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FAC1502/1/2015 (iii)
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1.5.1 Investors
1.5.2 Employees
1.5.3 Lenders
1.5.4 Suppliers and other trade creditors
1.5.5 Customers
1.5.6 Government and their agencies
1.5.7 Public
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ZEBRA SERVICES
STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) AS AT 30 NOVEMBER 20.1
ASSETS R EQUITY AND LIABILITIES R
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COMMENT
This statement of financial position (balance sheet) is in a basic form. Later we will deal
with statements of financial positions (balance sheets) in more detail.
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. Capital plus profit together form the equity of the owner. See the above exercise Ð
R(30 000 + 50 000) = R80 000.
. Profit is income minus expenditure.
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COMMENTS
. In an entity which has not yet entered into any transaction, the elements of the
equation will always be 0.
. The terms ``bank'' and ``capital'' in the analysis are actually names of accounts.
. The investment of capital is usually the first transaction.
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``Furniture'' instead of ``Bank'' will then increase.
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. The results of the first transaction form the balances which are brought down in this
transaction.
. Liabilities arise when another party or institution supplies funds (make loans) to the
entity.
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hand side of the BAE.
. The BAE balances after the transaction.
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&' ( 26
COMMENTS
. Assets may also be bought on credit and a creditor comes into being.
. The transaction is recorded when it is entered into and not when the payment is made.
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. The BAE balances after the transaction.
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ASSETS = EQUITY + LIABILITIES
Furniture Equipment Bank Capital Loan: Creditors
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COMMENTS
. Withdrawals are the opposite of capital contributions and reduce capital. Remember,
withdrawals are not expenditure.
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withdrawal.
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. The BAE balances after the transaction.
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COMMENTS
. Income earned increases the equity. It is the objective of the entity to earn income for
the entrepreneur.
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. The BAE balances after the transaction.
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. The BAE balances after the transaction.
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ASSETS = EQUITY + LIABILITIES
COMMENTS
. Organisations or clients who owe money to an entity are known as debtors and arise
from the entity rendering services or goods on credit.
. The left-hand side and the right-hand side of the BAE increase.
. The realisation principle applies here, and the income is shown as having been earned
on 18 February when the service was provided and not when the cash is received.
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COMMENTS
&' ( 30
4.5.5 Payments received from debtors
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COMMENTS
ASSETS = INTERESTS
EQUITY + LIABILITIES
Income/ Loan: Credi-
Date Debtors Furniture Equipment Bank Capital Expenditure ABC Bank tors
20.1 R R R R R R R R
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COMMENT
. Note that these totals correspond to the closing balances in paragraph 4.5.5 above.
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STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1
ASSETS Note R
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EQUITY AND LIABILITIES
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COMMENTS
. The statement of financial position balances and shows the same totals as the BAE.
. Note the heading Ð the statement of financial position is prepared to reflect the
financial position on a specific date.
. The withdrawals are subtracted from the capital. As mentioned, withdrawals are not
an expenditure item.
. The equity in the BAE is also R135 000.
&' ( 32
Transactions:
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Solution: Revision exercise 2
F FOX
(1) ACCOUNTING EQUATION
ASSETS = EQUITY + LIABILITIES
Library Income/
Date and Debtors Bank Capital Expendi- Creditors
Equip- ture
ment
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EQUITY AND LIABILITIES
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noitatneserper citamehcS 11.4
COMMENTS
. The top level of the schematic representation shows the basic accounting equation
(BAE).
. The second level of the schematic representation shows how each of the components
of the BAE becomes part of the account system. The left-hand side of the account is
known as the debit side (Dr) and the right-hand side as the credit side (Cr).
. The total of the amounts on the debit side of an asset account is usually larger than
that on the credit side. The account will therefore usually have a debit balance
(brought down). The total of the amounts on the credit side of a liability account is
usually larger than that on the debit side. The account will therefore usually have a
credit balance (brought down).
. The capital account reflects the equity of the owner at the date of the statement of
financial position. The balance on this account is the result of income, expenditure,
drawings and capital investment. These components are all dealt with separately in
the accounting system.
. Additional capital contributions and income increase equity.
. Drawings and expenditure decrease equity.
. But note: drawings is not an expenditure and therefore does not reduce
the profit.
. The left hand side (Equity section) forms the basis for the preparation of the Statement
of Profit or Loss and other Comprehensive Income and the Statement of Changes in
Equity.
. The Capital (Equity section) and the right hand side (ASSETS and LIABILITIES) form
the basis for the preparation of the Statement of Financial Position.
E /
A
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A
A
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,
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6??7
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~ ~
6??7
& '
68
57
~ ~
6??7
)% '
68
57
~ ~
6??7
)% - A
~ ~
COMMENT
All drawings by the owner are recorded in a separate account, namely ``Drawings'', and
not directly in the capital account. Drawings is a disbursement of the profit to the owner
and is not expenses resulting from business operations.
6?? 7
)% /
; 6
7
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-#
6' '
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GOLDEN RULE
6 )%7
-# 6- 7
' 6' 7
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- -
&
;
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&
;
20.1 R 20.1 R
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20.1
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&' ( 40
Dr 2<"; Cr
20.1 R
&# )%
Dr & Cr
20.1 R
&# '
Dr -#
Cr
20.1 R 20.1 R
&# &
&# )%
) (
20.1
$ ) #(
GOLDEN RULE
2< 6 '"7 5#
6 '
7
6' 7
# 6- 7
?
GOLDEN RULE
/
; 6
7
< 6' 7
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;
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GOLDEN RULE
2D"
6 A
7
< # 6- 7
" D"
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41
&' (
Dr '" Cr
20.1 R
&# )%
Dr - A
Cr
20.1 R
&# )%
Dr '
Cr
20.1 R 20.1 R
&# )% &# &
) (
;
20.1
$ ) #(
Dr @
Cr
20.1 R
&# )%
Dr
;
Cr
20.1 R
&# '
Dr /
; 6
7 Cr
20.1 R
&# )%
-#
&' ( 42
COMMENT
. Note that the details of an item in a ledger account is simply the name of the other
ledger account involved in the transaction. This other ledger account is known as the
contra ledger account.
#
#
#
A 6#(7
" ?
GOLDEN RULE
, # ==#
A>> 6#(7 ;
#
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FIX-'N-MAT
TRIAL BALANCE AS AT 28 FEBRUARY 20.1
Dr Cr
R R
)%
2<";
&
-#
'"
- A
5
'
@
;
&
GOLDEN RULE
D"
# 6- 7 #
#
A 6#(7
#
#?
GOLDEN RULE
2< 6"7 #
;
6' 7 #
#
A
6#(7
#?
43
&' (
COMMENTS
;
"
#
#
" "
;
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;
;
<
;
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?
, # "
;
? ,
;
;"
;
A
>
;
"
A
"
?
FIX-'N-MAT
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
MONTH ENDED 28 FEBRUARY 20.1
Note R
Revenue
-
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;
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6 7
@
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&' ( 44
COMMENTS
. Note the title. A statement of profit or loss and other comprehensive income is
prepared for a period ended, not on a certain date.
. The profit for the period as determined in the statement of profit or loss and other
comprehensive income corresponds to the income/expenditure column in the BAE.
. The income and expenditure accounts are called nominal accounts.
GOLDEN RULE
6
;"
;
7
D"
"
;
?
FIX-'N-MAT
STATEMENT OF CHANGES IN EQUITY FOR THE MONTH ENDED
28 FEBRUARY 20.1
Capital
R
) &# ?
,
;"
;
"
- A
6 7
) &# ?
GOLDEN RULE
, "
<
<?
COMMENTS
. Note that the statement of changes in equity is prepared for a period ended and not
on a specific date.
. The equity at the end of the month corresponds to the net total in the BAE in paragraph
4.6.
45
&' (
GOLDEN RULE
, #
"
;
< ;
#
;
==">>
;
"
?
@ A
A
A
;
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&D+>+$
;
;" A /&?
FIX-'N-MAT
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1
ASSETS Note R
Non-current assets
!
" " <";
COMMENTS
. See paragraph 4.15.4, Notes, for the calculation of property, plant and equipment.
. The total assets of R160 200 corresponds to the total as shown in the BAE in
paragraph 4.6.
. The total equity and liabilities of R160 200 corresponds to the total as shown in the
BAE in paragraph 4.6.
. Words and figures between brackets is for explaining purposes only and do not form
part of any financial statement.
&' ( 46
GOLDEN RULES
.
"
+
?
. *
+
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A 6
7 7
;"
"
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+ #
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# " ;
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4.15.4 Notes
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4.16 Summary
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&' (
4.17 Revision exercises and solutions
4.17.1 Revision exercise 1
6 7 *;
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#A
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67 1
A
A
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E
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.
;
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67 #
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7
&' ( 48
Solution: Revision exercise 2
ASSETS EQUITY LIABILITIES
Non- Non-
current Current current Current
assets assets Capital Income Expenditure liabilities liabilities
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67 !
67 !
67 /
;
67 :
6 7
67 -#
6B7 )%
6%7 &
67 2
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6;7 - A
67 #
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49
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Required:
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; " A
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&' ( 50
4.17.4 Revision exercise 4
,
A
3
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2
0
!
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/
Required:
! "
A #
%
@#
2
0
6 7 , ""
"
A #
"
"
#(
3
# ? ?
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?
67 , #
3
# ? ?
Dr - A
0 @ )
Cr
20.1 R
3 )%
Dr 2<"; 6
7 Cr
20.1 R
3 " %
-
51
&' (
Dr :
6
7 Cr
20.1 R
3 '"0
@ )
Dr )% Cr
20.1 R 20.1 R
3 '" 3
;
5
+ ; ,"
D"
- A
0
&
@ )
5
+ ;
) (
20.1
*
) #(
Dr " %
-
Cr
20.1 R
3 2<";
Dr
; Cr
20.1 R
3 )%
Dr &
Cr
20.1 R
3 )%
Dr
Cr
20.1 R
3 )%
Dr ,"
D"
Cr
20.1 R
3 )%
&' ( 52
WITBLITS ELECTRICIANS
(2) TRIAL BALANCE AS AT 31 OCTOBER 20.1
Dr Cr
R R
'" N @ )
- A
N @ )
2<"; 6
7
:
6
7
)%
5
+ ;
6 )%7
" %
-
&
;
,"
D"
Required:
6 7
#
#
A D;"0
20.1
$ ! "
# < N ?
53
&' (
67 ! "
;
<
! :
;
$ ? ?
67 ! " ! :
>
;
"
$ ?
;?
67
A
"
"
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?
P VICTOR
{
Capital
R
'"
#
;
A 7
5
"
67
- A
6 7
) $ ? 7
&' ( 54
P VICTOR
(3) STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20.1
ASSETS Note R
Non-current assets
!
" " <";
Current assets
,
#
'
<
6#%7
Total assets
EQUITY AND LIABILITIES
Total equity
'"
Current liabilities
,
"#
Total equity and liabilities
P VICTOR
(4) NOTES FOR THE MONTH ENDED 31 MARCH 20.1
?
"
0
,
;
# " "
#
;" A
/
& "
?
*
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A
A
;
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SELF-ASSESSMENT
Now that you have studied this study unit, can you prepare the following:
.
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. #E
. #
;
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55
&' (
&' ( 56
TOPIC B
Learning outcome
,
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B
6A
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7
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57
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CONTENTS
&' ( 58
5
STUDY UNIT
Learning outcome
# #
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Contents Page
I
"
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%
0 B
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B
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B
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"
B
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B
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B
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B
"
B
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B
B
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59
&' (
KEY CONCEPTS
.
;
. 4
.
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B
. '
. '
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B
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B
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.
B
. 2D;"
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. : D 6:,7
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5.1 Introduction
/ "
A
;
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A
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% A
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A A
% D?
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&' ( 60
5.3 Books of first entry: journals
)
;#
% "
"
? ,
;%
#%
; # ;
; ;
"
A " #
%
?
,
#
B
#
%
A
. the purchases journal and the purchases returns journal A "
"
. the sales journal and the sales returns journal A
. the general journal A
A
B
D;"
A
6# #
7
"
#
#%
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;
"
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;
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5
A
#%
;
A
&D+>+$
? &D+>+$>
"
B
A
%
A
0
FIX-'N-MAT
CASH RECEIPTS JOURNAL Ð FEBRUARY 20.1 CRJ1
Analysis Sundry accounts
Document Day Details of Bank Current
number receipts income Amount Fol Details
, ,
; '"
)' )% 5
0
)' )%
' '
' '
61
&' (
Dr )% Cr Dr '" Cr
20.1 R 20.1 R
&# "
&# )%
Dr &
Cr Dr 5
0 )' )% Cr
20.1 R 20.1 R
&# ???? ???? &# )%
)%
Dr ' '
Cr
20.1 20.1 R
&# ???? ???? &# )%
COMMENTS
. Source documents for entries in the cash receipts journal are the cash register roll,
duplicate receipts, duplicate cash invoices and duplicate deposit slips.
. The cash receipts for the month are recorded and analysed in date order.
. Each amount received during the day is not banked immediately. Receipts are first
recorded in the analysis of receipts column and the amount which is banked for that
day is recorded in the bank column.
. Check the addition in the columns by cross-casting. In other words, when the totals of
the analysis columns are added, they must equal the total in the bank column.
. Entries in the sundry accounts column are posted individually to the general ledger.
. Only the totals of the other columns are posted.
. The cash receipts journal is a book of first entry. The double-entry system has to be
applied in the general ledger.
. The amounts are not recorded individually again in the bank account in the general
ledger. Note that the credit entries in the accounts add up to R158 000, which
corresponds to the debit entry in the bank account.
. The number and headings of columns in the journal will depend on the frequency of
occurrence of transactions and can differ from one entity to the other.
&' ( 62
&D+>+$>
";
B
A
%
A
0
FIX-'N-MAT
CASH PAYMENTS JOURNAL Ð FEBRUARY 20.1 CPJ1
Cheque Day Details Bank Wages Sundry accounts
number Amount Fol Details
R R
H. &
2<";
8
5; 8
5;
'
- A
'
Dr )% Cr Dr 2<"; Cr
20.1 20.1 R 20.1 R
&# &# !;
&# )%
Dr @
Cr Dr 8
5; Cr
20.1 R 20.1 R 20.1
&# )% &# )% &# ??? ???
Dr - A
Cr
20.1 R
&# )%
Dr )% Cr
20.1 R 20.1 R
&# "
'8 &# !;
'!8
) (
20.1
$ ) #(
*
#
;
#% # A
)2
" " ? #%
" " ?
?
COMMENTS
. Source documents for entries in the cash payments journal are cheque counterfoils
and debit notes, or the bank statement issued by the bank.
. Entries are recorded and analysed in the cash payments journal in the same order as
the cheque numbers.
. The amount which is written on the cheque is the amount which is recorded in the
bank column.
. Check whether the adding of the columns is correct by cross-casting. In other words,
when the totals of the analysis columns are added, they must equal the total of the
bank column.
63
&' (
. Entries in the sundry accounts column are posted individually to the general ledger.
. Only the totals of the other columns are posted.
. The amounts are not recorded individually again in the bank account in the general
ledger.
. The cash payments journal is a book of first entry. The double-entry system has to be
applied in the general ledger.
. More analysis columns can be included as is required by the organisation.
Exercise 5.1
$
) )
"
)>
1
8 ?
A
80
20.3
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>
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8 /
Required:
6 7 ! "
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B
)>
1
8 ??
67 ! "
";
B
)>
1
8 ??
67
A "
;
B
?
67 ! " #
8 ??
&' ( 64
Solution Exercise 5.1
' @
,
)
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1
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) - A
3
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1
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; * ,"
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65
&' (
(3) BEAUTY'S HAIR
GENERAL LEDGER
Dr 2<"; B1 Cr
20.3 R
8 )% '!8
Dr )% B3 Cr
20.3 R 20.3 R
8 "
'8 8 !;
'!8
) (
20.3
8 ) #(
Dr '" B4 Cr
20.3 R
8 )% '8
Dr - A
B5 Cr
20.3 R
8 )% '!8
)% '!8
Dr '
; N1 Cr
20.3 R
8 )% '8
Dr D"
N2 Cr
20.3 R
8 )% '!8
Dr
N3 Cr
20.3 R
8 )% '!8
Dr ,"
D"
N4 Cr
20.3 R
8 )% '!8
&' ( 66
Dr '
;#
N5 Cr
20.3 R
8 )% '!8
Dr @
N6 Cr
20.3 R
8 )% '!8
COMMENTS
. The B numbers indicate the statement of financial position accounts and the N
numbers, the nominal accounts. Nominal accounts are income and expenditure
accounts while statement of financial position accounts are capital, asset and liability
accounts.
. In the folio column in the ledger, the cash receipts or cash payments journal is given as
a reference, but in the details column the names of the contra ledger accounts are
entered.
. The summarising effect of the subsidiary journals can be clearly seen in the ledger.
Note the entries in the bank account and the current income account.
#
? / "
#
"
#
? /
;
"
#;
A ;
N #
;
#% ; # ;
;
"
A " #
%
? &
debtors ledger creditors ledger
" A
#
>
>
%"?
67
&' (
#
; debtors control account
; creditors
control account? ,
;
;
"
;% "
? /
"
B
";
B
"
A
,
A # A
? ,
"
"
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;
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#
%
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trade
;
#
%
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"
B
"
B
A
;
0
&' ( 68
ABC DEALERS
PURCHASES JOURNAL Ð MAY 20.3 PJ5
Invoice No Day Details Fol Purchases Creditors
R R
4 @
'5
H. '
;" '5
5; '5
H. '
;" '5
H. '
;" '5
4 @
'5
5; '5
ABC DEALERS
PURCHASES RETURNS JOURNAL Ð MAY 20.3 PRJ5
Credit note Day Details Fol Purchases Creditors
No returns
R R
' 4 @
'5
' H. '
;" '5
Dr '
Cr AA Limited CL1
20.3 R 20.3 R / !8
$ !
$ !
/ !8
Dr !
Cr Grand Wholesalers CL2
20.3 R / !8
$ '
'
' !8
/ !8
XY Company CL3
/ !8
/ !8
/ !8
'
' !8
69
&' (
COMMENTS
. The source documents for entries in the purchases journal are original invoices.
Because these invoices come from different businesses, they are renumbered
consecutively.
. The source documents for entries in the purchases returns journal are the original
credit notes received from the creditors and they must be renumbered consecutively.
. Entries are recorded and analysed in date order in the purchases journal and
purchases returns journal.
. The creditor's name and the amount for which purchases or returns were made must
be clearly shown.
. Only the totals of the columns are posted to the general ledger.
. The amounts in the purchases and the creditors columns are the same in the
purchases journal because we are still ignoring VAT. The same applies for purchases
returns.
. The creditors' accounts are individually credited in the creditors ledger with purchases
and debited with returns. A three-column ledger is preferable to the traditional T-
account format because the balance can be calculated after each transaction.
. The total of all the balances of the individual creditor's accounts must correspond with
the balance of the creditors control account.
. The purchases journal and purchases returns journal are books of first entry. The
double-entry procedure has to be applied in the general ledger.
B
B
A
;
0
ABC DEALERS
SALES JOURNAL Ð MAY 20.3 SJ3
Invoice
No Day Details Fol Sales Debtors
R R
$ $
-5
# -5
4 4 -5
2 2
-5
4 4 -5
$ $
-5
2 2
-5
# -5
&' ( 70
ABC DEALERS
SALES RETURNS JOURNAL Ð MAY 20.3 SRJ3
Credit
Note No Day Details Fol Sales Debtors
returns
R R
- $ $
-5
- 4 4 -5
- 2 2
-5
Dr -#
Cr # -5
20.3 20.3 /
$
$
/
Dr
Cr 2 2
-5
20.3 /
$ -#
'
*
-
/
4 4 -5
/
/
' *
-
$ $
-5
/
'
*
-
/
COMMENTS
. The source documents for entries in the sales journal are the duplicates of sales
invoices.
. The source documents for entries in the sales returns journal are the duplicates of
credit notes issued to the debtors.
. The debtor's name and the amount of the transaction should be clearly indicated.
71
&' (
. Entries are recorded and analysed in date order in the sales journal and sales returns
journal.
. Only the totals of the columns are posted to the general ledger.
. The amounts in the sales and the debtors columns are the same in the sales journal
and sales returns journal, because we are still ignoring VAT. The effect of VAT will be
explained later.
. The debtors' accounts are debited individually in the debtors ledger with sales, and
credited with sales returns.
. The total of all the balances of the individual debtor's accounts must correspond with
the balance of the debtors control account.
. The sales journal and sales returns journal are books of first entry; it is, in other words,
a summary of sales and returns. The double-entry system has to be applied in the
general ledger.
general journal. 2D;"
6# #
7 A A
#
>
A
+ B
;
6A A
#
7?
NB: !
other than merchandise
B
" "
;
?
B
%
A
;0
ABC DEALERS
GENERAL JOURNAL Ð MAY 20.3 J3
Date Particulars Fol Debit Credit
R R
5 Vehicles 43 000
ABC Bank 43 000
Delivery vehicle bought on credit per invoice
F147 from ORA Motors. The delivery vehicle
was financed by obtaining a loan from
ABC Bank at an interest rate of 9% per annum
16 Packaging material 430
Stationery 430
Packaging material per invoice Z214 incorrectly
debited to stationery account
18 Credit losses (Bad debts) 84
F Field 84
F Field's balance written off as irrecoverable
COMMENTS
. The account which is entered first is the account which has to be debited in the general
ledger.
. The narration is very important since it gives the reason for the entry and must also
refer to source documents.
&' ( 72
. The general journal is a book of first entry. The double-entry system has to be applied
in the general ledger.
. Theoretically all transactions can be recorded in the general journal.
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&' ( 74
Solution: Revision exercise
AA SUPERMARKET
(1) SUBSIDIARY JOURNALS
(a) CASH RECEIPTS JOURNAL Ð MARCH 20.5 CRJ1
Analysis
Document Day Details Fol of Bank Sales Debtors Sundry accounts
number receipts control
Amount Fol Details
R R R R R
"" ) '"
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75
&' (
(c) PURCHASES JOURNAL Ð MARCH 20.5 PJ1
Invoice
no Day Details Fol Purchases Creditors
, @
'5
)) -
'5
-)* -
#
'5
* )
AA SUPERMARKET
(2) LEDGERS
(a) GENERAL LEDGER
Dr 2<"; 6
7 B1 Cr
20.5 R
$ '
8
'
8
&' ( 76
Dr @ "
B2 Cr
20.5 R
$ )% '!8
Dr -#
B3 Cr
20.5 R 20.5 R
$
8 $ )% '8
) (
20.5
" ) #(
Dr '
B4 Cr
20.5 R
$ )% '!8
Dr )% B5 Cr
20.5 R 20.5 R
$ "
'8 $ !;
'!8
) (
20.5
" ) #(
Dr '
B6 Cr
20.5 R 20.5 R
$ )% '!8 $ 2<"; 8
) ( 2<"; 8
8
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20.5
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Dr '" B7 Cr
20.5 R
$ )% '8
Dr - A
B8 Cr
20.5 R
$ )% '!8
)% '!8
77
&' (
Dr
N1 Cr
20.5 R
$ -#
8
)% '8
Dr
; N2 Cr
20.5 R
$ )% '8
Dr !
N3 Cr
20.5 R
$ '
!8
)% '!8
Dr
N4 Cr
20.5 R
$ )% '!8
'
8
Dr !% ; N5 Cr
20.5 R
$ )% '!8
Dr
;
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20.5 R
$ )% '!8
Dr
N7 Cr
20.5 R
$ )% '!8
Dr D"
N8 Cr
20.5 R
$ )% '!8
)% '!8
&' ( 78
Dr ,"
D"
N9 Cr
20.5 R
$ )% '!8
Dr @
N10 Cr
20.5 R
$ )% '!8
-5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
& 8
$ " *
'8
$ /
& 8
" *
'8
4 4 -5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
& 8
$ " *
'8 N
-5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
& 8
$ /
& 8
$ " *
'8
Debtors list R
Corresponds to the balance of account B3.
79
&' (
GOLDEN RULE
,
#
#
#
#
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'5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
!8
'< '!8
-)* -
#
'5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
!8
'< '!8
29/! '5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
M 8
'< '!8
'< '!8
1/ 9 '5
Date Details Fol Debit Credit Balance
20.5 R R R
$ /
M 8
'< '!8
/
M 8
'< '!8
Creditors list R
, @
)) -
-)* -
#
29/!
1/ 9
Corresponds to the balance of account B6
&' ( 80
GOLDEN RULE
,
#
$, <
#
?
AA SUPERMARKET
(3) TRIAL BALANCE AS AT 31 MARCH 20.5
Fol Debit Credit
R R
2<"; 6
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81
&' (
5.10 Value-Added Tax (VAT)
5.10.1 Background
Study " "
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&' ( 82
5.10.3 Accounting bases
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Exercise 5.2
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83
&' (
(b) TRANSACTIONS FOR MARCH 20.4
$ '
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&' ( 84
Solution Exercise 5.2
RUNDU DEALERS
(1) SUBSIDIARY JOURNALS
(a) CASH RECEIPTS JOURNAL Ð MARCH 20.4 CRJ2
Date Details Fol Bank Sales Debtors VAT input VAT Settlement Sundry accounts
output discount
granted
Dr Dr Amount Fol Details
R R R R R R R
@ @
6 P7 Q 6 7
5 5
67 Q 67
3 3 2<";
6 7 6 7
5 5
P -
F :,
R114 6 14 = R14
1 114
Q :, "
#? Q
;;
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'
A
P -
F :,
R114 6 14 = R14
1 114
85
&' (
(c) SALES JOURNAL Ð MARCH 20.4 SJ2
Date Details Fol VAT output Sales Debtors
R R R
5 5
@ @
5
&' ( 86
(g) GENERAL JOURNAL Ð MARCH 20.4 J2
Date Detail Fol Debit Credit
R R
12 Printing 600
VAT input L15 84
Stationers Ltd/Creditors control 684
Account received for printing
31 VAT control L17 5 627
VAT input L15 5 627
Transfer of VAT input to the
VAT control account
VAT output L16 6 131
VAT control L17 6 131
Transfer of VAT output to the
VAT control account
NB: ,
A
B
#
after :, "
:,
"
#
;"? /
==#
>>
A
:,
?
RUNDU DEALERS
(2) General ledger
Dr :, " L15 Cr
20.4 R 20.4 R
$ ) #( $ '
!8
)% '!8 :,
8
-#
'8
'
!8
'
8
Dr :,
L17 Cr
20.4 R 20.4 R
$ :, " 8 $ :,
" 8
) (
20.4
" ) #( P
P < ;
#
87
&' (
COMMENTS
% or R
Example: Amount received on 1 March 20.4 = R15 504 (including VAT). (See cash
receipts journal.)
VAT = 114 14 6 R15 504 = R1 904
or
SALES = R15 504 7 R1,14 = R13 600.
. VAT on cash sales is credited to the VAT output account because Rundu Dealers
received VAT for payment to the South African Revenue Service.
. VAT on credit sales is credited to the VAT output account.
. VAT on cash purchases is debited to the VAT input account.
. VAT on credit purchases is debited to the VAT input account.
. VAT on sales returns is debited to the VAT output account. (To cancel the VAT output
portion of the sales returned.)
. VAT on purchases returns is credited to the VAT input account. (To cancel the VAT
input portion of the purchases returned.)
. # VAT on settlement discount granted to debtors is debited to the VAT input account
(to reduce the amount owed to the South African Revenue Service).
. VAT on settlement discount received from creditors is credited to the VAT output
account (to increase the amount owed to the South African Revenue Service).
. The balances of the VAT input and VAT output accounts are transferred to the VAT
control account to determine what amount must be paid to or to be claimed from the
South African Revenue Service.
. When the difference between the debit and credit sides of the VAT control is a:
. credit, the difference is payable to the South African Revenue Service (current
liability)
. debit , the difference is refundable by the South African Revenue Service (current
asset)
NB: VAT is charged on services, for example telephone account, water and electricity
account and repairs.
,
A
:,
? , "
;
0 6, :, "
#
< ;
?7
&' ( 88
SUNSHINE GLASS TRADERS
(a) TRIAL BALANCE AS AT 31 JANUARY 20.4
Fol Debit Credit
R R
Land and buildings (at cost) B1 60 000
Furniture (at cost) B2 5 320
Inventory: Trading B3 6 536
Debtors control B4 2 431
Bank B5 2 554
Creditors control B6 6 075
Capital B7 75 000
Drawings B8 3 884
VAT input B9 4 337
VAT output B10 4 527
Sales N1 13 569
Purchases N2 9 855
Rent income N3 800
Packaging material N4 964
Telephone expenses N5 483
Water and electricity N6 1 247
Settlement discount granted N7 170
Settlement discount received N8 210
Wages N9 2 150
Stationery N10 250
100 181 100 181
8 8
- A <
A%>
A
'
<
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;
4
5
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-
A
;
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A
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Required:
6 7
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#
B
4
,
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67 '
"
B
6
;
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NB: 67 ;;#
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4
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&' ( 90
SOLUTION: Revision exercise
SUNSHINE GLASS TRADERS
(1) SUBSIDIARY JOURNALS
(a) CASH RECEIPTS JOURNAL ± FEBRUARY 20.4 CRJ2
Date Details Fol Bank Sales Debtors Settlement VAT input VAT Sundry accounts
discount output
granted
Dr Dr Amount Fol Details
R R R R R R R
) '"
'
'
8 8
67 67
'
& )
A 67 67
M M *
;
) * ) * ) )
&
5 67 67
1! )% ) - A
) * ) * * ) )
91
&' (
(d) PURCHASES JOURNAL Ð FEBRUARY 20.4 PJ2
Date Details Fol Creditors VAT input Purchases
R R R
&
5;
4
5
4
5
) ) *
&' ( 92
(2) GENERAL LEDGER
Dr 5 #
6
7 B1 Cr
20.4 R
&# ) #(
Dr & 6
7 B2 Cr
20.4 R
&# ) #(
' &
8
Dr /
0 , B3 Cr
20.4 R
&# ) #(
Dr -#
B4 Cr
20.4 R 20.4 R
&# ) #( &# )%
'8
8
8
) (
20.4
$ ) #(
Dr )% B5 Cr
20.4 R 20.4 R
&# ) #( &# ,
";
'!8
,
"
'8 ) (
20.4
$ ) #(
Dr '
B6 Cr
20.4 R 20.4 R
&# )%
'!8 &# ) #(
!
!8 & 8
) ( ! 8
!
!8
20.4
$ ) #(
Dr '" B7 Cr
R 20.4 R
&# ) #(
)% '8
93
&' (
Dr - A
B8 Cr
20.4 R
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)% '!8
Dr :, " B9 Cr
20.4 R 20.4 R
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8 :,
8
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8
)% '!8
-#
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Dr :,
B11 Cr
20.4 R 20.4 R
&# :, " 8 &# :,
" 8
) (
20.4
$ ) #(
Dr
N1 Cr
20.4 R
&# ) #(
)% '8
-#
8
Dr !
N2 Cr
20.4 R
&# ) #(
)% '!8
'
!8
&' ( 94
Dr
; N3 Cr
20.4 R
&# ) #(
)% '8
Dr !% ; N4 Cr
20.4 R
&# ) #(
Dr ,"
D"
N5 Cr
20.4 R
&# ) #(
)% '!8
Dr ;
N7 Cr
20.4 R
&# ) #(
-#
'8
Dr ;
N8 Cr
20.4 R
&# ) #(
'
'!8
Dr @
N9 Cr
20.4 R
&# ) #(
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95
&' (
Dr
N10 Cr
20.4 R
&# ) #(
)% '!8
Dr
N11 Cr
20.4 R
&# -#
8
Dr !
N12 Cr
20.4 R
&# '
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Dr ! N13 Cr
20.4 R
&# !
5; 8
&' ( 96
COMMENTS
. After the journal entries have been posted to the VAT input account and the VAT
output account in the general ledger, the ``balances'' on these accounts must be
transferred to the VAT control account. This means that the general journal entries on
28 February 20.4 can only be done after the ``balances'' on these accounts have been
calculated.
. The VAT control account has a debit balance, which is refundable by the South African
Revenue Service.
. VAT is not included in the amount credited to sales as this is not an income for the
business but must be paid over to the South African Revenue Service.
. The debtors owe the VAT-inclusive amount to the business.
. The same reasoning applies to creditors and purchases.
SELF-ASSESSMENT
Having studied this study unit, can you:
. " "
A #
%
% :+ ,D
E
.
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B
.
";
B
. "
B
. "
B
.
B
.
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97
&' (
6
STUDY UNIT
Adjustments
Learning outcome
# #
+ B
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Contents Page
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&' ( 98
KEY CONCEPTS
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6.1 Introduction
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3
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Accounting entries
, # # D"
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reduce D"
credit
# ;? , #
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JOURNAL ENTRIES
ADJUSTMENT ENTRY: 28 FEBRUARY 20.1 J1
! " D"
45
/
45
Adjustment of insurance account
45
/
45
Transfer of insurance to profit or loss account
GENERAL LEDGER
Dr /
40 Cr
20.1 R 20.1 R
8 )% '!8 &# ! " D"
8
!
8
Dr ! " D"
55 Cr
20.1 R
&# /
8
Dr !
6D 7 60 Cr
20.1 R
&# /
8
XA-XA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1
(extract)
R
Current assets DDDD
! ";
A
D"
? 3
D;
H+H>
#
&# A
# %
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101
&' (
Accounting entries
, # #
A D"
#
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,
increase expense account debit
# ;? , #
A
A
A D" ; ? ,
;
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liability
;
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D"
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JOURNAL ENTRIES J5
ADJUSTMENT ENTRY Ð 28 FEBRUARY 20.1
@ 45
D"
45
Adjustment of water and electricity account
45
@ 45
Closing of water and electricity account to profit or
loss account
GENERAL LEDGER
Dr @ 41 Cr
20.1 R 20.1 R
&# ) #( &# !
8
D"
8
Dr !
6D 7 60 Cr
20.1 R
&# @
8
XA-XA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1 (extract)
R
Current liabilities DDDD
,
"#
DDDD
D"
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reduce
expense account credit
# ;? , #
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;
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asset
?
JOURNAL ENTRIES
ADJUSTMENT JOURNAL Ð 28 FEBRUARY 20.1 J3
/
0
45
45
Adjustment of stationery account
45
45
Closing of stationery account
GENERAL LEDGER
Dr
42 Cr
20.1 R 20.1 R
&# ) #( &# /
0
8
!
8
Dr /
0
57 Cr
20.1 R
&#
8
103
&' (
Dr !
6D 7 60 Cr
20.1 R
&#
8
XA-XA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1 (extract)
R
Current assets DDDD
/
DDDD
"
?
A
? H+H -
"
#
;
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#
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, #
;
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reduce
income account debit
# ;? , #
;
A
A
A
; ; ? ,
;
A # A
"
JOURNAL ENTRIES
ADJUSTMENT JOURNAL Ð 28 FEBRUARY 20.1 J9
; 45
/
; 45
Adjustment of rental income account
45
Closing of rental income to profit or loss account
GENERAL LEDGER
Dr
; 44 Cr
20.1 R 20.1 R
&# /
; &# ) #(
8
!
8
Dr !
6D 7 60 Cr
20.1 R
&#
; 8
XA-XA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1 (extract)
R
Current liabilities DDDD
/
;
;
A
;
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D;
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6 ;;
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105
&' (
Accounting entries
, #
;;
;
#
# ? ,
increase income account
credit
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ADJUSTMENT JOURNAL Ð 28 FEBRUARY 20.1 J11
; 45
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Closing of commission income to profit or loss
account
GENERAL LEDGER
Dr '
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XA-XA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1 (extract)
R
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GENERAL JOURNAL Ð 25 JANUARY 20.1 J13
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45
Credit losses GL62 230
Closing of credit losses to profit or loss account
GENERAL LEDGER
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107
&' (
DEBTORS LEDGER
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ADJUSTMENT JOURNAL Ð 28 FEBRUARY 20.1 J15
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45
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account
GENERAL LEDGER
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XA-XA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1 (extract)
ASSETS Note R
Non-current assets
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XA-XA DEALERS
NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.1
Property, plant and equipment Machinery Total
Carrying amount: )
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109
&' (
6.4 Preparation of the trial balance
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(1) GENERAL LEDGER
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A ABBO
(2) GENERAL JOURNAL
ADJUSTMENT ENTRIES: 30 JUNE 20.2 J1
R R
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To adjust the above
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113
&' (
A ABBO
(3) CLOSING TRANSFERS J2
R R
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Closing off of accounts against the
profit or loss account
!
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profit or loss account
A ABBO
(4) STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 20.2 (extract)
ASSETS Note R
Non-current assets
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EQUITY AND LIABILITIES
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(5) NOTES FOR THE YEAR ENDED 30 JUNE 20.2
Property, plant and equipment Machinery Total
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115
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7
STUDY UNIT
Learning outcome
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Study unit Page
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117
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7.1 Introduction
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121
&' (
LEDGER ENTRIES
GENERAL LEDGER
Dr /
Cr
20.1 R 20.1 R
8 ) #( - '
- '
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20.2
8 ) #(
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Cr
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64
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COMMENTS
. When determining the cost of sales, it is important to establish whether the mark-up
was made on the cost price or the selling price since the price that applies is taken
to be 100 (100%).
Suppose the mark-up of 25% is on the cost price as in the above exercise.
Thus:
%
Cost price = 100
Mark-up = 25
Selling price = 125
The cost price will again be less than the selling price.
Thus: 75
100
x
75 000
1
. The gross profit, which is also called the trading profit, is determined in the
trading account.
. The details which are required to calculate the gross profit or loss are
transferred to the trading account by means of the general journal:
. The sales account is debited and the trading account is credited (sales are
closed).
. The cost of sales account is credited (the account is closed) and the trading
account is debited. The balance on the trading account represents the gross
profit or loss.
. The closing balance of the inventory account (asset) represents the closing
inventory.
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purchases returns account?
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123
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COMMENTS
GENERAL LEDGER
Dr /
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COMMENTS
. The gross profit calculated is the same for both systems (see * above and in the
previous example).
. The main differences between the two systems are:
(1) In the perpetual inventory system, purchases are recorded at cost price in the
inventory account (asset) and a cost of sales account is kept during the financial
period.
(2) In the periodic inventory system, purchases are recorded in the purchases
account (expenditure) and the cost of sales is calculated, by implication, in the
trading account.
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127
&' (
Transaction Perpetual inventory Periodic inventory
system system
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Remember that the trading account and the profit or loss account form part of the
accounting system.
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TOEKELA DEALERS
PRE-CLOSING TRIAL BALANCE AS AT 31 January 20.1
Fol Dr Cr
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TOEKELA DEALERS
GENERAL LEDGER
Dr '" B1 Cr
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131
&' (
Dr !
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8
;
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20.1 R 20.1 R
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N6 Cr
20.1 R 20.1 R
8 ) #( 8 !
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8 ) #( 8 !
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20.1 R 20.1 R
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7 8
64
"
7 8
COMMENTS
To transfer settlement discount granted to the sales account the sales account is debited
and the settlement discount granted account is credited (thus the account is closed)
20.1 R R
Jan 31 Sales 150
Settlement discount granted 150
Closing transfer of settlement discount granted
(1) To transfer the opening inventory to the trading account, the inventory account is
credited (account is closed) and the trading account is debited by means of a closing
transfer in the general journal
20.1 R R
Jan 31 Trading account N12 5 000
Inventory B4 5 000
Closing transfer of opening inventory
133
&' (
(2) To transfer purchases to the trading account, the purchases account is credited
(account is closed) and the trading account is debited.
20.1 R R
Jan 31 Trading account N12 49 750
Inventory N3 49 750
Closing transfer of purchases account
(3) To transfer sales returns to the trading account, sales returns is credited (account is
closed) and the trading account is debited.
J1
20.1 R R
Jan 31 Sales N12 1 500
Sales returns N2 1 500
Closing transfer of sales returns
(4) To transfer sales to the trading account, sales are debited (account is closed) and the
trading account is credited.
20.1 R R
Jan 31 Sales N1 75 850
Trading account N12 75 850
Closing transfer of sales account
(5) To transfer purchases returns to the trading account, purchases returns are debited
(account is closed) and the trading account is credited.
J1
20.1 R R
Jan 31 Purchase returns N4 2 500
Purchases N12 2 500
Closing transfer of purchases returns
(6) To record the closing inventory, which is an asset, in the books, the inventory account
is debited and the trading account is credited.
J1
20.1 R R
Jan 31 Inventory B4 8 000
Trading account N12 8 000
To record the closing inventory in the books
(7) The trading account is now balanced. The result (balance) is the gross profit, namely
R29 100, which is transferred by means of a closing transfer to the profit or loss
account, where the profit is determined.
20.1 R R
Jan 31 Trading account N12 29 100
Profit or loss N13 29 100
Closing transfer of gross profit to profit or
loss account
GOLDEN RULE
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COMMENTS
135
&' (
CLOSING TRANSFERS OF EXPENDITURE
J2
20.1 R R
Jan 31 Profit or loss N13 150
Stationery N6 150
Closing transfer
Profit or loss N13 10 550
Wages N7 10 550
Closing transfer
Profit or loss N13 950
Water and electricity N8 950
Closing transfer
Profit or loss N13 300
Credit losses (Bad debts) N9 300
Closing transfer
(3) To transfer the income accounts to the profit or loss account, the income accounts
such as rental income and commission received are debited (accounts are closed)
and the profit or loss account is credited.
CLOSING TRANSFERS OF INCOME J2
20.1 R R
Jan 31 Rental income N5 600
Profit or loss N13 600
Closing transfer
(4) Instead of all the individual closing transfers, a combined entry can be made, for
instance:
GENERAL JOURNAL J2
20.1 R R
Jan 31 Rental income N5 600
Profit or loss N13 11 350*
Stationery N6 150
Wages N7 10 550
Water and electricity N8 950
Credit losses (Bad debts) N9 300
Closing off the above accounts against
the profit and loss account
* Balancing figure between debits and credits. Remember that the amounts in the
nominal accounts are shown separately in the profit or loss account, which means that
the amount of R11 350 is not posted in itself to the account.
GOLDEN RULE
The profit or loss account, also being a nominal account, is closed off to the capital
account. The profit or loss must be disclosed in the statement of changes in equity. (See
the schematic representation.)
CLOSING TRANSFER OF PROFIT FOR THE YEAR/PERIOD J3
20.1 R R
Jan 31 Profit or loss N13 17 750
Capital B1 17 750
To transfer profit to capital
(7) If the entity suffers a loss, the profit or loss account is credited and the capital account
is debited (equity decreases).
(8) At the same time the owner owes the amount in the drawings account to the entity. To
bring this debt into account, the drawings account is closed against the capital
account by crediting drawings and debiting the capital account (equity decreases).
GENERAL JOURNAL J3
20.1 R R
Jan 31 Capital B1 3 000
Drawings B2 3 000
To close drawings
(9) The complete capital account will then look like this:
Dr Capital B1 Cr
20.1 R 20.1 R
Jan 31 Drawings J3 3 000 Jan 31 Balance b/d 103 400
Balance c/d 118 150 Profit or loss J3 17 750
121 150 121 150
20.1
Feb 1 Balance b/d 118 150
In the above example this trial balance is as follows (note that there are NO nominal
account balances, or a balance for the Drawings account, any more, as they have
been closed off):
137
&' (
POST-CLOSING TRIAL BALANCE AS AT 31 JANUARY 20.1
Fol Dr Cr
R R
Capital B1 118 150
Bank B3 4 250
Inventory B4 8 000
Vehicles (at cost) B5 91 000
Equipment (at cost) B6 19 500
Debtors control B7 10 100
Creditors control B8 14 700
132 850 132 850
GOLDEN RULE
, "
#
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Profit for the year
3
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,
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GOLDEN RULE
,
;
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? 6
;
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?7
TOEKELA DEALERS
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 JANUARY 20.1
Capital
R
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6 7
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139
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TOEKELA DEALERS
STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 20.1
ASSETS Note R
Non-current assets
!
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Current assets
/
,
#
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Total assets
COMMENTS
. When the totals of the different assets are calculated and added together, the result is
equal to:
. the equity, plus
. the totals of the different liabilities which are calculated and added together (In the
example there is only one short-term liability, namely creditors.)
. Remember that the balances in the statement of financial position are the opening
balances of the ledger accounts for the next financial period.
GOLDEN RULE
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Study " "
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COMMENT
The gross profit is normally expressed as a percentage of either the selling price or the
cost price of goods sold.
Gross profit 100 = 29 000 6
100
6
Selling price 1 76 000 1
= 38,2%
= 61,7%
2
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67
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HOT-ROD DEALERS
(1) GENERAL LEDGER (POSTINGS INCLUDED)
Dr '" 1 Cr
20.4 R 20.4 R
- - A
8 - ) #(
) ( !
8
Dr - A
2 Cr
20.4 R 20.4 R
- ) #( - '" 8
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6
7 4 Cr
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7 5 Cr
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6) #
7 8
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20.5
8 ) #(
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Dr '
11 Cr
20.4 R
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12 Cr
20.4 R 20.4 R
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8 - ) #(
,
8
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13 Cr
20.4 R 20.4 R
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8
145
&' (
Dr '
14 Cr
20.4 R 20.4 R
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8
Dr ' ;;
; 15 Cr
20.4 R 20.4 R
- !
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; 16 Cr
20.4 R 20.4 R
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; - ) #(
8
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17 Cr
20.4 R 20.4 R
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,
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18 Cr
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7 20 Cr
20.4 R 20.4 R
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8
-#
8
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Dr !% ; 22 Cr
20.4 R 20.4 R
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; 8
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23 Cr
20.4 R 20.4 R
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25 Cr
20.4 R
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8
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147
&' (
Dr /
; 27 Cr
20.4 R
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; 8
Dr -"
30 Cr
20.4 R 20.4 R
- ; - !
8
"
0
8
;
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8
HOT-ROD DEALERS
GENERAL JOURNAL
(2) ADJUSTMENT ENTRIES Ð 31 DECEMBER 20.4 J1
R R
/
0 !% ; 45
!% ; 45
Packaging material on hand at 31 December 20.4
'
6) #
7 45
-#
45
Write S Sorry's debt off as irrecoverable
! " D"
45
45
Salaries prepaid
'
"
45
D"
45
Carriage on purchases still payable
; 45
Commission earned not yet received
-"
45
; "
0
45
; "
0 45
Provision for depreciation
HOT-ROD DEALERS
GENERAL JOURNAL
(3) CLOSING ENTRIES Ð 31 DECEMBER 20.4 J2
R R
!
45
!
45
Closing transfer of purchases returns
45
45
Closing transfer of sales returns
/
0 , 6
7 45
45
,
45
Closing off and transfer of accounts to trading
account
,
45
/
0 , 6
" 7 45
!
45
'
"
45
Closing off and transfer of accounts to trading
account
,
45
!
45
Transfer of gross profit
'
;;
; 45
; 45
!
45
Closing off of accounts against profit or
loss account
149
&' (
R R
!
45
45
@ 45
'
45
/
45
!% ; 45
'
45
-"
45
Closing off of accounts against profit or
loss account
!
45
'" 45
Transfer of profit to capital
'" 45
- A
45
Close off drawings against capital
HOT-ROD DEALERS
GENERAL LEDGER
Dr ,
31 Cr
20.4 R 20.4 R
- /
0 -
8
, 6
" 7 8 /
0
!
8 ,
'
6
7 8
"
8
!
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Dr !
32 Cr
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; 8
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; 8
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6) #
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;+
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7 8
HOT-ROD DEALERS
(5) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR
THE YEAR ENDED 31 DECEMBER 20.4
R
Revenue
'
6 7
/
6 8 ?7
* "
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;
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3
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151
&' (
COMMENTS
. Revenue are sales less sales returns R (253 615 7 615) = R253 000.
. Net purchases are purchases less purchases returns R (170 550 7 550) = R170 000.
HOT-ROD DEALERS
(6) STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 DECEMBER 20.4
Capital
R
) 8 ? 7
,
;"
;
7
- A
6 7
) -;# ? P 7
P '"
HOT-ROD DEALERS
(7) STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.4
ASSETS Note R
Non-current assets
P -#
L
; K ?
Q '
L D"
K ?
?
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A
; "
"
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Property, plant and Land and Vehicles Furniture Total
equipment buildings
R R R R
Carrying amount:
)
'
; "
6N7 6 7 6 7 6 7
-"
6N7 6 7 6 7 6 7
Carrying amount:
2
P P
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6N7 6 7 6 7 6 7
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155
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7.9.3 Revision exercise 3
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64
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7
Required:
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A #
?
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Dr '
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) #( ,
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) #( ,
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(3)
Dr ,
6 Cr
20.1 R 20.1 R
/
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" 7
!
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6
7
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7
COMMENTS
. Instead of separate journal entries for closing transfers a combined journal entry is
made, but remember that each item is recorded separately in the trading account.
. All expenditure which influences the cost price of products, such as carriage on
purchases and customs duties in the present example, is added to the purchases (ie
the purchase price).
R
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CLOSING TRANSFERS J2
20.1 R R
Feb 28 Profit or loss GL10 5 870
Capital GL1 5 870
Transfer of profit to capital
Capital GL1 5 000
Drawings GL2 5 000
To close drawings account
67
67 6K L 7 7
67 6K 7 7
A
6 7 7
161
&' (
7.9.7 Revision exercise 7
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163
&' (
Solution: Revision exercise 8
NTINI'S STORE
(1) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR
THE YEAR ENDED 31 DECEMBER 20.4
Notes R
Revenue 6 L J J 7
'
6 7
/
6 8 ?7
* "
6 7 J 7
'
"
/;"
/
6 -;# ?7 6 7
Gross profit
3
;0
;
-
#
;
D"
6 7
'
;
NTINI'S STORE
(2) STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 DECEMBER 20.4
Capital
R
) 8 ?
,
;"
;
- A
6 7
) -;# ?
NTINI'S STORE
(4) NOTES FOR THE YEAR ENDED 3 DECEMBER 20.4:
"
0
,
;
# " "
#
;" A /
& "
?
/
; "
;
?
Property, plant and Land and Equipment Vehicles Total
equipment buildings
R R R R
Carrying amount:
)
'
; "
6N7 6N7 6N7 6N7
-"
6N7 6N7 6N7 6N7
Carrying amount:
2
'
; "
6N7 6N7 6N7 6N7
*
"
A
A
?
165
&' (
SELF-ASSESSMENT
Now that you have studied this study unit, can you:
.
"
E
. "
E
.
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;E
.
"
;E
. "
B
"
E
. " "
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Learning outcome
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167
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CONTENTS
Learning outcome
# #
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Contents Page
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169
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KEY CONCEPTS
. 3
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. ) " #%
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bank reconciliation statement.
REMEMBER
.
# #% account #
debit
#%
A
#%
;?
.
#
A #% account #
credit
#%
A
#%
;?
.
# #% statement #
credit
#%
;
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#%
;?
171
&' (
.
#
A #% statement # 6 # -, -
3-7
debit
#%
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GOLDEN RULE
,
A entity ;
;
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entity, ? ? #%
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GOLDEN RULE
,
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6
A7
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bank reconciliation ? ? "
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Exercise 8.1
* Cheque no 11 was not presented for payment during July and must, again, be shown as
BENSON TRADERS
CASH RECEIPTS JOURNAL ± JULY 20.0 (bank column only) crj 7
Interest income 80
)
Amounts in italics are amounts entered as a result of the amounts reflected on the bank
statement, but not yet in the CRJ. This updates the CRJ.
BENSON TRADERS
CASH PAYMENTS JOURNAL ± JULY 20.0 (bank column only) cpj 7
Insurance 500
Bank charges 43
)
Amounts in italics are amounts entered as a result of the amounts reflected on the bank
statement, but not yet in the CPJ. This updates the CPJ.
173
&' (
P ,
A ! D
#
;
# # A ;
R R R R
) #( 0
-"
0 V
'< ? V
" <0
A 0 V
'< 0 V
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'< 0 V
'< 0 V
'< 0 V
-"
0 V
" <0
! D
0
/
0
-"
0 '
0
'< 0 V
H.M /
'
? 0
-"
#
%
0 8
The unticked debit entries were entered in the cash payments journal before the journal was
The unticked credit entries were entered in the cash receipts journal before the journal was
?
6#7 , "
((?
"
?
GENERAL LEDGER
Dr )% B15 Cr
20.0 R 20.0 R
8 ) #( 8 !;
'!8
"
'8 ) (
) #(
Exercise 8.2
(b)
Dr )% Cr
R 20.9 R
8 ) #(
175
&' (
(c) CASH RECEIPTS JOURNAL (bank column only) FOR JUNE 20.9 CRJ 6
(d) CASH PAYMENTS JOURNAL (bank column only) FOR JUNE 20.9 CPJ 6
Cheque
Number Date Details Fol Amount
R
) *% V
A V
42$ )
I I; O '
V
Required:
K Nkome 90
T Nkwe 40
1 290
Insurance 50
Interest expenses 20
Bank charges 10
177
&' (
(2) GENERAL LEDGER
Dr )% Cr
20.9 R 20.9 R
8 "
'8 8 ) #(
) ( !;
'!8
20.9
8 ) #(
COMMENTS
. L Lombard's cheque (R50) has been outstanding for more than 6 months.
. Cheque no 453 issued to K Kum and Co for R170 was entered correctly in the cash
payments journal. The bank made the mistake of debiting the bank statement with only
R116. A mistake made by the bank must be shown in the bank reconciliation
statement. During July 20.9 the bank will correct the error in the bank statement. The
(R170 7R116 = R54) correction will then be ticked off against the R54 in the bank
reconciliation statement for June 20.9.
; # <?
,
A
; ;
# "
D;"
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A
A
%
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petty cash float
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Exercise 8.3
)
%
-%
,
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PETTY CASH PAYMENTS Ð JUNE 20.9
'
< ;#
Required:
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B
8 ? A
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;
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67 !
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179
&' (
Solution Exercise 8.3
DICKSON TRADERS
(1) PETTY CASH JOURNAL Ð JUNE 20.9 PCJ 1
Receipts Payments
Date Details Petty Fol Total Wages Postage Station- Sundries
cash ery Amount Fol Details
Date Fol Total voucher
20.9 R 20.9 R R R R R
8 '!8
'!8 ;"
@
!
+
@
;"
!"
@
$
20.9 )+
8
#(
7
$ *%
;
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) ;
1 2# ;
!
&
!
;
181
&' (
(d) BANK STATEMENT Ð JANUARY 20.9
Cheque Cheque
Date Details number etc Deposits Balance
R R R
) -
-
'
-
'
'
'
-
'
-
-
-
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'
/
'
'
'
)%
'
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'
Required:
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$
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67
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,
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;?
3 300 3 300
67 /;
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+
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183
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185
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Required:
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$
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67
A #%
"
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67 ! " #%
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187
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Solution: Revision exercise 4
BUWANG TRADERS
(1) CASH RECEIPTS JOURNAL ± MAY 20.8 (extract)
Date Details Bank
#
;
-
6'< 7
. The opening balance of the bank account of R1 724,60 is taken from the given (April's)
bank reconciliation statement.
. Cheque 715 had still not been presented at the end of May and was recorded on the
bank reconciliation statement at 31 May 20.8.
. Cheque 420 had not been presented after six months. It was debited to the bank
account as it is a stale cheque.
. Interest on the overdraft was entered separately and was not included in the bank
charges.
3
?
?
<
A
?
Required:
6 7 ! " "
B
? A
A ";
;
0
A
"
?
67 !
"
#
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189
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Solution: Revision exercise 5
PITSI DEALERS
(1) PETTY CASH JOURNAL Ð AUGUST 20.4 PCJ6
Receipts Payments
Date Details Petty Fol Total Wages Postage Station- Sundries
cash ery
Date Fol Total vou- Amount Fol Details
cher
20.4 R 20.4 R R R R R
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20.4
Sep 1 #(
SELF-ASSESSMENT
Now that you have studied this study unit, can you:
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Dr -#
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20.0 R 20.0 R
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$ )%
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R 20.0 R
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20.0 R 20.0 R
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193
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R 20.0 R
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20.0 R R
$ -#
Dr )% Cr
20.0 R R
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3 $ ? $ ,
A
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0
AM TRADERS
GENERAL JOURNAL
Fol Debit Credit
20.0 R R
May 15 Credit losses 660
A Langa/Debtors control 660
Write A Langa's account off as irrecoverable
GENERAL LEDGER
Dr -#
Cr
20.0 R 20.0 R
$ ) #( $ '
Dr '
Cr
20.0 R R
$ -#
DEBTORS LEDGER
A Langa
Debit Credit Balance
20.0 R R R
May 1 Account rendered 660
Credit losses 660 Ð
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Exercise 9.3
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TRIO TRADERS
GENERAL JOURNAL
Debit Credit
20.0 R R
Jun 30 Credit losses 800
Allowance for credit losses 800
Allowance for credit losses created
at year end
GENERAL LEDGER
Dr -#
Cr
20.0 R
8 ) #(
Cr
20.0 R
8 '
Cr
20.0 R
8
A
or loss account
GENERAL LEDGER
Dr '
Cr
20.0 R 20.0 R
8
A
8 !
Dr !
6D 7 Cr
20.0 R
8 '
COMMENTS
. When an allowance is created the only accounts which are affected are the credit
losses account (a nominal account) and the allowance for credit losses (a contra asset
account). In the general ledger the balance on the debtors control account remains
R20 000. The debtors' control account will only be credited when actual credit losses
are verified.
. The allowance for credit losses (R800) is deducted from debtors (R20 000). The
R19 200 is shown in the statement of financial position as current assets under trade
and other receivables.
. The R800 credit losses is closed off to the profit and loss account.
3 8 ?
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197
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Solution Exercise 9.4
B
A
0
TRIO TRADERS
GENERAL JOURNAL
Debit Credit
20.1 R R
Jun 30 Credit losses 400
Allowance for credit losses 400
Allowance for credit losses adjusted: R
New allowance 1 200
GENERAL LEDGER
Dr -#
Cr
20.1 R
8 ) #(
Cr
20.0 R
8 ) #(
20.1
8 '
Dr '
Cr
20.1 R 20.1 R
8 ) #( 8 !
A
COMMENTS
. The credit losses written off during the year were debited to the credit losses account
(the current balance of R730) and were credited to the debtors control account before
the balance of R30 000 was calculated on the control account.
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TRIO TRADERS
GENERAL JOURNAL
Debit Credit
20.2 R R
Jun 30 Allowance for credit losses 200
Credit losses 200
Allowance for credit losses adjusted: R
Existing allowance 1 200
199
&' (
GENERAL LEDGER
Dr -#
Cr
20.2 R
8 ) #(
Cr
20.2 R 20.1 R
8 '
8 ) #(
Dr '
Cr
20.2 R 20.2 R
8 ) #( 8
A
!
COMMENTS
. The debtors control account is not affected by changes in the allowance for credit
losses.
. The credit balance that has increased from the original R800 to R1 200 must now be
reduced to R1 000. This has to be done by making a debit entry in the account.
However, the balance carried forward on the allowance for credit losses account will
always be a credit balance.
. The fact that in the years 20.0 and 20.1 the entries in the credit losses account have
been debited does not mean that all the entries posted to the account will be debits. It
is self-evident that if the allowance is decreased, the difference between the existing
and the new allowance has to be added back. The only way this can be done is to
debit the allowance for credit losses account and credit the credit losses account.
9.4.5 Writing off credit losses (bad debts) when an allowance for credit
losses exists
/
A
A
A
D
A
;
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METHOD 1:
# A
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0 #
A
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0
TRIO TRADERS
GENERAL JOURNAL
Debit Credit
20.1 R R
Nov 30 Allowance for credit losses 730
B Down/Debtors control 730
Write B Down's account off as irrecoverable
GENERAL LEDGER
Dr -#
Cr
20.0 R 20.0 R
8 ) #( *
A
20.1
8
20.1
8 )%
) (
20.1
8 ) #(
Cr
20.0 R 20.0 R
*
-#
8 ) #(
20.1 20.1
8 ) ( 8 '
P
20.1
8 ) #(
P)
201
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Dr '
Cr
20.1 R 20.1 R
8
A
8 !
DEBTORS LEDGER
B Down
Debit Credit Balance
20.0 R R R
Jul 1 Account rendered 730
Nov 30 Allowance for credit losses 730 Ð
Method 2:
,
A
;
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Exercise 9.7
;
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,
A
0
TRIO TRADERS
GENERAL JOURNAL
Debit Credit
20.0 R R
Nov 30 Credit losses 730
B Down/Debtors control 730
Write B Down's account off as irrecoverable
GENERAL LEDGER
Dr -#
Cr
20.0 R 20.0 R
8 ) #( *
'
20.1 20.1
8
8 )%
) (
20.1
8 ) #(
Cr
20.0 R
8 ) #(
20.1
8 '
Dr '
Cr
20.0 R 20.1 R
*
-#
8 !
20.1
8
A
DEBTORS LEDGER
B Down
Debit Credit Balance
20.0 R R R
Jul 1 Account rendered 730
Nov 30 Credit losses 730 Ð
COMMENT
. The amount written off as credit losses in the profit or loss account remains
unchanged. (Refer to previous exercise.)
7 ;
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9.5 Presentation on the statement of financial position
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NAME OF ENTITY
STATEMENT OF FINANCIAL POSITION AS AT .........................
ASSETS R
Non-current assets
Current assets DDD DDD
/
DD DDD
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D DDD
Total assets DDD DDD
EQUITY AND LIABILITIES
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Exercise 9.8
JOURNALS
SALES JOURNAL Ð MAY 20.2 SJ1
45
205
&' (
CASH RECEIPTS JOURNAL Ð MAY 20.2 CRJ1
P "" D;
&
:, " -5
'(#
Received
Required:
6 7 ! " #
?
67 ! "
#
#
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P 5
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#
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GENERAL LEDGER
Dr -#
GL5 Cr
20.2 R 20.2 R
$ )P #( $
8
8 )%
& 8
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:,
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:, " 8
) (
20.2
8 )PP #(
GOLDEN RULE
, #
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Dr ) DL2 Cr
20.2 R 20.2 R
$ )P #( $
8
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20.2
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207
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Dr ' DL3 Cr
20.2 R 20.2 R
$ )P #( $
8
8 )%
& 8
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) (
20.2
8 )PP #(
PP 5
#
#
R
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GOLDEN RULE
,
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COMMENTS
. The totals from the journals are posted to the control account.
. The opening and closing balances on the control account are the same as the
totals of the lists of balances of the individual debtors.
. When debtors settle their accounts and they receive discount, VAT is also affected.
The actual amount received from the debtor is shown in the bank column, the discount
in the settlement discount allowed column and the VAT that must be cancelled in the
VAT input column. These three amounts must add up to the amount shown in the
debtors column. The total of the debtors column that is posted to the debtors control
account at the end of the month already includes discount and is posted as bank and
discount. The totals of the settlement discount granted column and the VAT input
column are consequently not credited separately to the debtors control account.
R
)
#
J $ ?
Totals for the month 0
'
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0
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6-#
;7
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6-#
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/ "
Required:
6 7 ! " #
8 ? "
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;
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67
#
#
; #
A
#
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209
&' (
Solution Exercise 9.9
N NELSON
(1) GENERAL LEDGER
Dr -#
Cr
20.1 R 20.1 R
8 ) #( 8 )% 67 '8
8
6 7 '
48
7 6 7 8
'
48
67 48 ) (
/
48
20.1
8 ) #(
(2) RECONCILIATION
R R
,
#
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Less: 2
#>
Remarks
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211
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JOURNAL ENTRY J1
20.3 R R
Feb 28 Debtors control 800
Credit losses recovered 800
Reversal of entry made 1/7/20.2
, #
# A # increased #
decreased #
A ?
JOURNAL ENTRY J2
20.3 R R
Feb 28 Credit losses 1 500
Debtors control 1 500
Credit losses written off
Dr -#
Cr
20.3 R 20.3 R
&# ) #( &# '
8
'
) (
8
20.3
$ ) #(
Dr '
Cr
20.3 R 20.3 R
&# -#
8 &# !
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P 8
6
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6 7 )
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-#
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6 7
; #
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8
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20.0 R 20.1 R
$ ) #( &# )% 67
20.1 ;
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67
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) 6 7 (
20.1
$ ) #( 6 7
Remarks
6 7 , #
#
A
A
D
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67 , ;
cash received
; #
;
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;
debtors column
"
B
A #
A
;
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A
0
6$
A
A J
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GENERAL JOURNAL
20.1 R R
Feb 28 Allowance for credit losses 500
J Solomon/Debtors control 500
Writing off of amount owed by J Solomon
213
&' (
GENERAL LEDGER
Dr
A
Cr
20.1 R 20.0 R
&# -#
$ ) #(
) ( 20.1
&# '
20.1
$ ) #(
Dr '
Cr
20.1 R 20.1 R
&#
A
&# !
COMMENT
. Irrespective of which method is followed (refer to paragraph 9.5) the balance on the
allowance for credit losses account will be R4 265, and R1 525 will be debited to the
profit or loss account as credit losses.
((?
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#
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#
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Required:
&# ?
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) (
20.8
$ ) #(
215
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67
#
R R
Total of debtors list 11 520
Add: R/D cheque adjustment (G Great) 900
Sales invoice adjustment
R(400 7 40) (D Dandy) 360 1 260
12 780
Less: Duplicate sales invoice (B Broad) (600)
Credit loss (1 420) (2 020)
Balance as per debtors control 10 760
67 8
A
GENERAL JOURNAL J2
20.8 R R
Feb 28 Credit losses 1 448
Allowance for credit losses 1 448
Adjustment of allowance
R R
New allowance R10 760 6 5% 538
Add: Credit loss written
GENERAL LEDGER
Dr
A
Cr
20.8 R 20.7 R
&# -#
8 P $ ) #(
) ( 20.8
&# '
PP 8
20.8
$ ) #(
Dr '
Cr
20.8 R 20.8 R
&#
A
&# !
8P
P 8
8 8
#
A?
PP )
. Always read the question carefully. Much of the information given in this question has
nothing to do with the debtors control account. Make sure that you know what items
have to be entered in a debtors control account.
. The actual amount written off (R1 420) is more than the opening balance of the
allowance. An additional amount (more than the new allowance) must therefore be
credited to the allowance (and debited to the credit losses account).
. If the other method of writing off credit losses were followed (paragraph 9.4) the net
result would be the same. The balance of the allowance for credit losses would be
R538 and the amount written off as credit losses in the profit or loss account would be
R1 448.
SELF-ASSESSMENT
Now that you have studied this study unit, can you:
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217
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10
STUDY UNIT
Inventory
Learning outcome
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Contents Page
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KEY CONCEPTS
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Exercise 10.1
&
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219
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Required:
! " B
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67 /
( (?
Less: $
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6#7 !
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Add: '
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67 !
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Less: '
67
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Add: "
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gross profit method. /
;;
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VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV
7 K
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VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV
L K
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;0
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0
Gross profit
Sales 6 100 R100 000 100 1
1 = R300 000 6 1 = 33 3 %
? /
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;
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Example
!
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0
Current assets R
/
6 L 7
,
;
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"
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D"
A
;
D"
;
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;"
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223
&' (
10.7 Revision exercises and solutions
10.7.1 Revision exercise 1
6 7 @
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A
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6#7 ,
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67 @
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67 @
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COMMENTS
67 '
"
"
A
?
R
Cost of sales:
Sales 175 000
Sales returns (5 000)
Revenue 170 000
Cost of sales (105 000)
Opening inventory ± 28 Feb. 20.3 20 000
Purchases 110 000
130 000
Closing inventory ± 28 Feb. 20.4 (25 000)
Gross profit 65 000
COMMENTS
. Closing inventory is only goods for sale (merchandise) and does not include
packaging material. Packaging material is a consumable inventory. Packaging
material used is an expense and packaging material on hand is shown under
inventory as a current asset in the statement of financial position.
. Revenue is equal to gross sales minus sales returns. All other expenses related to
sales are deducted from gross profit.
225
&' (
10.7.3 Revision exercise 3
From the following information, calculate the gross profit percentage on cost of sales and sales.
ADDITIONAL INFORMATION
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11
STUDY UNIT
Learning outcome
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11.2 Determination of the cost price of property, plant and
equipment
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COMMENT
. The depreciable amount is the cost of the asset less its residual value. The residual
value is the expected value (eg scrap value, trade-in value) of the asset at the end of
its useful life. In this example there was no residual value given.
BILGREDON
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY (extract)
20.5 20.4 20.3 20.2 20.1
Non-current assets R R R R R
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COMMENTS
. Only the carrying amount is shown on the face of the statement of financial position.
. A detailed reconciliation of movements in the carrying amount from the beginning to
the end of the financial period is shown in a note.
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BILGREDON
NOTES FOR THE YEAR ENDED 31 MAY 20.2
Property, plant and equipment Machinery Total
R R
Carrying amount:
COMMENT
. Additions and disposals are shown in the exercise for illustrative purposes only. They
need not be shown unless there were additions or disposals during the applicable
financial period.
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(b) (2) JOURNAL ENTRIES FOR THE FIVE YEARS
GENERAL JOURNAL
20.1 R R
$ -"
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Provision for depreciation at 20% pa on the
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20.2
$ -"
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20.3
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20.4
$ -"
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20.5
$ -"
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20.2 20.2
$ ; $ !
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20.3 20.3
$ ; $ !
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20.4 20.4
$ ; $ !
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20.5 20.5
$ ; $ !
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237
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6D 7 Cr
20.1 R
$ -"
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20.2
$ -"
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20.3
$ -"
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20.4
$ -"
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20.5
$ -"
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BILGREDON
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY (extract)
20.5 20.4 20.3 20.2 20.1
Non-current assets R R R R R
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BILGREDON
NOTES FOR THE YEAR ENDED 31 MAY 20.2
Property, plant and equipment Machinery Total
R R
Carrying amount:
(c) (2) THE JOURNAL ENTRIES ARE SIMILAR TO THOSE IN (b) (2).
239
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20.3 20.3
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20.4 20.4
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20.5 20.5
$ ; $ !
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20.1 R
$ -"
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20.2
$ -"
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20.3
$ -"
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20.4
$ -"
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;
20.5
$ -"
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BILGREDON
STATEMENT OF FINANCIAL POSITION AS AT 31 MAY (extract)
20.5 20.4 20.3 20.2 20.1
Non-current assets R R R R R
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Required:
GENERAL JOURNAL
20.5 R R
May 31 Accumulated depreciation: machinery 460 000
Machinery (at cost) 460 000
Scrapped machine written off
GENERAL LEDGER
Dr $ 6
7 Cr
20.1 R 20.5 R
8 )% $ ;
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Required:
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realisation account
*NOTE: The account ``Realisation of machinery'' is used to capture the entries regarding the
disposal of the machinery.
GENERAL LEDGER
Dr $ 6
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20.0 R 20.5 R
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;
243
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Dr ; "
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20.5 R 20.1 R
$
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20.2
$ -"
20.3
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$ -"
20.5
$ -"
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20.5 R 20.5 R
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$ ;
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$
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BILGREDON
(b) NOTES FOR THE YEAR ENDED 31 MAY 20.5
2
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Exercise 11.4
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Required:
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GENERAL JOURNAL
20.5 R R
May 31 Realisation of machinery 460 000
Machinery (at cost) 460 000
Transfer machine at cost to
realisation account
Bank* 60 000
Realisation of machinery 60 000
Cash received for machinery
P,
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GENERAL LEDGER
Dr $ 6
7 Cr
20.0 R 20.5 R
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;
245
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Dr ; "
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20.5 R 20.1 R
$
$ -"
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20.5 R 20.5 R
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1. Record the depreciation of the current period up until the date of disposal (general
journal):
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3. Transfer the cost price of the disposed asset to the realisation account (general
journal):
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4. Record the amount earned on the realisation (note that the realisation account is
credited in all three cases):
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asset (general journal):
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247
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11.10 Revision exercises and solutions
11.10.1 Revision exercise 1
The following information relates to Bacinis:
ADDITIONAL INFORMATION
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67 ; "
6#7 $
67 ! "
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traded in
machine traded in
traded in
20.4
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Dr $
Cr
20.4 R 20.4 R
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CALCULATIONS:
Depreciation on machine traded in R
,
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20 5
1006 126 6 7 7
249
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Trade-in value
M
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;
20
6 7 76 100
8
B
;
20 6 7
6 L 76 100
12
(3) BACINIS
NOTES FOR THE YEAR ENDED 31 AUGUST 20.4
Property, plant and equipment Machinery Total
R R
Carrying amount:
2
'
6 L J 7
; "
6 L J 7 6 7 6 7
ADDITIONAL INFORMATION
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67
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20.3 R 20.3 R
8 $ 8 ) #(
8 -"
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20.4
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251
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67
Dr $
Cr
20.3 R 20.3 R
8 $ 6
7 8 ;
"
M.! '
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CALCULATIONS
Balances on 31 December 20.2: R
$ 0 M#
8
Depreciation:
Required:
67
Dr -"
Cr
20.1 R 20.1 R
$ ; $ !
"
6 7
20.2 20.2
$ ; $ !
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67
20.3 20.3
$ ; $ !
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67
20.4
8 ; $ !
7
20.4
$ ;
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253
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67
Dr ; "
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20.2 R 20.1 R
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6 7
20.2
$ -"
67
20.3 20.2
$ ) ( " ) #(
20.3
$ -"
67
20.3 20.3
8 $ " ) #(
67 8 -"
67
20.4 20.4
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67
20.4
" ) #(
67
Dr $
Cr
20.3 R 20.3 R
8 $
8 ;
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P )
CALCULATIONS
-"
0 R R
6 7 8 ?
$ ? 0 6 25 6 9
100 12
67 &
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$ ?0 6 25 15 000
100
;
3
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$ ?0 6 25 6 6 10 000 25 000
100 12
67 &
; 6
7
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8 ?0 6 25 6 3 3 750
100 12
Required:
67
Dr $
Cr
20.1 R 20.1 R
$ ;
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5
;
255
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67
Dr ; "
Cr
20.1 R 20.1 R
$ $ ) #(
6 7 -"
20.2 20.2
&# ) ( &# -"
67
20.2
$ ) #(
67
Dr -"
Cr
20.1 R 20.2 R
; &# !
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20.2
&# ;
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CALCULATIONS:
Depreciation to be written off R
Machine X
SELF-ASSESSMENT
Having studied this study unit, can you:
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Other non-current assets
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12.1 Introduction
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TOPIC D
Learning outcome
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CONTENTS
Current liabilities
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KEY CONCEPTS
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13.4 Disclosure in the statement of financial position
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NAME OF ENTERPRISE
STATEMENT OF FINANCIAL POSITION AS AT ...........
ASSETS R
EQUITY AND LIABILITIES
Total equity
Current liabilities XXX XXX
Trade and other payables XX XXX
Income received in advance X XXX
Other financial liabilities X XXX
Current portion of long-term borrowings XX XXX
Current VAT payable X XXX
Exercise 13.1
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PICNIC TRADERS
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.1 (extract)
ASSETS R
EQUITY AND LIABILITIES
Total equity
Current liabilities 274 600
Trade and other payables R(221 000 + 1 500) 222 500
Income received in advance 13 000
Other financial liabilities 34 600
Current VAT payable 4 500
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TIP-TOP TRADERS
(1) GENERAL LEDGER
Dr '
Cr
20.2 R 20.2 R
" !
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)% '!8 !
6
) ( J L 7 !8
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@
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GOLDEN RULE
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GOLDEN RULE
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20.2 R R R
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269
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Dr Cr Balance
20.2 R R R
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8 M
Dr Cr Balance
20.2 R R R
"
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GOLDEN RULE
,
#
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COMMENTS
. If information was omitted or was transferred incorrectly from the source document to
the purchases journal both the creditors control account and the individual creditor's
account will be affected by the mistake.
. If the information was entered correctly in the journal but a posting error was made to
the creditors ledger, the individual creditor's account must be corrected and the
creditors list must be adjusted to correct the error.
. If an adding mistake was made in one or more columns in the journals, the correction
must only be made in the creditors control account.
. In this exercise the mistakes or omissions on the creditors' personal accounts were
corrected on their accounts and a new list (adjusted list) that equalled the balance of
the creditors control account was compiled at 30 September 20.2.
Required:
A
;
:, "#
?
Dr -#
Cr
20.1 R
-
:,
Dr :,
" Cr
20.1 R
- -#
#
;
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Required:
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A ;
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;
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271
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Solution: Revision exercise 2
MY COMPANY
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.0 (extract)
ASSETS R
EQUITY AND LIABILITIES
Total liabilities 600 000
Non-current liabilities 400 000
Long-term borrowings 400 000
Long-term loan secured by a first mortgage over land
and buildings 400 000
Current liabilities 200 000
Current portion of long-term borrowings 200 000
COMMENT
R
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(2) RECONCILIATION
R R
Total of the list of creditors balances
(credit balances less debit balances) (R16 8127 R110) 16 702
Less:Tims Ltd R(1 878 ± 1 787) 91
Ewing Ltd R(60 6 2) 120
Overcasting 500 711
Balance of creditors control account 15 991
273
&' (
SELF-ASSESSMENT
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LEDGER ACCOUNTS
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COMMENTS
. When an instalment on a loan is payable during the next financial year, the instalment
must be disclosed as a current liability in the statement of financial position of the
current year.
. In the statement of financial position as at 31 December 20.5 the amount indicated as
a long-term loan will be R85 500 and under current liabilities an amount of R28 500 will
be shown as the current portion of long-term borrowings.
. In the statement of profit or loss and other comprehensive income an expense of
R19 380 (17% x R114 000) in respect of interest expense will be shown annually for
the first five years.
14.2.2 Debentures
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Solution Exercise 14.2
A COMPANY
LEDGER ACCOUNTS
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STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.1 (extract)
ASSETS R
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COMMENTS
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Solution: Revision exercise 2
B BOMB ENTERPRISES
(1) LEDGER ACCOUNTS
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B BOMB ENTERPRISES
(2) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR
THE YEAR ENDED 30 SEPTEMBER 20.1 (extract)
R
Profit from operations xx xxx
Finance costs: (x xxx)
Interest expenses 3 400
COMMENTS
. On 30 September 20.1 interest had not yet been paid on the loan because it is payable
annually on 30 June. The first amount of interest will therefore be paid only on 30 June
20.2.
The interest is calculated as follows:
For the year the amount is
R80 000 6 10017 = R13 600
Because only three months' interest has accrued, the amount that has to be provided
for is:
R13 600 6 123 = R3 400
. The interest is shown as an expense in the statement of profit or loss and other
comprehensive income because the loan has already been utilised for three months of
the financial year, irrespective of whether the interest has been paid.
. The statement of financial position has to show all the details of the loan Ð only that
part that will be outstanding for more than 12 months on 30 September 20.1 will be
shown as a non-current liability. The instalment which is payable within 12 months is
shown as a current liability.
. The land is a non-current asset on which no depreciation is written off.
. The interest which has not yet been paid is also a current liability. See also paragraph
6.2.2.
SELF-ASSESSMENT
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necessary entries and calculations in the books and show how they will appear in the
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. On 1 March 20.1 ``Capital'' indicates the interest of J Brewis (the owner) in his
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accounting worlds. You will have to learn to differentiate between the various
meanings by noting the context in which the word is used.
. The cash portion of the capital is usually recorded in the cash receipts journal.
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STATEMENT OF FINANCIAL POSITION AS AT 1 MARCH 20.1
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. The original investment of the owner and any further contributions specified as capital
contributions are referred to as capital. When profit is added and drawings subtracted
from the capital investment this is known as equity. The equity shows the interest of
the owner in the entity. In other words the balance of R41 000 represents equity and
not capital. Equity is the claim that the owner has against the assets of the entity. In a
sole proprietorship the capital account is used to show the changes in equity. The
changes in equity are disclosed in a statement called the ``Statement of changes in
equity''.
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JEFF'S MAINTENANCE SERVICES
(4) NOTES FOR THE YEAR ENDED 31 DECEMBER 20.1
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PETER PUMPKIN
(1) STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR
THE YEAR ENDED 28 FEBRUARY 20.1
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28 FEBRUARY 20.1
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Doc Date Details Fol Bank Sales Dr Debtors Dr Amount Fol Details
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SALES RETURNS JOURNAL FOR FEBRUARY 20.1 SRJ12
Credit Sales
Date Details note Fol returns VAT output Debtors
R R R
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(4) BANK RECONCILIATION STATEMENT AS AT 28 FEBRUARY 20.1
Debit Credit
R R
Credit balance as per bank statement 15 005
Outstanding cheques: No 134 671
135 2 200
Correction of error 3 000
Debit balance as per bank account 15 134
18 005 18 005
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RECONCILIATIONS
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307
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KUMANBUY GENERAL DEALER
(6) POST-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 20.1
Debit Credit
R R
Furniture and equipment (at cost) 41 000
Vehicles (at cost) 50 000
Inventory 56 080
Bank 15 134
Accumulated depreciation:
Furniture and equipment 8 000
Vehicles 10 000
Capital 169 630
Drawings 10 000
Debtors control 4 630
Creditors control 8 455
VAT control 632
Sales 241 200
Sales returns 100
Purchases 181 260
Purchases returns 150
Repairs 4 650
Petrol 3 304
Stationery 364
Water and electricity 6 748
Rental expenses 24 000
Wages and salaries 27 600
Telephone expenses 2 342
Settlement discount granted 30
Settlement discount received 60
Credit losses 840
Depreciation 9 000
Accrued expenses 264
Bank charges 45
437 759 437 759
(7) CLOSING JOURNAL ENTRIES 8
Date Details Fol Debit Credit
20.1 R R
Feb 28 Settlement discount received L26 60
Purchases L16 60
Closing transfer
Sales L14 30
Settlement discount granted L25 30
Closing transfer
Inventory L3 60 000
Sales L14 241 070
Trading account L31 301 070
Closing transfer
or loss account
309
&' (
KUMANBUY GENERAL DEALER
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 20.1
Capital
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SELF-ASSESSMENT
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16
STUDY UNIT
Nonprofit entities
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16.7 Exercises
Exercise 16.1
Special fund
Income from a fund which must be used for a specific expense
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income received from the donation may only be used for the
Required:
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Expend- Non- Expend- Non-
able expend- able expend-
(income) able (income) able
(capital) (capital)
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CALCULATION
67 6 F 6 7 L 6 F 6 7 K
COMMENTS
. Because the interest earned and the expenses in respect of the tennis courts that were
painted are accounted for in the fund account, these items will not be disclosed in the
income and expenditure statement. The tennis courts were painted during the year.
The recording of these expenses would have been as follows: Debit the painting of
tennis courts account and credit the bank account. On 30 June 20.2, the date on which
the interest was received, the fund account was debited with this expense and the
painting of tennis courts account was credited. (This entry will balance the painting of
tennis courts account.)
. The statement of financial position of the Stear Tennis Club will show the items in
respect of the fund as follows:
317
&' (
STEAR TENNIS CLUB
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 20.2 (extract)
ASSETS Note R
Non-current assets
&
0 N &D "
F " ; )' )%
Exercise 16.2
SPECIAL FUND
Income from a fund which must be used to purchase property, plant and equipment.
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Expend- Non- Expend- Non-
able expend- able expend-
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CALCULATION
67 6 F 6 7 L 6 F 6 7 K
COMMENTS
. Because a non-current asset was obtained from the income of the fund, the amount
contributed by the fund must be credited to the accumulated fund account. Bear in
mind that the asset account was debited during the year at the date of the purchase.
. The statement of financial position of Stear Tennis Club will show the items in respect
of the fund as follows:
STEAR TENNIS CLUB
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 20.2 (extract)
ASSETS Note R
Non-current assets
!
" " <";
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FUNDS AND LIABILITIES
Funds HH HHH
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319
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STEAR TENNIS CLUB
NOTES FOR THE PERIOD ENDED 20 JUNE 20.2 (extract)
*
6D 7
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Remark
The accumulated fund account will be credited with the amount which the fund
contributed to the building of the tennis courts. In other words, the amount of R21 000 will
be added to the balance of the accumulated fund account.
Exercise 16.3
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COMMENT
. Assume that there were no conditions and that the donation of R3 520 could be spent
on general expenses. The amount would be debited to the bank account and credited
to the donation received account on the date on which the donation was received. The
donation received will be disclosed in the general income and expenditure statement
as follows:
2
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323
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PRETORIA MODELLERS' CLUB
2(b) RECEIPTS AND PAYMENTS STATEMENT FOR THE YEAR ENDED
28 FEBRUARY 20.2
R
)% # &# ? 6 7
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325
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PRETORIA MODELLERS' CLUB
(4) NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.2
*
6D 7
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N 6 7 6 7
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; "
N 6 7 6 7
CALCULATIONS
67
Dt $;#
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20.1 R 20.1 R
$ ) #( $ ) #(
20.2 20.2
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COMMENTS
. The above example is an illustration of the treatment of funds. Note the following:
. The income from the Jekyll fund is used to finance an expense item.
. The nonexpendable capital amounts of funds are treated separately from the
unspent portions of the interest which are still available for future applications
(expendable funds).
327
&' (
. Should the income from a fund be insufficient to cover an expense, the shortage can
be debited to the income and expenditure account of the club.
. In the above example the income and expenditure in respect of the hobbies fair is
merely shown as a calculation in the income and expenditure statement. Had there
been a number of different items pertaining to the fair, it would have been necessary to
prepare a separate trading statement in respect of the hobbies fair.
. Entrance fees are capitalised, that is, credited directly to the accumulated fund
account.
. In the question the opening balance of the accumulated fund is given. If it is not given,
it can be calculated as the difference between the total debit balances and the total
credit balances supplied in any list of balances from which the final statements are to
be compiled.
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329
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Solution: Revision exercise 1
GREEN GOLF CLUB
(1) INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED
31 DECEMBER 20.4
R
Income 7
$;#
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7
6 L 7 L 7 67
4
7
/
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7
- 7
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A
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/
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& 7
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ASSETS Note R
Non-current assets
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331
&' (
GREEN GOLF CLUB
(3) NOTES FOR THE YEAR ENDED 31 DECEMBER 20.4
*
6D 7
CALCULATIONS
67
Dr $;#
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R R
/
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;
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67 Dining room gross profit
Less: '
6 6 F7
3"
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Less: '
6) 7
4
"
COMMENTS
. Entrance fees are not shown in the income and expenditure statement because
. They represent nonrecurrent income.
. They are of a capital nature.
. The current expenses of a club, society or organisation not for gain should be
estimated in advance for the next financial year. The annual membership fees are
then determined by dividing the total budgeted expenses by the number of members.
. Smaller donations received can be regarded as normal revenue, but should a
donation be of a nonrecurrent nature and the amount is material (eg where a
benefactor makes a special donation, or where a testamentary legacy is bequeathed),
then it clearly becomes a receipt of a capital nature. Certain bodies, such as welfare
organisations, often receive large amounts from the proceeds of a street collection, or
from state grants-in-aid. These receipts are naturally not of a capital nature (unless
specifically labelled and awarded as such) and should therefore be disclosed in the
income and expenditure statement.
. Crockery, glassware, linen, et cetera are not current assets, but form part of the
equipment that must be provided before income can be earned.
. Wages do not form part of gross profit and must be shown in the income and
expenditure statement.
. Note that in practice calculations are not shown on final statements [eg insurance
(R40 + 1/2 of R160)]. For examination purposes, you may show calculations in this
manner, on condition that they are clearly indicated as calculations.
333
&' (
16.10.2 Revision exercise 2
,
A
;
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R R
Equipment (at cost) 21 600
Less: Accumulated depreciation 8 880 12 720
Fixed deposit at Trade Bank (at 12% per annum) 25 600
Inventory: Tennis balls 984
Accrued membership fees 192
Accrued interest on fixed deposit 1 024
Prepaid rental 480
Savings account (favourable) 2 880
Bank (favourable) 8 400
Accumulated fund 26 440
Special fund for championships 25 600
Prepaid membership fees 168
Accrued wages 72
Receipts: R
:
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20.3 20.3
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335
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SPRING TENNIS CLUB
(2) INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED
31 DECEMBER 20.2
R
Income 7
:
>
7
$;#
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6
7 7
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7
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337
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CALCULATIONS
67 Loss on sale of equipment and depreciation
Accumulated
Cost price depreciation
R R
)
@
6 7 67
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K
Depreciation for the year R
6 J 7 6 F
6 F 6
6#7 Championship shortage R
2D"
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6 6 F7
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Less:
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Add: "
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67 Accumulated fund
339
&' (
17
STUDY UNIT
Incomplete records
Learning outcome
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17.3 Calculation of profit/loss from incomplete records
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D DONOVAN
STATEMENT OF ASSETS AND LIABILITIES AS AT 30 APRIL 20.1
ASSETS R
Non-current assets
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/
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Total assets
EQUITY AND LIABILITIES
Total equity
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Total liabilities
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5
+ ; #
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Required:
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Assets R
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Capital
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Estimated profit for the year
343
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D DONOVAN
STATEMENT OF ASSETS AND LIABILITIES AS AT 30 APRIL 20.1
ASSETS R
Non-current assets
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Current assets
/
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6 L 7
Total assets
EQUITY AND LIABILITIES
Total equity
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Total liabilities
Non-current liabilities
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Liabilities 6 7
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Dr -#
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347
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Gross profit
-
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6 6 F7 K L &
6 6 F7 K ?
C CAITY
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 APRIL 20.1
Capital
R
) $ ?
,
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6 7
349
&' (
C CAITY
STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 20.1
ASSETS Note R
Non-current assets
!
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.
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67 I I A
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353
&' (
Solution: Revision exercise 2
CALCULATIONS
67 '" #
0
R
Assets
5 #
:
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6 7
Liabilities
5
0 *I )%
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67
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355
&' (
M MANDOSA
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
YEAR ENDED 30 JUNE 20.2
R
Revenue
'
6 7
/
0 8 ?
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@
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P :
6 D F7 K L <"; 6 D F7 K
M MANDOSA
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 20.2
Capital
R
) 8 ?
'
#
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Total assets
SELF-ASSESSMENT
Now that you have studied this study unit, can you
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