debtors’ subsidiary ledger for April 2020.

List of debtors as at 30 April 2020 R
L Sun C Mars

M Venus

B Moon X Saturn

18 900

79 380

109 620

11 340

5 400

Total of list 224 640

Additional information:
The following errors and omissions were discovered after the above were drawn up:

1. X Saturn was declared insolvent and the liquidators paid 50% of the balance outstanding at 30 April 2020. This amount was deposited directly into the business bank account. The balance must be written off as irrecoverable. All the necessary entries to record the amount received from the liquidators and the amount written-off must still be recorded.
2. An amount of R22 680 was received from C Mars and recorded correctly in the Cash Receipts Journal, but was not posted to his personal account in the Debtors ledger.
3. A credit note number CR678 for R2 700 was issued to B Moon for the return of damaged goods. This was recorded correctly in the Sales Return Journal but erroneously posted to L Sun’s account in the debtors’ ledger.
4. D Venus’s account is overdue and must be charged interest of R1 096.
5. A credit sale of goods to L Sun for R3 240 has not yet been recorded.
6. The sales return journal is undercast by R540.

Use the information provided to correct and prepare the following:
Debtors Control account for April 2020. You are required to show the corrections made and balance the account. (12)
A List of debtors as at 30 April 2020. You are required to show the corrections and total the list (8)
Question 3:

Joe Soap owns a general dealer business situated in Umzinto. The following information was provided for Joe’s General Dealers for the financial year ended 28 February 2020.

Joe’s General Dealers

Pre-adjustment trial balance as at 28 February 2020 Debit – R Credit – R
Vehicles at cost 507 800  
Equipment at cost 448 500  
Accumulated depreciation: vehicles   107 300
Accumulated depreciation: equipment   147 700
Inventory: trading (1 March 2019) 184 900  
Trade debtors control 55 680  
Bank 169 560  
Capital   403 300
Drawings 131 000  
Loan term borrowing from People’s Bank   300 000
Trade creditors control   65 000
Sales   1 413 585
Sales returns 5 580  
Purchases 672 400  
Purchases returns   2 735
Carriage on purchases 4 596  
Carriage on sales 3 750  
Insurance on purchases 987  
Commission income   54 000
Rental income   19 500
Settlement discounts received           T0 be deducted from   1 675
Settlement discounts granted            relevant trading 1 395  
items 25 725  
Insurance 15 300  
Electricity and water 13 800  
Packing material 273 822  
Sundry expenses    
  2 514 795 2 514 795

Additional information
1. Physical stock-take on 28 February 2020 revealed the following Inventories on hand;
• Trading inventory R228 250, and
• Consumable inventory: packing material R3 600
2. A new tenant rented a portion of the premises from 1 March 2019. According to the rental agreement the rent for the period 1 March 2019 to 31 March 2020 was R1 500 per month. Rent is usually received in advance ie. rent is received in the month before it is due. For example; the April 2019 rent was received during March 2019.
3. Commission income of R10 800, earned in February 2020, has not yet been received nor recorded.
4. Electricity and water of R1 600 for February 2020 has not been paid and is not yet included in the above records.
5. The long term loan from People’s Bank was obtained on 1 September 2016 at an interest rate of 11,5% per year. The loan was payable in four (4) equal annual instalments. The first instalment was paid on 31 August 2019. The second instalment is payable on 31 August 2020. Interest is paid during March each year.
6. A debtor who owes Joe’s General Dealers R12 680 cannot be traced. His account must be written-off as irrecoverable.
7. The insurance account balance of R25 725 covers the period 1 March 2019 to 30 April 2020. The monthly insurance premium remained unchanged during this period.
8. Provide for depreciation for the year as follows:
• Vehicles – at 10% per year on straight line method, and
• Equipment – at 14% on the diminishing balance method.
There were no purchases or sales of the above items during the current financial year.


Use the above information to prepare the statement of profit and loss and other comprehensive income for Joe’s General Dealers for the year ended 28 February 2020. Your answer must comply with International Financial Reporting Standards that are appropriate to this type of business.
Round off all amounts to the nearest rand. All calculations must be shown.
Mat and Will are partners in a business that offers their services as Top Debt Collectors. Their business is very successful and the following information was extracted from their accounting records for the year ended 28 February 2020. The statement of profit and loss and other comprehensive income has been completed and the following needs to be considered to prepare the statement of changes in equity.

Balances as at 28 February 2020 R
Capital: Mat Capital: Will

Current account: Mat (credit balance: 1 March 2019) Current account: Will (debit balance:1 March 2019) Drawings-general: Mat

Drawings-general: Will Drawings-salary: Mat Drawings-salary: Will

Profit for the year

400 000

400 000

30 000

10 000

52 400

71 600

60 000

35 000

780 000

Additional Information:
During the current financial period Mat and Will’s capital contributions changed as follows:
On 31 August 2019, Mat contributed an additional R100 000 as capital and Will withdrew R50 000 from his capital. These have been correctly recorded to arrive at the above capital balances.
Mat and Will have a partnership agreement which includes the following relevant items;
Provision must be made for interest on capital at 10% per year.
Interest on current account debit balances and credit balances at beginning of the year must also be recorded at 10% per year.
Interest on drawings-general has been calculated on daily balance as follows:

  • Mat R4 600
  • Will R5 400

Partners are entitled to the following salaries:

  • Mat is entitled to a salary of R6 000 per month for the full year;
  • Will is entitled to a salary of R7 000 per month from 1 September

The remaining profits must be shared equally.

Prepare the statement of changes in equity for Top Debt Collectors for the year ended 28 February 2020. The statement must be presented in the following format.

Recommended format:
Top Debt Collectors
Statement of changes in equity for the year ended 28 February 2020.

The following information was extracted from the accounting records of Humid Limited for the year ended 31 May 2020:

Humid Ltd
Summary of the statement of profit and loss and other comprehensive income for the year ended 31 May 2020 .

  31 May 2020


Sales 1 840 000
Cost of sales (980 000)
Gross profit 860 000

Other income


185 000

Commission income 123 000
Profit on sale of non-current asset 62 000

Distribution administration and other expenses


(625 000)

Audit fees 58 000
Depreciation 80 000
Salaries and wages 402 000
Other expenses 85 000

Finance cost


(40 000)

Interest on borrowings 40 000
Profit before taxation 380 000
Income tax expense (80 000)
Profit / total comprehensive income for the year 300 000

Humid Ltd
Extract from the statement of financial position as at 31 May 2020.

  31 May 2020


31 May 2019


Inventories – merchandise 90 000 122 000
–    Stationery 5 000 5 800
Trade debtors 330 000 298 000
Bank 147 000 53 000
Trade creditors 170 000 178 000
Prepaid expenses 4 200 1 800
Accrued expenses 16 800 17 600


Prepare the following section of the statement of cash flows of Humid Limited for the year ended 31 May 2020:
• “Cash generated by operations” section only.

Note that the entire “cash flows from operating activities” section is not required. Humid Limited uses the indirect method to prepare its statement of cash flows.

Answers to Above Questions on Financial Accounting 

Answer 1: The transactions of Paine-free Dentistry’s are processed in the table below:


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