FAC 1502 Study Guide - 2015 PDF

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CONTENTS
Introduction and overview of the module (v)
Topic A THE BASIC PRINCIPLES AND SPHERES OF ACCOUNTING
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Topic B COLLECTING AND PROCESSING THE ACCOUNTING DATA OF
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Topic C ACCOUNTABILITY FOR CURRENT AND NON-CURRENT ASSETS

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Topic D ACCOUNTABILITY FOR CURRENT AND NON-CURRENT LIABILITIES

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Topic E ACCOUNTING REPORTING

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Aims of this module

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(iv)
INTRODUCTION AND OVERVIEW
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TOPIC A
THE BASIC PRINCIPLES AND

SPHERES OF ACCOUNTING
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The nature of accounting theory,

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1.1 Introduction
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11
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2
STUDY UNIT
The financial position
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This statement of financial position (balance sheet) is in a basic form. Later we will deal
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3
STUDY UNIT
The financial performance (result )
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3.6 Statement of profit or loss and other comprehensive

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4
STUDY UNIT
The double-entry system and the

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. / ; A
? ,
A

0

?
. / ;#
#
B ?
4.3 The effect of transactions on the basic accounting

equation (BAE)

"
; " A
6
7 ; ;"
>

#
<? /
A

)2? 2

"
; ;"
;?
,

;
.

( < ( #
. ;

D"
Study " " ? "

# # %?
4.4 Transactions which affect only assets, equity and

liabilities
) A A " D;"

A

? 6A ``+''
indicates an increase and a ``7'' indicates a decrease.)
Study " "
?? ?? "
# # %?
4.4.1 Capital contributions

,
, , ;
"+ #

&D+>+$? 1
&# ? A A ;
"

"

&D+>+$>
#% ?

6 7 ,
``Bank''

#
A ;
&D+>+$>
#% ?
67 , A , , ; "
&D+>+$ A

&D+>+$? , < ``Capital''

# ?
ASSETS = EQUITY + LIABILITIES

Bank Capital
R R R
!
#

,

L L
*A #
K L
&' ( 24
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.
. Capital may be contributed in the form of cash or any other asset (eg furniture).
``Furniture'' instead of ``Bank'' will then increase.
. The BAE balances after the transaction.
4.4.2 Acquisition of loans

,
&D+>+$ # A "#% " ;
&# ? ; )' )%? , ; A
"
#% ?

6 7 ,
``Bank''

# ?
67 )' )% A
;

&D+>+$
# ; ``Loan: ABC Bank'' ;
# ?

Bank Capital Loan:
ABC Bank
R R R
)
#
A
,
L L
*A #
K L
COMMENTS
. 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.
. Amounts (in this case R25 000) are added to both the left-hand side and the right-
hand side of the BAE.
25
&' (
4.4.3 Purchase of assets for cash
,
&D+>+$ # <"; ; H. &

" #
&# ? <?

6 7 ,
``Bank''

#
;
#
A A?
67 ,
``Equipment''

?

Equip- Loan:
ment Bank Capital ABC Bank
R R R R
)
# A
,
L 7
*A #
K L
COMMENTS
. Assets now consist of bank and equipment.

. The left-hand side of the equation increases and decreases. One asset is exchanged
for another asset.
4.4.4 Buying assets on credit (debt)

,
&D+>+$ # ; 8 5;?
&# ?

6 7 ,
``Furniture''

# ?
67 # ``Creditor'' ;
# ?

Furniture Equipment Bank Capital Loan: Creditors
ABC
Bank
R R R R R R
)
# A

,
L L
*A #
K L
&' ( 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.
. The left-hand side and the right-hand side of the BAE increase.
4.4.5 Payments to creditors

,
&D+>+$ " 8 5;>
?
&# ?

6 7 ,
``Bank''

# ?
67 , # ``Creditors''

# ?

ABC
Bank
R R R R R R
)
#
A
,
7 7
*A #
K L
COMMENTS
. The left-hand side and the right-hand side of the BAE decrease.
4.4.6 Withdrawals by owner

,
, A A A
A
?
&# ?

6 7 &D+>+$>
``Bank''

# ?
67 , , ;>
``Capital'' 6<7 &D+>+$

# ?
27
&' (
ABC
Bank
R R R R R R
)
#
A
,
7 7
*A #
K L
COMMENTS
. Withdrawals are the opposite of capital contributions and reduce capital. Remember,
withdrawals are not expenditure.
. Where the entity pays personal expenses of the owner's, it is also treated as a
withdrawal.
. The left-hand side and the right-hand side of the BAE are reduced.
4.5 Transactions which give rise to income and expenditure

4.5.1 Income (cash)
,
&D+>+$ "

<
&# ? ?

6 7 ,
``Bank''

# ?
67 , A &D+>+$

;? Equity

# ?

Furniture Equipment Bank Capital Income/ Loan: Cred-
Expend- ABC itors
iture Bank
R R R R R R R
)
# A

,
L L
*A #
K L
&' ( 28
COMMENTS
. Income earned increases the equity. It is the objective of the entity to earn income for
the entrepreneur.
4.5.2 Expenditure (cash)

,
&D+>+$ " A
# < ?
&# ?

6 7 ,
``Bank''

# ?
67 @
D" ; equity

# ?

Furniture Equipment Bank Capital Income/ Loan: Creditors
Expenditure ABC
Bank
R R R R R R R
)
# A

,
7 7
*A #
K L
COMMENTS
. In essence expenditure incurred decreases income and therefore also decreases the
equity.
. The left-hand side and the right-hand side of the BAE decrease.
4.5.3 Income (credit)

,
&D+>+$ "

A ' ' ?
&# ?

6 7 ' ' # ;
# &D+>+$? ,
``Debtors'' ;
#

# ?
67 ``Fees earned'' ; ; <

# ?
29
&' (
Debtors Furniture Equipment Bank Capital Income/ Loan: Credi-

Expenditure ABC Bank tors
R R R R R R R R
)
#
A
,
L L
*A #
K L
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 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.
4.5.4 Expenditure (credit)

,
&D+>+$ "
; A
"" ?
&# ? !; A

?

6 7 , # ``Creditors''

# ?
67 ``Advertisements'' D" ; <

# ?

R R R R R R R R
)
#
A
,
7 L
*A #
K L
COMMENTS
. Expenditure may also be incurred on credit (for goods/services received).

. The organisations to which money is owed are known as creditors.
. The right-hand side of the BAE increases and decreases.
. The expenditure is shown on 21 February 20.1 and not only when it is paid. The
accrual principle applies here.
&' ( 30
4.5.5 Payments received from debtors
,
' '

" ?
&# ?

6 7 ,
``Bank''

# ?
67 ,
``Debtors''

# ?

R R R R R R R R
)
#
A
,
7 L
*A #
K L
COMMENTS
. This transaction affects assets only.

. The left-hand side of the BAE increases and decreases.
4.6 Summary of transactions

&D+>+$>

&# ? A #
;;

A
0
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
&#
L L
L L
L 7
L L
7 7
7 7
L L
7 7
L L
7 L
7 L
L L L L K L L L L L
{
{
{
K L

K
31
&' (
COMMENT
. Note that these totals correspond to the closing balances in paragraph 4.5.5 above.
4.7 Basic form of a statement of financial position (previously

known as the balance sheet)
* A A " "
; "

)2 6

" " ?7? , #
;
; "

#
)2? .
;

;"
; "
" " ??

; "

"

; "

;
)2?
FIX-'N-MAT
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1
ASSETS Note R
* +

2<";
&
'

, #

'

<

Total assets
EQUITY AND LIABILITIES
, <
'"
* + #

5 + ; # A

' #

, "#

Total equity and liabilities
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.

- !

#

8 ? ? , A

% "
; 0
&' ( 32
Transactions:
8 '
#% "

" " ?
- !
;
" <"; # #

?
<"; "
" # < ?
/

A % I $" ?
: "
; : '
5; ? ,

A
# # ; ' A )%
F "
;?
I $" " ?
@
" ?
'< A "
?
! : '
5; ?
Required:

#
<
# ;

A
0
NB0 6 7 A
#
< A "

6L7
;

677
?
67 ) < ?
Example: 3 8 ? - !

' %
& ' " ?
Date Basic accounting equation

A = E + L
20.1 R R R
8 L L

D PAULUS
Date Basic accounting equation
A = E + L
20.1 R R R
8 L L
L L
L
7
L L
L L
L
7
7 7
7 7
7 7
Total

{

33
&' (
, A

8 ? & & D ?
Date Transactions Amount

20.1 R
8 & & D "

" "
! 8 ?
) A # ; ) % 5;
) ;"
; 5 5;
!

-# - - A

5 5; " <";
& & D A < "

& & D ;;
" "

! A # <
67

67 5 5; 6 7
"; ; - -

Required:
6 7
#

# ;
A
0

Library Income/
Date and Debtors Bank Capital Expendi- Creditors
Equip- ture
ment
, = +
67 ! "
; "
& & D 8 ? ?
&' ( 34
F FOX
(1) ACCOUNTING EQUATION
Library Income/
Date and Debtors Bank Capital Expendi- Creditors
Equip- ture
ment
20.1 R R R R R R
8 L L
7 7
L L
L 7
L L
L L
7 L
7 7
L L
7 7
7 7
7 L
, L L L K L L L L
{
F FOX
Non-current assets
2<";
5#

(2) STATEMENT OF FINANCIAL POSITION AS AT 31 JANUARY 20.1

ASSETS
{

Note R

Current assets
, #

'

<

Total assets
Total equity
'"
Current liabilities
, "#

35
&' (
4.9 The general ledger account
" A A A
# < ;

""
;
"
)2?
@

;

;; )2
A

"
< # ;? @ ;

#
<"; "

? )
;" " " A < A
N B

% A A "" #

A

C ,
A
A " account ; )2? @
"%
general ledger #

#

A A A D" ?

"
# < ;? 2

""

A "
;# A

% A
folio number?

A

" ;
?
Study " "

? ?? "
# # %?
4.9.1 Assets
Study " " ?? "
# # %?
4.9.2 Equity and liabilities

Study " "
?? ?? "
# # %?
4.10 Balancing an account

@ A # A A % A ;
#
#

?
Study " " ? "

# # %?
NB:
,
# "
" # ;
" # D " ?
. ( K A A
; # A A ;
. #( K # A A
;
# # A ;
"
;
&' ( 36
&' (
<2
' ; 7#
*
" ;
O ;
";

" ; 7 02!2!
37
"' ! 0
5 !
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.
4.12 Recording of transactions in ledger accounts

@ A
A
%

0 @
E /
A
<
A A

" "
? ?
6,+
7?
,

6?? 7
)% '"

~ ~
6??7
)% 5

~ ~
&' ( 38
6??7
2<"; )%

~ ~
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

~ ~
6??7
)% @

~ ~
39
&' (
6??7
-#
6' ' 7 / ; 6
7

~ ~
6??7
'

;

~ ~
6??7
)% -#
6' ' 7

~ ~
4.13 The general ledger

/ "
D;" A
A " ;
? / "

A
#%
;;
#%? 4
; A #
A % A ;? 2

# ;?
GOLDEN RULE

6 )%7
-# 6- 7

' 6' 7

?
Dr )% Cr
- -
& ; - -
& ;
20.1 R 20.1 R
&# '" &# 2<";
5 0)' )% '

&
- A

-#
@

) (

20.1
$ ) #(
&' ( 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 " ; ?
GOLDEN RULE
2D"

6 A
7

< # 6- 7 " D"

?
41
&' (
Dr '" Cr
20.1 R
&# )%
Dr - A
Cr
20.1 R
&# )%
Dr 5 0 )' )% 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.
4.14 The trial balance

Study " " ? "
# # %?
#

#
# A 6#(7

" ?
GOLDEN RULE
, # ==# A>> 6#(7 ;
#
" " #?
, A #

# " " ;
" " ? ?
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
. The trial balance balances.

. Note that an account with a debit balance (brought down) is shown on the debit side of
the trial balance and an account with a credit balance (brought down) on the credit
side.
. If we compare the totals of the trial balance with the totals of the columns of the BAE
(see paragraph 4.6), we note the following:
. Capital in the BAE is R129 000. In the trial balance capital, R130 000 (Cr), and
drawings, R1 000 (Dr), are shown separately. This also gives a net total of
R129 000.
. Income less expenditure = R6 000. If the expenses in the trial balance, namely
wages and advertisements with debit balances of R800 and R200 respectively, are
subtracted from the income, namely fees with a credit of R7 000, the net amount is
R(7 000 7 1 000) = R6 000 credit, which corresponds to the income in the
BAE.
4.15 Preparing financial statements

/
; A A
; "

; ;"

;
;
<
A

;
? ,
;

A
A # A &' ?

; "
#

#

" "
;
;"
;
;
<
; "
?
, # "

; ? ,
; ;"

;
A
>

; "

A

"
?
Study " "

? ? "
# # %?
4.15.1 The statement of profit or loss and other comprehensive income

@ A
; ; # " " ? # " "

; "
;"

; &D+>+$?
FIX-'N-MAT
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
MONTH ENDED 28 FEBRUARY 20.1
Note R
Revenue
-
# ;
D"

6 7
@

;

Profit for the period

3 ;"
; " N
, ;"
; "
&' ( 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"

"
4.15.2 The statement of changes in equity

,

;
A

< A " ?
, " "

;
<
< #
" A < " ? , # <
"

A
; "
? 2< A
#

;

?
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
, # "
;
< ;
#

;
==">>
; "
?
4.15.3 The statement of financial position

) A " "
; "
"
" " ?

; "
&D+>+$ A A ;" " " ??
@ A A
A
; "
&D+>+$ ;
;" A /&?
FIX-'N-MAT
ASSETS Note R
Non-current assets
! " " <";
Current assets

, #

'

<
6#%7
Total assets

Total equity
'"
Total liabilities

Non-current liabilities
5 + ; # A

Current liabilities

, "#

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
.

" +

?
. * +

#

"

?
. '

"

?
. 2< 6
A 6
7 7 ;"

" ?
. 5#
;"

+ #
. * + #
# " ;
? '
#

; ;
# " A ;
?
4.15.4 Notes
; ;
""
;

;
?
,
D"

A
;
A
? @ A
;
A

; A
A

;
;"
;?
* ;#

"
#

? * A
" "

&D+>+$?
FIX 'N MAT

NOTES FOR THE MONTH ENDED 28 FEBRUARY 20.1
? " 0
,
;
# " "

#

;" A
/ & "
?
? "

?
? Property, plant and equipment Equipment Furniture Total

R R R
Carrying amount: ) " N N N
'
N N N
; " N N N

-" N N N
Carrying amount: 2 "
'

; " N N N
* " A
A
" ?
4.16 Summary
@ # # D" "
6
; "
7
" ; 6
; ;"
;7 A #% A A

"
; ?
47
&' (
6 7 *; "

?
67 @
#A #

E
67 1 A A
;

E

6 7 .
. 5#
. 2< A

0
. "
. A
. ;
. D"
67 )
67 ) " " #

5
A

# # A?
==& >>

D;"?
ASSETS EQUITY LIABILITIES

Non-
Non-current Current Expendi- current Current
assets assets Capital Income ture liabilities liabilities
&
5
#
0
67 5 #
6#7 )
67 !

67 !

67 /
;
67 :
6 7
67 -#
67 '
6B7 )%
6%7 &

67 2 "

6;7 - A
67 #
"
6? ? $;#
"
7
&' ( 48
ASSETS EQUITY LIABILITIES
Non- Non-
current Current current Current
assets assets Capital Income Expenditure liabilities liabilities
67 5

#
6#7 )
67 !

67 !

67 /

;
67 :
6 7
67 -#
67 '
6B7 )%

6%7 &

67 2
"

6;7 - A
67 #
"

, A

&# ? 4 4 ;
0

20.1 R
&# 4 4 ; "

" "
4 4 ;
"
<";
;
! &# # <
) ; );

;
4 4 ; A < "

/
< ); " ";

' ' ;
"; ; ;

! A # <0
67

67 @

67 ,"
49
&' (
Required:
#

#

A D;"0
&# 4 4 ; " A # < N ?
Date General ledger A = E + L
20.1 Account Account Dr Cr Dr Cr Dr Cr

Feb debited credited
R R R R R R
@ )%


G GOODMAN
Date General ledger A = E + L
20.1 Account Account
Feb debited credited Dr Cr Dr Cr Dr Cr
R R R R R R
)% '"
2<"; '"
)%
D"

& ) );
; &

- A
)%
) ); )%
)% &

)% ;

)%
@
)%
," )%
D"

&' ( 50
, A

3 # ? @#
2
0

20.1 R
3 @ )
A "

" "
3# ; )%
) <"; ; " %
-

/
<

; A
+
""
! " # <
< ; 1 1

- A < "

" # @ )

; #

!

# <
/
< )%

";
Required:
! " A # %
@#
2
0
6 7 , "" "
A #

" "
#(
3 # ? ?
NB0 / ?
67 , # 3 # ? ?

WITBLITS ELECTRICIANS
(1) GENERAL LEDGER
Dr '"0 @ )
Cr
20.1 R
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 5 + ; # A 6 )%7 Cr

20.1 R 20.1 R
3 )% 3 )%
) (

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"


, A

$ ? ! : 0

20.1 R
$ ! : "
;
"

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! $
) " " ; & +I "
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@
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)
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-"

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! -

!

# <
! : A < "

Required:
6 7 #

#

A D;"0
20.1
$ ! " # < N ?

Equip- Income/
Date Bank Debtors ment Capital Expendi- Creditors
ture
20.1 R R R R R R
$ 7 7
,
7 7
53
&' (
67 ! "
;
< ! : ;
$ ? ?
67 ! " ! : >

; "

$ ? ;?
67 A " " " " <";
?

P VICTOR
(1) TRANSACTION ANALYSIS
ASSETS = EQUITY + LIA-

BILITIES
Income/
Equip- Expendi- Credi-
Date Bank Debtors ment Capital ture tors
20.1 R R R R R R
$ L L
7 7
L L
7 7
L L
L 7
7 L
L L
7 7
7 7
7 7
L L L = L 7 + L

{
P VICTOR

{
(2) STATEMENT OF CHANGES IN EQUITY FOR THE MONTH ENDED

31 MARCH 20.1
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
Total equity
'"
Current liabilities
, "#

P VICTOR
(4) NOTES FOR THE MONTH ENDED 31 MARCH 20.1
? " 0
,
;
# " "

#

;" A
/ & "
?
? Property, plant and equipment Equipment Total

R R
Carrying amount: ) " N N
'
N N
; " N N

-" N N
Carrying amount: 2 "
'

; " N N
* " A
A ; ?
SELF-ASSESSMENT
Now that you have studied this study unit, can you prepare the following:
.
E
. #E
. #

; "
;"

;E
.
;
<E
. #

; "
E
.

;
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55
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&' ( 56
TOPIC B
COLLECTING AND PROCESSING

THE ACCOUNTING DATA OF
ENTITIES
Learning outcome
,
# # "
B
6A
7
; ;"
; "

;"
; 6 #
"
7
;

< "
; "

"
" " ?
57
&' (
CONTENTS
Study unit Page

!3'2/*4 ''3*,/*4 -,
-8,$2*,
,12 '53/*4+3&& !3'2-2 -2,2$/*/*4 !3&/,
3& * 2*,/,. *- !2!/*4 &/**'/5
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&' ( 58
5
STUDY UNIT
Processing accounting data
Learning outcome

# # " " B
"

" " #?
Contents Page
I "

? /
? ,
? ) %

0 B

? ,"
B

? '
B

?? '
"
B
?? '
";
B
? ' B
B
?? /
?? /

;

?? !

B "

B
??
B

B
?? 4 B
? , #
?
D

? ;

?? ;

?? ;

? : D 6:,7
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? ? ,D "
? ? #

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D

+
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59
&' (
KEY CONCEPTS
. ;
. 4
. . -#

. '
"
B . '

. '
";
B . ' ;"
D
. !

B . :
. !

B . ,D#
""
.
B . 2D;"
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.

B . ;

. 4 B . : D 6:,7
. 3" :, . /" :,
5.1 Introduction
/ "

A

;
#
< ? @

A D" " " #+

; ;"

A
;"
? ,
;A % A
"

A A % D?
Study " " ? "

# # %?
5.2 The accounting cycle

"
A ;A % A

% A

?
, A ;
A
0
,

% "
!
' ;"

;
!

B
!
!

!
"

;
!

"

;
!
-
;% #
; ;
&' ( 60
5.3 Books of first entry: journals
)
;#

% "
"

? ,
;%
#%
; # ;

; ;
"
A " # %
?
,

#
B
# %

A

; " "

# #
;;
;
? B

% #A
;
? No transaction
may be recorded in the ledger before it has been recorded in a journal.
Study " " ? "

# # %?
5.4 Types of journals

,
"
B
# %

# ; # A A #
A 0
. the cash receipts journal and the cash payments journal 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
5.5 Cash journals

5.5.1 Cash receipts journal
;
A
"
>
#%

"
B ? ; ; A "

; >

"

# #% ? , ;
"

? , ;

;

?
Study " " ?? "

# # %?
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.
5.5.2 Cash payments journal

";

";
# <
";
B ?
; ; A "

; >

";

#% ? , ;

"

#

? , ;

; #

?
Study " " ?? "

# # %?
&' ( 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
&# )%
, ;" #% A A % A ;0
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
8 -"
#

>
#%
! ; >
# < 1 ?
! A "
?
8 ) A <"; A
;# ;
1 ""
" # < ?
8 &

?
8 - A < "

>
A
?
8 '
#%

?
8 - A < " A%>
A
; # $
) >
A
?
8 '

?
8 )
; 3 ""
" # <?
8 &

?
8 ! A%>
A
?
8 )
;" < ;
; 1 ""
" # <
?
8 '

?
8 /
< ,% ; " " A

?
8 '
< ? A
A >
A
A

A
?
8 '
#%

?
Required:
6 7 ! "
"
B )>
1 8 ??
67 ! "
";
B )>
1 8 ??
67 A "

;
B

?
67 ! " #
8 ??
&' ( 64
Solution Exercise 5.1
(1) BEAUTY'S HAIR

CASH RECEIPTS JOURNAL Ð JUNE 20.3 CRJ1
Document Day Details Analysis Bank Current Sundry accounts
number of receipts income Amount Fol Details
) ) ) '"
'
'
'
'
'
'

) *
6' K '

7
(2) BEAUTY'S HAIR

CASH PAYMENTS JOURNAL Ð JUNE 20.3 CPJ1
Consum- Sundry accounts
Cheque Day Details Bank able inven-
number tory Wages Amount Fol Details
1 *
D"

' @
,
)
"

1
""
) 2<";
'

'
) - A
3
""
*
'

1
""

,% ; * ,"
D"

'
) - A

) * *
65
&' (
(3) BEAUTY'S HAIR
GENERAL LEDGER
Dr 2<"; B1 Cr
20.3 R
8 )% '!8
Dr @ "

B2 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
(4) BEAUTY'S HAIR

TRIAL BALANCE AS AT 30 JUNE 20.3
Fol Debit Credit
R R
2<"; )
@ "
)
)% )
'" )
- A
)
' ; *
D"

*
*
," D"

*
'
;# *
@
*

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.
5.6 Credit journals and the general journal

5.6.1 Introduction
/ ; #

#
? / "

# " #

? /

;
" #;

A ; N # ;

#% ; # ;

; "
A " # %
? &

debtors ledger creditors ledger " A
#
>
>
%"?

67
&' (
#
; debtors control account
; creditors
control account? ,
;

;
" ;% "

? /
"
B
";
B "

; ;

#

?
. ; # #

A
Study " " ?? "

# # %?
5.6.2 Inventory systems

@

#A "

; " "

;
A A # A
?

% A

6;
7 A
"

# # purchases
periodic system
#
? !
;
# ; "

;

#
B ? / perpetual inventory

;

6;
7
# inventory account ;
<

"

;
#
B
?
5.6.3 Purchases journal and purchases returns journal

$
"

"

B ? ;
"

;
# "

? /
;

"

B ?
NB: & " "

; merchandise purchased on credit

"

B ? "

B ?
,

A # A
? ,
"
"

? , ;

; "

# %
"
? ,
trade

;
# %
"
?
, # "

( A " cash
"
# ? /

A
" "
A #

;

> # %

;

#
> # %
? , ; ;
# "

A
" " ?
Study " "

? ? "
# # %?
"

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

GENERAL LEDGER CREDITORS LEDGER

Dr !

Cr
20.3 R R Date Details Fol Debit Credit Balance
$ '

20.3 R R R
$
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.
5.6.4 Sales journal and sales returns journal

$

B ? ;

;

# #

? / #

;

B ?
NB: & " "

; merchandise

B ?

B ?
Study " "

??? ??? "
# # %?

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

GENERAL LEDGER DEBTORS LEDGER

Dr
Cr
20.3 Date Details Fol Debit Credit Balance
$ -#
20.3 R R R
$
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.
5.6.5 General journal

A # B
A A

general journal. 2D;"

6# #
7 A A

#
>

A + B
;
6A A
#

7?
Study " " ??? "

# # %?
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.
5.7 The trial balance

&
# ;
< ? , #
#

" #
?
#

" " " ; A
# ;? ,

#

#?
Study " " ? "

# # % ?
5.8 Revision exercise and solution

3 $ ? "" "
" ; % ; " ; %? 1

"

; A

$ ?0
20.5
$ "" "
>
#%
"
# ?
! # < 81) 5
?
)
" <"; ; 29/! "

"
?
/
< ' ,

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?
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?
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"% ; ; ""
" # < ?
- A
<
?
'

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;
; A A

0
)) -

-)* -
#

#
; 4 4
< ?
'

"

?
- A < " A
?
/

A " "

0
) )
?
!
;
; M M " # < ?
!
;" ; 1/ 9 ? /
< A

"
"" ;"
""
?
73
&' (
20.5
$ A " "0
4 4 ?
?
'

?
- A
< A 0
@
?
3A >
A
?
< ; ) ) ?
!
;
; , @

" # < ?
$

?
4

0
) ) ?
?
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?
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;% "
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?
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; 1/ 9 ?
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A " " "
;
0
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)) -

-)* -
#

1/ 9
'

? 1 "
?
'

?
/
<
A 0
5 5; ; >

29/!
81) 5
"
/
< ,% ; " "

'

/
"
A #
;
0
4 4
) )
'
< " A
# A

A >
A
?
Required:
! " A 0
6 7 ,
#
B
" ; % $ ?
67 , #
>
>
" ; % $ ?
67 , # " ; %
$ ?
/ :,?
&' ( 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
"" ) '"
'

4 4 * ;
'

'

) ) -5
'

-5
'

-5
-5
'

'

4 4 -5
) ) -5

) * )
(b) CASH PAYMENTS JOURNAL Ð MARCH 20.5 CPJ1

Cheque Day Details Fol Bank Creditors Purchases Wages Sundry accounts
number control
Amount Fol Details
R R R R R
81) 5
* D"

29/! '5

' ,
) @
"

""
* !% ;
'
) &
'

M M
1/ 9 '5 *
'
) - A
, @

, *A
;% *
;
'

, @

'5
)) -
'5
-)* -
#
'5
1/ 9 '5
5 5; *
29/! '5

81) 5
* D"

,% ; * ," D"

'
) - A

) ) * *
75
&' (
(c) PURCHASES JOURNAL Ð MARCH 20.5 PJ1
Invoice
no Day Details Fol Purchases Creditors
, @

'5
)) -
'5
-)* -
#
'5

* )
(d) SALES JOURNAL Ð MARCH 20.5 SJ1

Invoice
No Day Details Fol Sales Debtors
& ) ) -5
& -5
& 4 4 -5
& -5
& ) ) -5
& -5
& -5

* )
(e) GENERAL JOURNAL Ð MARCH 20.5 J1

Date Details Fol Debit Credit
R R
1 Equipment B1 10 000
EQUIP/Creditors control B6 10 000
Shop equipment bought on credit per invoice
Z001
14 Equipment B1 5 260
HI Q/Creditors control B6 5 260
Computer bought on credit per invoice Z002
25 Stationery N4 267
HI Q/Creditors control B6 267
Stationery bought on credit per invoice Z003
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
!

!8

20.5
" ) #(
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
;
N6 Cr
20.5 R
$ )% '!8
Dr
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$ )% '!8
Dr D"

N8 Cr
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$ )% '!8
)% '!8

&' ( 78
Dr ," D"

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20.5 R
$ )% '!8
Dr @
N10 Cr
20.5 R
$ )% '!8
(b) DEBTORS LEDGER

) ) -5
Date Details Fol Debit Credit Balance
20.5 R R R
$ / & 8
$ " * '8
$ / & 8
$ " * '8 N
-5
20.5 R R R
$ / & 8
$ " * '8
$ / & 8
" * '8
4 4 -5
20.5 R R R
$ / & 8
$ " * '8 N
-5
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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(c) CREDITORS LEDGER

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, @

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1/ 9
Corresponds to the balance of account B6
&' ( 80
GOLDEN RULE
,

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$, <
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AA SUPERMARKET
(3) TRIAL BALANCE AS AT 31 MARCH 20.5
Fol Debit Credit
R R
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5.9 Settlement discount

5.9.1 Settlement discount granted
-

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5.9.2 Settlement discount received

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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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(a) TRIAL BALANCE AS AT 28 FEBRUARY 20.4

Debit Credit
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83
&' (
(b) TRANSACTIONS FOR MARCH 20.4
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&' ( 84
RUNDU DEALERS
(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 ;;
"?
(b) CASH PAYMENTS JOURNAL Ð MARCH 20.4 CPJ2

Date Details Fol Bank Purchases Creditors VAT VAT Settlement Sundry accounts
input output discount
received
Cr Amount Fol Details
R R R R R R R
, , 6 P7 6 7
' ' '
"

'

A
) );

6 7 6 7
5 5
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
(d) PURCHASES JOURNAL Ð MARCH 20.4 PJ2

Date Details Fol VAT input Purchases Creditors
R R R
, ,

5
(e) SALES RETURNS JOURNAL Ð MARCH 20.4 SRJ2

Sales
Date Details Fol VAT output returns Debtors
R R R
5 5

5
(f) PURCHASES RETURNS JOURNAL Ð MARCH 20.4 PRJ2

Purchases
Date Details Fol VAT input returns Creditors
R R R
, ,

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
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RUNDU DEALERS
(2) General ledger
Dr :, " L15 Cr
20.4 R 20.4 R
$ ) #( $ '
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)% '!8 :, 8
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'
!8
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8

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20.4 R 20.4 R
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87
&' (
COMMENTS
. Calculation of VAT on all amounts which include 14% VAT is:
% or R
Amount without VAT = 100 1,00

VAT = 14 0,14
; Amount VAT inclusive = 114 1,14
To calculate an amount if VAT was included

114 x Amount given
14
Example: Amount received on 1 March 20.4 = R15 504 (including VAT). (See cash
receipts journal.)
VAT = 114 14 6 R15 504 = R1 904
SALES = 114 6 R15 504 = R13 600

100
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 ;

4
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&' ( 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
(b) Transactions, 14% VAT inclusive, for February 20.4:

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&' ( 90
SOLUTION: Revision exercise
SUNSHINE GLASS TRADERS
(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 *
;
67 67
) * ) * ) )
(b) CASH PAYMENTS JOURNAL Ð FEBRUARY 20.4 CPJ2

Date Details Fol Bank Purchases Creditors Wages Settlement VAT VAT Sundry accounts
discount input output
received
Cr Amount Fol Details
R R R R R R R
' ' * @

4
5
! ! *
'

4
5 67 67
'

'

'

'

,% ; * ,"
D"

&
5 67 67
1! )% ) - A
67 67
) * ) * * ) )
(c) SALES JOURNAL Ð FEBRUARY 20.4 SJ2

Date Details Fol Debtors VAT output Sales
R R R
8 8

& ) 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

) ) *
(e) SALES RETURNS JOURNAL Ð FEBRUARY 20.4 SRJ2

Sales
Date Details Fol Debtors VAT output returns
R R R
8 8

& ) A

) ) *
(f) PURCHASES RETURNS JOURNAL Ð FEBRUARY 20.4 PRJ2

Purchases
Date Details Fol Creditors VAT input returns
R R R
4
5

) ) *
(g) GENERAL JOURNAL Ð FEBRUARY 20.4 J2

R R
4 Furniture B2 3 100
VAT input B9 434
City Furnitures/Creditors control B6 3 534
Desk purchased on credit
26 Printing N13 700
VAT input B9 98
Printo Limited/Creditors control B6 798
Printing of documents on credit
28 VAT output B10 8 426
VAT control B11 8 426
Transfer of VAT output to the
VAT control account
VAT control B11 8 999
VAT input B9 8 999
Transfer of VAT input to the
VAT control account
&' ( 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

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) (

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$ ) #(
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20.4 R 20.4 R
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$ ) #(
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B6 Cr
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!

!8 & 8
) ( ! 8
!

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20.4
$ ) #(
Dr '" B7 Cr
R 20.4 R
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93
&' (
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B8 Cr
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8

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N2 Cr
20.4 R
&# ) #(
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'
!8

&' ( 94
Dr ; N3 Cr
20.4 R
&# ) #(
)% '8

Dr !% ; N4 Cr
20.4 R
&# ) #(
Dr ," D"

N5 Cr
20.4 R
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20.4 R
&# ) #(
)% '!8

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N7 Cr
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N8 Cr
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N9 Cr
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&# ) #(
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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
&# '
!8
Dr ! N13 Cr
20.4 R
&# ! 5; 8
(3) TRIAL BALANCE AS AT 28 FEBRUARY 20.4

Fol Debit Credit
R R
5 #

)
&
)
/ 0 , )
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&' ( 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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.
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B
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B
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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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credit
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temporary asset

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JOURNAL ENTRIES
ADJUSTMENT ENTRY: 28 FEBRUARY 20.1 J1
! " D"

45
/
45
Adjustment of insurance account
&' ( 100

CLOSING TRANSFER: 28 FEBRUARY 20.1 J2
!
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
(extract)
R
Current assets DDDD
! ";

6.2.2 Accrued expenses

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Accounting entries
, # # A D"

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, increase expense account debit
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liability

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JOURNAL ENTRIES J5
ADJUSTMENT ENTRY Ð 28 FEBRUARY 20.1
@ 45
D"

45
Adjustment of water and electricity account
CLOSING TRANSFER Ð 28 FEBRUARY 20.1 J6

!
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 D"

56 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 liabilities DDDD
, "#
DDDD
D"

&' ( 102

6.2.3 Consumable inventory adjustments
Study " " ?? "
# # %?
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expense account credit
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asset
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?
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
R
Current assets DDDD
/
DDDD

6.2.4 Income received in advance

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; 45
/ ; 45
Adjustment of rental income account
&' ( 104

; 45
!
45
Closing of rental income to profit or loss account
GENERAL LEDGER
Dr ; 44 Cr
20.1 R 20.1 R
&# / ; &# ) #(
8
!
8

Dr / ; 59 Cr

20.1 R
&# ; 8
Dr !
6D 7 60 Cr
20.1 R
&# ; 8
XA-XA DEALERS
R
Current liabilities DDDD
/ ;
6.2.5 Accrued income

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; 45
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; 45

Adjustment of commission income account

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; 45

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Closing of commission income to profit or loss
account
GENERAL LEDGER
Dr ' ;;
; 45 Cr
20.1 R 20.1 R
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Dr ; 61 Cr

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; 8
Dr !
6D 7 60 Cr
20.1 R
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; 8
XA-XA DEALERS
R
Current assets DDD
, #
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;
&' ( 106

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JOURNAL ENTRIES
GENERAL JOURNAL Ð 25 JANUARY 20.1 J13
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7 45
) %(-#
-5(45
Write off debtor's account as irrecoverable

!
45
Credit losses GL62 230
Closing of credit losses to profit or loss account
GENERAL LEDGER
Dr '

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7 62 Cr
20.1 R 20.1 R
8 -#
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8
6 ) %7 8
Dr !
6D 7 60 Cr
20.1 R
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Dr -#
6 Cr
20.0 20.1 R
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8
107
&' (
DEBTORS LEDGER
Dr ) % 2 Cr
20.1 R 20.1 R
8 ) #( 8 '

8
/
A

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6.2.7 Allowance for settlement discount

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6.3 Long-term adjustments (depreciation)

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-" 45
; " 0 ; 45
Adjustment to make provision for depreciation
&' ( 108

!
45
-" 45
Closing of depreciation to the profit or loss
account
GENERAL LEDGER
Dr -" 46 Cr
20.1 R 20.1 R
&# ; &# !
8
" 0
; 8
Dr ; " 0 ; 63 Cr

20.1 R
&# -" 8
Dr !
6D 7 60 Cr
20.1 R
&# -" 8
XA-XA DEALERS
ASSETS Note R
Non-current assets
! " " <";
XA-XA DEALERS
NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.1

Property, plant and equipment Machinery Total
Carrying amount: ) N N
'
N N
; " N N

-
"

N N
-" 6 7 6 7
Carrying amount: 2
'

; " 6 7 6 7
109
&' (
6.4 Preparation of the trial balance
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&' ( 110

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A ABBO
(1) GENERAL LEDGER
Dr ; 1 Cr
20.2 R 20.2 R
8 !
8 8 ) #(

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Dr 2 Cr
20.2 R 20.2 R
8 ) #( 8 / 0
8
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111
&' (
Dr '

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Dr / 0 10 Cr
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8 8
Dr D" 11 Cr

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Dr / ; 12 Cr

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8 ' ;;

; 8
&' ( 112

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20.2 R 20.2 R
8 ; 8 !
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20.2 R 20.2 R
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A ABBO
(2) GENERAL JOURNAL
ADJUSTMENT ENTRIES: 30 JUNE 20.2 J1
R R
; 45
; 45
To adjust the above
/ 0 45
45
To adjust the above
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; 45

/ ; 45
To adjust the above
'

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45
To adjust the above
-" 45
; " 0 ; 45
To make provision for depreciation
@ 45
D" 45
To adjust the above
113
&' (
A ABBO
(3) CLOSING TRANSFERS J2
R R
; 45
' ;;
; 45

!
45
Closing off of accounts against the
profit or loss account
!
45
45
@ 45
'

45
-" 45
Closing off of accounts against the
profit or loss account
A ABBO
(4) STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 20.2 (extract)
ASSETS Note R
Non-current assets
! " " <";
Current assets H HHH
/

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6 L 7
Current liabilities HHH
, "#

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A ABBO
(5) NOTES FOR THE YEAR ENDED 30 JUNE 20.2
R R
Carrying amount0
) "
'

; " 6 7 6 7
-" 6 7 6 7
Carrying amount:
2 "
'

; " 6 7 6 7
&' ( 114

SELF-ASSESSMENT
Now that you have studied this study unit can you:
.

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115
&' (
7
STUDY UNIT
The closing-off procedure, determining

profit of an entity and preparing financial
statements
Learning outcome

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Contents
Study unit Page
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KEY CONCEPTS
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117
&' (
7.1 Introduction
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nominal accounts (income and expenditure) are closed off and they provide the details
for compiling the statement of profit or loss and other comprehensive income.
,
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7.2 Financial performance of a service entity

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7.3.2 Profit for the year/period

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profit or loss account.
&' ( 118

7.3.3 Cost price of sales
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Study " " ?? "

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7.4 Inventory systems (trading inventory)

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perpetual 6
7

; periodic

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7.4.1 The perpetual (continuous) inventory system

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70
Purchase of inventory for cash:

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inventory

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bank

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Purchase of inventory on credit:

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Sale of merchandise for cash:

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119
&' (
/
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Merchandise sold on credit:

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6
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When merchandise is returned by a debtor:

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Merchandise returned, previously sold for cash:

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If the business is willing to refund the cash:

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&' ( 120

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Accounting entries which have to be made

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A
purchased # asset cost price

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selling price

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7 cost price

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7 # cost of sales 6D"
7 account.
121
&' (
LEDGER ENTRIES
GENERAL LEDGER
Dr / Cr
20.1 R 20.1 R
8 ) #( - '

- '
'

)% ) (

20.2
8 ) #(
Dr
Cr
20.1 R 20.1 R
- , - -#

)%

Dr '

Cr
20.1 R 20.1 R
- / - ,
/

Dr , Cr
20.1 R 20.1 R
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-

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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
&' ( 122

The cost price in Rand will obviously be less than the selling price.
Therefore:
Multiply by the smaller figure (100) and divide by the larger figure (125).
To calculate the cost of sales of R75 000
100 75 000
x
125 1
Cost price = R60 000

If the mark-up of 25% is on the selling price:
%
Selling price = 100
Mark-up = 25
Cost price = 75
The cost price will again be less than the selling price.
Thus: 75
100
x
75 000
1
Cost price = R56 250
. 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.
7.4.2 The periodic inventory system

"

; "

not recorded in the
inventory account.
" % A
purchases account

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#
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purchases returns account?

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Less: '
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123
&' (
,

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70
Purchase of inventory for cash:

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Purchase of inventory on credit:

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Sale of merchandise for cash:

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Sale of merchandise on credit:

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When merchandise is returned by a debtor:

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Merchandise returned, previously sold for cash:

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&' ( 124

When inventory is returned to a creditor:
- '
6 #

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B
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Physical inventory count at the end of the financial year:

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A
A
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Accounting entries which have to be made

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&' (
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COMMENTS
. Determining cost of sales and gross profit R

Opening inventory at cost price 10 000
Plus: Purchases at cost price 90 000
Inventory available for sale at cost price 100 000
Less: Closing inventory at cost price 20 000
Cost of sales 80 000
Gross profit 20 000*
Sales 100 000
* Balancing figure
. When determining the gross profit, the required details are transferred to the trading
account:
. The inventory account is credited and the trading account is debited with the
opening inventory (transfer of opening inventory).
. The purchases account is credited and the trading account is debited (purchases
account is closed).
. The sales account is debited and the trading account is credited (sales account is
closed).
The closing inventory is given (see accounting entry 4 above) and has already been
entered in the inventory account and the trading account.
GENERAL LEDGER
Dr / Cr
20.1 R 20.1 R
8 ) #( - ,
20.1
- ,
Dr !

Cr
20.1 R 20.1 R
- '
- ,
)%

&' ( 126

Dr
Cr
20.1 R 20.1 R
- , - -#

)%

Dr , Cr
20.1 R 20.1 R
- / 6 " 7 -

!

/ 6
7
!
" 7P

P )
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.
7.4.3 Additional purchase costs

Study " " ??? "
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127
&' (
Transaction Perpetual inventory Periodic inventory
system system
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- / - ' "

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7 7

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R
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Add: !

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7.4.4 Drawings and donations of inventory

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system
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7.5 Closing-off of nominal accounts

Study " " ? "
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&' ( 128

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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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&' (
GOLDEN RULES
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gross profit
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TOEKELA DEALERS
GENERAL LEDGER
Dr '" B1 Cr
20.1 R
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&' ( 130

Dr - A
B2 Cr
20.1 R 20.1 R
8 ) #( 8 '" 8
Dr )% B3 Cr
20.1 R
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Dr / B4 Cr
20.0 R 20.1 R
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20.1
8 , 8
Dr :
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8
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N2 Cr
20.1 R 20.1 R
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131
&' (
Dr !

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20.1 R 20.1 R
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N4 Cr
20.1 R 20.1 R
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Dr ; N5 Cr
20.1 R 20.1 R
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Dr N6 Cr
20.1 R 20.1 R
8 ) #( 8 !
8
Dr @
N7 Cr
20.1 R 20.1 R
8 ) #( 8 !
8
Dr @ N8 Cr

20.1 R 20.1 R
8 ) #( 8 !
8
Dr '

6) #
7 N9 Cr
20.1 R 20.1 R
8 ) #( 8 !
8
Dr ;
N10 Cr
20.1 R 20.1 R
8 ) #( 8
8

&' ( 132

Dr ;
N11 Cr
20.1 R 20.1 R
8 !

8 8 ) #(

Dr , N12 Cr

20.1 R 20.1 R
8 / 6 " 7 8 8
8
!

8 /
!
6
7 8
64
" 7 8

COMMENTS
CLOSING TRANSFERS OF SETTLEMENT DISCOUNT:
(1) Settlement discount granted transferred to sales:
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
(2) Settlement discount received transferred to purchases:
To transfer settlement discount received to the purchases account the settlement

discount received account is debited (thus the account is closed) and the purchases
account is credited.
20.1 R R
Jan 31 Settlement discount received 250
Purchases 250
Closing transfer of settlement discount received
CLOSING TRANSFERS TO THE TRADING ACCOUNT:
(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
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
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
Profit or loss N13 29 100
Closing transfer of gross profit to profit or
loss account
&' ( 134

(8) Instead of all the separate closing transfers, a combined entry can be made with the
same effect.
General journal J1
20.1 R R
Inventory (closing) B4 8 000
Inventory (opening) B4 5 000
Purchases N3 49 750
Trading account N12 29 100*
Closing off and transfer of above
accounts to trading account
* Balancing figure between debits and credits
, ;
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COMMENTS
Closing journal entries
(1) The gross profit has already been transferred.

(2) To transfer the expenditure accounts to the profit and loss account, the expenditure
accounts such as stationery, wages, and water and electricity are credited (accounts
are closed) and the profit and loss account is debited with each account individually.
This is done so that the expenditure on each item can readily be identified.
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
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
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.
&' ( 136

(5) The profit or loss is the result (``balance'') of the profit or loss account.
(6) To transfer the profit due to the owner to the capital account, the profit or loss
account is debited (account is closed) and the capital account is credited (equity
increases).
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
(10) Post-closing trial balance

At this stage a post-closing trial balance can be prepared. This trial balance contains
the balances of all those accounts the balances of which are to be carried forward to
the following financial period. These balances are used to prepare the statement of
financial position.
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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7.6 Preparation of financial statements

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7.6.1 The statement of profit or loss and other comprehensive income

(financial performance)
, ; trading profit or loss

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statement of profit or loss and other comprehensive income.
&' ( 138

TOEKELA DEALERS
YEAR ENDED 31 JANUARY 20.1
Notes R
Revenue
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3"
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6 7
Gross profit
3 ;0
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Profit for the year
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7.6.2 The statement of changes in equity

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TOEKELA DEALERS
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
31 JANUARY 20.1
Capital
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139
&' (
GOLDEN RULE
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7.6.3 The statement of financial position

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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 equity
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Current liabilities
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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.
&' ( 140

. There are usually more items under trade and other receivables and trade and other
payables than merely debtors and creditors. These items will be listed under trade and
other receivables and trade and other payables and will be added up to give the total
for trade and other receivables and trade and other payables.
GOLDEN RULE
,
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7.6.4 Notes
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Property, plant and Equipment Vehicles Total

equipment
R R R
Carrying amount:
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" 6N7 6N7 6N7
-" 6N7 6N7 6N7
Carrying amount:
2

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7.7 Gross profit percentage

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141
&' (
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%
Gross profit 100 = 29 000 6

100
Cost of sales 6 1 47 000 1
= 61,7%
2

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7.8 Integrated example

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1 + -
0
&' ( 142

HOT-ROD DEALERS
(1) PRE-ADJUSTMENT TRIAL BALANCE AS AT 31 DECEMBER 20.4
Fol Debit Credit
R R
'" 45
- A
45
5 #
6
7 45
:
6
7 45
& 6
7 45
/ 0 , N 8 ? 45
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)% 45
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; " 0 45
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45

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; 45
; 45
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!

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/
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@ 45

(2) ADDITIONAL INFORMATION:

67 / -;# ? R
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Required:
6 7 3"
1 + -
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143
&' (
67
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6#7 ! " " <";?
Solution: Integrated example

Please note: 3

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HOT-ROD DEALERS
(1) GENERAL LEDGER (POSTINGS INCLUDED)
Dr '" 1 Cr
20.4 R 20.4 R
- - A
8 - ) #(
) ( !
8
20.5

8 ) #(
Dr - A
2 Cr
20.4 R 20.4 R
- ) #( - '" 8
Dr 5 #

6
7 3 Cr
20.4 R
- ) #(
Dr :
6
7 4 Cr
20.4 R
- ) #(
Dr & 6
7 5 Cr
20.4 R
- ) #(
&' ( 144

Dr / 0 , 6 Cr
20.4 R 20.4 R
8 ) #( - ,
- , 8 8
) (

20.5
8 ) #(
Dr -#
7 Cr
20.4 R 20.4 R
- ) #( - '
6) #
7 8
) (

20.5
8 ) #(
Dr )% 8 Cr
20.4 R
- ) #(
Dr ; " 0

9 Cr
20.4 R 20.4 R
- ) #(
-" 8

Dr ; " 0 10 Cr

20.4 R 20.4 R
- ) #(
-" 8

Dr '
11 Cr
20.4 R
- ) #(
Dr
12 Cr
20.4 R 20.4 R
-

8 - ) #(
, 8

Dr

13 Cr
20.4 R 20.4 R
- ) #( -
8
145
&' (
Dr '

14 Cr
20.4 R 20.4 R
- ) #( - !
8
Dr ' ;;
; 15 Cr
20.4 R 20.4 R
- !
8 - ) #(

; 8

Dr ; 16 Cr
20.4 R 20.4 R
- / ; - ) #(
8
!
8

Dr !

17 Cr
20.4 R 20.4 R
- ) #( - !

8
, 8

Dr !

18 Cr
20.4 R 20.4 R
- !

8 - ) #(
Dr ' "

19 Cr
20.4 R 20.4 R
- ) #( - , 8
D"

8

Dr '

6) #
7 20 Cr
20.4 R 20.4 R
- ) #( - !
8
-#
8

&' ( 146

Dr /
21 Cr
20.4 R 20.4 R
- ) #( - ! "
D"

8
!
8

Dr !% ; 22 Cr
20.4 R 20.4 R
- ) #( - / 0
!%
; 8
!
8

Dr
23 Cr
20.4 R 20.4 R
- ) #( - ! "
D"

8
!
8

Dr @ 24 Cr

20.4 R 20.4 R
- ) #( - !
8
Dr ! " D"

25 Cr
20.4 R
-
8
/
8

Dr ; 26 Cr

20.4 R
- ' ;;

; 8
147
&' (
Dr / ; 27 Cr
20.4 R
- ; 8
Dr D"

28 Cr
20.4 R
- '
"

8
Dr / 0 !% ; 29 Cr

20.4 R
- !%
; 8
Dr -" 30 Cr
20.4 R 20.4 R
- ; - !
8
" 0

8
;
" 0
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
&' ( 148

R R
! " D"

45
/
45
Insurance prepaid for 3 months
; 45
/ ; 45
Rent received in advance for January 20.5
; 45
' ;;
; 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

45

45
/ 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
!
" 7 8

Dr !
32 Cr
20.4 R 20.4 R
-
8 - ,
@ 8 6
" 7 8
'

8 ' ;;

/
8 ; 8
!% ; 8 ; 8
'
6) #
7 8
-" 8
'" 6, ;+
"
;
7 8

&' ( 150

HOT-ROD DEALERS
(4) POST-CLOSING TRIAL BALANCE AS AT 31 DECEMBER 20.4
Fol Debit Credit
R R
'" 45
5 #
6
7 45
:
6
7 45
& 6
7 45
/ 0 , 45
!% ; 45
-#
45
)% 45
; " 0
45
; " 0 45
'
45
! " D"

45
; 45
/ ; 45
D"

45

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
* "

' "

/ 6 -;# ?7 6 7
Gross profit

3 ;
;
' ;;
;

-
# ;
D"

6 7

@
'

/

!% ;
'

6) #
7
-" 6 L 7
Profit for the year
3 ;"
; N
, ;"
;
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
! " " <";

Current assets
/
6 L 7
, #
6 L 7P
! ";

'

<

Total assets
Total equity
'"
Current liabilities
, "#
6 L 7Q
/ ;
P -#
L ; K ?
Q '
L D"

K ?
&' ( 152

HOT-ROD DEALERS
(8) NOTES FOR THE YEAR ENDED 31 DECEMBER 20.4
" 0
? ,
;
# " "

#

;" A / & "
"" " #

?
? ! " " <";
A

; " ?

5 #

; " "
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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
'

; " 6N7 6 7 6 7 6 7
P ' ;# 2, ; -" 2,

6 7 *; A
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67 @

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67 @ A

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67 *; ;
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67 '
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F
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Account in general Assets = Equity + Liabilities

ledger to be
No Subsidiary journal debited credited + ± ± + ± +
Transactions:
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&' ( 154

(1) ENTITY USING A PERPETUAL INVENTORY SYSTEM
ledger to be
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ZETTA TRADERS
GENERAL LEDGER
Dr / 1 Cr
20.1 R 20.2 R
8 ) #( 8 ,
20.2
8 ,
Dr !

2 Cr
20.2 R 20.2 R
8 ) #( 8 ,
Dr
3 Cr
20.2 R 20.2 R
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&' ( 156

Dr , 4 Cr
20.2 R 20.2 R
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P ELLIS
(1) GENERAL LEDGER
Dr / 0 , 1 Cr
20.1 R 20.1 R
) #( , 8
20.1
" , 8
Dr !

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) #( , 8
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157
&' (
Dr ' "

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) #( , 8
Dr '
;

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20.1 R 20.1 R
) #( , 8
(2) CLOSING JOURNAL TRANSFER J1

20.1 R R
Aug 31 Sales GL3 7 300
Inventory (closing) GL1 1 500
Inventory (opening) GL1 2 000
Purchases GL2 3 000
Carriage on purchases GL4 250
Customs duties GL5 800
Trading account GL6 2 750*
Closing transfer to trading account
* Balancing figure
(3)
Dr , 6 Cr
20.1 R 20.1 R
/ 6 " 7

!

/ 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).
&' ( 158

, A #
"" ;
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6 7
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(1) GENERAL LEDGER
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8 $ ) #(
) ( 20.1
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8

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159
&' (
Dr ' ;;
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Dr $" D
8 Cr
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&' ( 160

(2) CLOSING TRANSFERS J1
20.1 R R
Feb 28 Trading account 46 990
Profit or loss GL10 46 990
Transfer of gross profit from trading
account
Commission income GL3 1 450

Profit or loss GL9 41 120*
Rental expenses GL4 12 850
Salaries and wages GL5 28 460
Credit losses GL6 260
Stationery GL7 150
Municipal taxes GL8 850
Closing transfer to profit or loss
account
* Balancing figure
(3) GENERAL LEDGER

Dr !
10 Cr
20.1 R 20.1 R
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" 7 8
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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
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H HILTON
28 FEBRUARY 20.2
R
Capital
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&' ( 162

H HILTON
(2) STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.2
ASSETS R
Non-current assets
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Current assets
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TRIAL BALANCE AS AT 31 DECEMBER 20.4

Debit Credit
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&' (
NTINI'S STORE
Notes R
Revenue 6 L J J 7
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NTINI'S STORE
31 DECEMBER 20.4
Capital
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&' ( 164

NTINI'S STORE
ASSETS Note R
Non-current assets
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NTINI'S STORE
(4) NOTES FOR THE YEAR ENDED 3 DECEMBER 20.4:
" 0
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Property, plant and Land and Equipment Vehicles Total
equipment buildings
R R R R
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-" 6N7 6N7 6N7 6N7
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2
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165
&' (
SELF-ASSESSMENT
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&' ( 166

TOPIC C
ACCOUNTABILITY FOR CURRENT

AND NON-CURRENT ASSETS
Learning outcome
,
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6A ""#7 B
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167
&' (
CONTENTS
Study unit Page

'1 *- '1 29/:52*,
,-2 *- 3,12 2'2/:)52
/*:2*,3.
!3!2,. !5*, *- 29/!$2*,
3,12 *3*+'2*, 2,
&' ( 168

8
STUDY UNIT
Cash and cash equivalents
Learning outcome

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Contents Page
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KEY CONCEPTS
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8.1 The nature of cash and cash equivalents

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8.2 Internal control over cash

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&' ( 170

8.3 Reconciliation of the bank statement balance with the
bank account balance
8.3.1 Introduction
Study " " ? "
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creditor of the bank? ! "

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8.3.2 Why a bank reconciliation is necessary

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REMEMBER
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171
&' (
. # A #% statement # 6 # -, - 3-7

debit
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8.3.3 Procedure to follow in the reconciliation process

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GOLDEN RULE
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Exercise 8.1
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&' ( 172

BENSON TRADERS
BANK RECONCILIATION STATEMENT AS AT 30 JUNE 20.0
Debit Credit
R R
& # # " #%
;
-"
6"
((?7 V
'<
"
";
* N ((? 6- 7 P
* N ((? 6)'
7 V
& # # " #%

* Cheque no 11 was not presented for payment during July and must, again, be shown as
outstanding on the July 20.0 bank reconciliation statement.
BENSON TRADERS
CASH RECEIPTS JOURNAL ± JULY 20.0 (bank column only) crj 7
Doc no Date Details Bank

'

V
'

V
'

Rental income 850
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
Doc no Date Details Bank

$" V
8 >
@

V
)'
V
N A 6(- <7P V
'
6A
7 V
,% ;
'
6A
7 V
P Saxo (R/D cheque)* 300
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 #
;
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A
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,0 6 7 J
&D0 6 7 J
)2*3* ,-2
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!2,3/

((( ;
8 ?
Details Cheque no Fee Date Debit Credit Balance
R R R R
) #( 0
-"
0 V
'< ? V
" <0
A 0 V
'< 0 V
-"
0 V
'< 0 V
'< 0 V
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-"
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
closed off for July 20.0.
The unticked credit entries were entered in the cash receipts journal before the journal was
closed off for July 20.0.
&' ( 174

ADDITIONAL INFORMATION
67 A ! D #
#

?
6#7 , "
((?

" ?
GENERAL LEDGER
Dr )% B15 Cr
20.0 R 20.0 R
8 ) #( 8 !;
'!8
"
'8 ) (

) #(
BANK RECONCILIATION STATEMENT AS AT 31 JULY 20.0

Debit Credit
R R
& # # " #%
;
-"
6"
((?7
'<
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";0
* N ((? 6- 7
* N ((? 6,% ;7
& # # " #%

Exercise 8.2
, A ;

' ' ' ,
0
(a) BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.9
Dr Cr
R R
-# #
" #%
;
'<
"
";0
* J ( (? 65 5 ;# 7
* J ((? 6$ $
7
-"
V
/ # #% V
' #
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(b)
Dr )% Cr
R 20.9 R
8 ) #(
175
&' (
(c) CASH RECEIPTS JOURNAL (bank column only) FOR JUNE 20.9 CRJ 6
Date Details Fol Amount

R
2 Sales 300 V
5 Sales 150 V
10 L Long 150 V
19 J Dlamini 200 V
25 Sales 240 V
28 Sales 70
1 110
(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

(e) BANK STATEMENT FOR JUNE 20.9

Cheques
Date Details etc Deposits Balance
R R R
1 Balance 460 Dr
4 Deposit 300 V 160 Dr
6 Deposit 150 V 10 Dr
10 Deposit 150 V 140 Cr
12 Cheque 451 160 V 20 Dr
15 Deposit Ð K Nkome 90 70 Cr
20 Cheque 453 116 46 Dr
Cheque ``R/D''
(L Long) 150 196 Dr
28 Cheque 454 200 V 156 Dr
Stop order Ð insurance 50 206 Dr
Deposit Ð T Nkwe 40 166 Dr
Deposit 115 V 51 Dr
Error corrected 20 V 31 Dr
29 Bank interest 20 51 Dr
Service fees 10 61 Dr
Cheque 450 40 V 101 Dr
&' ( 176

(f) ADDITIONAL INFORMATION:
.
< ;# A
" I I; O ' ?
Required:
6 7 ' ;" )% ;

"

";
B

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8 ??
67 A #% ' ' ' ,
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67 ! " #%
; ' ' ' ,

8 ?? ' ;; A #
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COOL CAT CARTER TRADERS

(1) CASH RECEIPTS JOURNAL (bank column only) ± JUNE 20.9 CRJ 6
Date Details Fol Bank

R
2 Sales 300 V
5 Sales 150 V
10 L Long 150 V
19 J Dlamini 200 V
25 Sales 240 V
28 Sales 70
30 L Lombard/Creditors control 50
K Nkome 90
T Nkwe 40
1 290
CASH PAYMENTS JOURNAL (bank column only) ± JUNE 20.9 CPJ 6
Cheque Date Details Fol Bank

No
R
) *% V
A V
42$ )

I I; O '
V
L Long/Debtors control 150
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 ) #(
(3) BANK RECONCILIATION STATEMENT AS AT 30 JUNE 20.9

Dr Cr
R R
Credit balance as per bank statement 99
Deposit not yet credited by the bank 70
Cheques not yet presented for payment:
No 447 ± dated 25/5/20.9 (M Mitsi) 25
No 452 ± dated 17/6/20.9 (GEM Builders) 300
Bank error Ð cheque No 453 (R170±R116) 54
Credit balance as per bank account 210
379 379
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.
8.4 The petty cash journal

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&' ( 178

Study " " ? "
# # %?
Exercise 8.3
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-%
,
N 8 ??
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8?
PETTY CASH PAYMENTS Ð JUNE 20.9
Date Details Cash voucher Amount

R

;"

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A

! +
"

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Required:
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67 !
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179
&' (
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 ;"

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@

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@

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20.9 )+
8
#(
(2) GENERAL LEDGER

Dr !
Cr
20.9 R 20.9 R
8 )% '!8 8 !

)% '!8 ";
!'8
) (

20.9
8 ) #(

, A ; 8 ?
$ , 0
(a) BANK RECONCILIATION STATEMENT AS AT 31 DECEMBER 20.8

Dr Cr
R R
Debit balance as per bank statement 2 300
Deposit not yet credited 2 100
No 846 ± dated 18/12/20.8 (B Small) 400
No 849 ± dated 21/12/20.8 (L Langa) 300
Credit balance as per bank account 900
3 000 3 000
&' ( 180

(b) CASH RECEIPTS JOURNAL Ð JANUARY 20.9 (extract) CRJ 8
Date Details Analysis of Bank

receipts
R R

;
) ; 6< N
< +
7

$ *%

;

(c) CASH PAYMENTS JOURNAL Ð JANUARY 20.9 (extract) CPJ 8
Cheque Date Details Amount Bank

number
R R
!

$"
@

;

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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
) -
-
'
-
'
'
'
-
'
-
-
-
'
'
/
'
'
'
)%
'
" '
(e) ADDITIONAL INFORMATION:

. ,
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" ;; A !
/
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. , "
6 8 ?7 A
; #
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8 &# ??
Required:
6 7 ! "
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$ ,
8 ??
67 A #% $ , " " #
8 ??
67 ! " #%
; $ ,
8 ??
) A #
" #%
;?

MONDAY TRADING
(1) CASH RECEIPTS JOURNAL ± JANUARY 20.9 (extract)
Date Details Bank
#
;

&' ( 182

CASH PAYMENTS JOURNAL ± JANUARY 20.9 (extract)
Date Details Bank
#
/
D"

)%

/

(2) GENERAL LEDGER

Dr )% Cr
20.9 R 20.9 R
8 "
'8 8 ) #(
!;
'!8
) (

20.9
&# ) #(
(3) BANK RECONCILIATION STATEMENT AS AT 31 JANUARY 20.9

Dr Cr
R R
Credit balance as per bank statement 1 700
Deposit not yet credited 1 600
No 849 ± dated 27/12/20.8 (L Langa) 300
No 852 ± dated 3/1/20.9 (S Sono) 100
No 861 ± dated 30/1/20.9 (R Seema) 600
Debit balance as per bank account 2 300
3 300 3 300

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ONTARIO TRADERS
(1) CASH RECEIPTS JOURNAL ± DECEMBER 20.8 (extract)
Date Details Bank
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CASH PAYMENTS JOURNAL ± JANUARY 20.8 (extract)

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(2) GENERAL LEDGER
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(3) BANK RECONCILIATION STATEMENT AS AT 31 DECEMBER 20.8

Debit Credit
R R
Credit balance per bank statement 990
Cheque not yet presented for payment:
No 985 ± dated 29/12/20.8 (water and electricity) 2 211
Credit balance per bank account 429
2 211 2 211

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(1) CASH RECEIPTS JOURNAL ± SEPTEMBER 20.7 (extract)
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CASH PAYMENTS JOURNAL ± SEPTEMBER 20.7 (extract)

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(3) BANK RECONCILIATION STATEMENT AS AT 30 SEPTEMBER 20.7

Debit Credit
R R
Debit balance per bank statement 104
No 2894 ± dated 30/9/20.7 (telephone) 450
Debit erroneous deposit 175
Debit balance per bank account 79
808 808
&' ( 186

BOOKS OF BUWANG TRADERS
(a) BANK RECONCILIATION STATEMENT AS AT 30 APRIL 20.8
Dr Cr
R R
Credit balance per bank statement 840,60
Credit outstanding deposit 370,00
Debit cheques not yet presented:
No 420 ± dated 20/11/20.7 (Donations) 2 000,00
No 691 ± dated 17/1/20.8 (LL Traders) 416,40
No 715 ± dated 28/2/20.8 (R Rex) 638,80
Credit error on bank statement 120,00
Credit balance per bank account 1 724,60
3 055,20 3 055,20
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&' (
BUWANG TRADERS
(1) CASH RECEIPTS JOURNAL ± MAY 20.8 (extract)
Date Details Bank
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CASH PAYMENTS JOURNAL ± MAY 20.8 (extract)

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(3) BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.8

Debit Credit
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&' ( 188

COMMENTS
. 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.

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Date Details Cash voucher Amount

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&' (
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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&' ( 190

9
STUDY UNIT
Trade and other receivables
Learning outcome

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Contents Page
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KEY CONCEPTS
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9.1 Introduction

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9.2 Settlement discount granted

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&' ( 192

Exercise 9.1
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9.4 Credit losses (bad debts)

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&' ( 194

Study " "
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Exercise 9.2
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Solution Example 9.2
,

A
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
9.4.2 Allowance for credit losses

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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 ) #(
Dr A

Cr
20.0 R
8 '

&' ( 196

Dr '

Cr
20.0 R
8 A

CLOSING JOURNAL ENTRY

Debit Credit
20.0 R R
Jun 30 Profit or loss 800
Credit losses 800
Closing credit losses off to the profit
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.
9.4.3 Increasing the allowance for credit losses (bad debts)

Exercise 9.4
3 8 ?
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197
&' (
, A

B
A

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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
Existing allowance 800
Amount needed for adjustement 400
GENERAL LEDGER
Dr -#
Cr
20.1 R
8 ) #(
Dr A

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.
&' ( 198

. The debtors control account is not affected by a change in the allowance for credit
losses.
. The allowance for 20.0 (R800) is deducted from the allowance calculated for 20.1
(R1 200). Only the difference is debited to credit losses and credited to the allowance
for credit losses.
. Remember that the debtors control account is an asset account and allowance for
credit losses is a contra asset account. The allowance for credit losses (R1 200) must
be deducted from the debtors control account (R30 000) to determine the amount at
which debtors must be taken into account under trade and other receivables in the
statement of financial position.
. The credit losses for the year (R730) and the difference in the allowance (R400) are
written off as an expense in the profit and loss account (R1 130).
9.4.4 Decreasing the allowance for credit losses

Exercise 9.5
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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
New allowance (R25 000 6 4%) 1 000
Amount needed for adjustment 200
199
&' (
GENERAL LEDGER
Dr -#
Cr
20.2 R
8 ) #(
Dr A

Cr
20.2 R 20.1 R
8 '

8 ) #(
) (

20.2
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
/

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METHOD 1:

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&' ( 200

Exercise 9.6
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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 ) #(
Dr A

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201
&' (
Dr '

Cr
20.1 R 20.1 R
8 A 8 !

DEBTORS LEDGER
B Down
20.0 R R R
Jul 1 Account rendered 730
Nov 30 Allowance for credit losses 730 Ð
Method 2:
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Exercise 9.7
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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 ) #(
&' ( 202

Dr A

Cr
20.0 R
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Dr '

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20.0 R 20.1 R
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8 !

20.1
8 A

DEBTORS LEDGER
B Down
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.)
9.4.6 Recovery of credit losses (bad debts) written off

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9.4.7 VAT, credit losses and credit losses recovered

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203
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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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DD DDD
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D DDD
Total assets DDD DDD
9.6 Debtors control account

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&' ( 204

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Exercise 9.8
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JOURNALS
SALES JOURNAL Ð MAY 20.2 SJ1
Date Debtor Fol Sales VAT output Debtors

R R R
-5
) -5
' -5

45
SALES RETURNS JOURNAL Ð MAY 20.2 SRJ1
Date Debtor Fol Sales returns VAT output Debtors

R R R
) -5
' -5

45
205
&' (
CASH RECEIPTS JOURNAL Ð MAY 20.2 CRJ1
Date Details Fol Bank Debtors Discount VAT

allowed input
R R R R
-5 P
) -5
' -5

45
P "" D;
GENERAL JOURNAL Ð MAY 20.2 J1
Date Details Fol Total

Debit Credit
R R
'(#
-5
&
:, "
Sold furniture on credit to C
&
:, " -5
'(#

Received
furniture back from C

Required:
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&' ( 206

GENERAL LEDGER
Dr -#
GL5 Cr
20.2 R 20.2 R
$ )P #( $

8

8 )%
& 8
'8
:, " 8 & 8
:, " 8
) (

20.2
8 )PP #(
GOLDEN RULE
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GOLDEN RULE
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DEBTORS LEDGER (General ledger format)

Dr DL1 Cr
20.2 R 20.2 R
$ )P #( $ )%

8
'8

Dr ) DL2 Cr
20.2 R 20.2 R
$ )P #( $

8

8 )% '8
) (

20.2
8 )PP #(
207
&' (
Dr ' DL3 Cr
20.2 R 20.2 R
$ )P #( $

8

8 )%
& 8
'8
& 8
) (

20.2
8 )PP #(
PP 5

#
#
R
N
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'

GOLDEN RULE
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#
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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.
&' ( 208

Exercise 9.9
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Totals for the month 0
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209
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N NELSON
(1) GENERAL LEDGER
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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
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20.3 R R
Feb 28 Credit losses 1 500
Debtors control 1 500
Credit losses written off
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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
Credit losses 1 525

Allowance for credit losses 1 525
Adjustment of allowance R
Allowance 4 265
* Add: Credit loss written off 500
4 765
Less: Existing allowance 3 240
Amount needed 1 525
213
&' (
GENERAL LEDGER
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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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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
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Credit loss (1 420) (2 020)
Balance as per debtors control 10 760
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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
off (P Pauper) 1 420

Less: Opening balance
of allowance: 510 910

Amount needed 1 448
GENERAL LEDGER
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COMMENTS
. 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
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217
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10
STUDY UNIT
Inventory
Learning outcome

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&' ( 218

10.1 Introduction
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20.2 20.1 20.0

Total equity R R R
Capital 332 230 224 230 120 000
219
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ADJUSTED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME
20.2 20.1
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10.3 Valuation of inventory at historical cost

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1 R200 000 1
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Sales 6 100 R100 000 100 1
1 = R300 000 6 1 = 33 3 %
10.5 Consistency in the application of procedures

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COMMENTS
. Statement (a) The goods were not bought for resale.

. Statement (b) Stationery has nothing to do with the cost of purchasing goods for
resale. Stationery used is a selling expense shown under distribution,
administrative and other expenses in the statement of profit or loss and
other comprehensive income.
. Statement (c) When the periodic inventory system is used the only way of knowing
how much inventory is on hand is to do an inventory count.
. Statement (d) If the ownership of goods has passed to the purchaser, that is the
purchaser has paid or undertaken to pay for the goods, then these
goods are not included in the closing inventory figure.
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Balances at 28 February 20.4:
Inventory: Trading Ð 28 February 20.3 20 000
Purchases 106 000
Purchases returns 6 000
Import duty 10 000
Sales 175 000
Sales returns 5 000
Carriage on sales 4 800
Packaging material used 7 200
&' ( 224

Inventory: Trading Ð 28 February 20.4 25 000
Inventory: Packaging material Ð 28 February 20.4 600
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Cost of goods purchased Cost of sales

1. R116 000 R111 000
2. R110 000 R110 400
3. R116 000 R110 400
4. R110 000 R105 000

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Calculation:
R
Purchases 106 000
Purchases returns (6 000)
100 000
Import duty 10 000
Cost of goods purchased 110 000
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
&' (
From the following information, calculate the gross profit percentage on cost of sales and sales.
20.3 20.2 20.1

R R R
Revenue 600 000 375 000 300 000
Cost of sales (402 000) (255 000) (210 000)
Gross profit 198 000 120 000 90 000

20.3 20.2 20.1
Gross profit 100 R198 000
Cost of sales 6 1 R402 000 6100
1
R120 000
R255 000 6100
1
R90 000
R210 0006100
1
= 49,3% = 47,1% = 42,9%
Gross profit 100 R198 000
Sales 6 1 R600 000 6100
1
R120 000
R375 000 6100
1
R90 000
R300 000 6100
1
= 33% = 32% = 30%

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M DRY
YEAR ENDED 30 JUNE 20.6 (extract)
R
Revenue 114 000
Inventory Ð 1/7/20.5 30 000
Purchases 90 000
120 000
Inventory Ð 30/6/20.6 (44 000)
Gross profit 38 000
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M DRY
THE YEAR ENDED 30 JUNE 20.7 (estimated)
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COMMENT
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(2) VALUE OF INVENTORY DESTROYED:

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SELF-ASSESSMENT
Now that you have studied this study unit, can you
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11
STUDY UNIT
Property, plant and equipment
Learning outcome

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KEY CONCEPTS
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11.2 Determination of the cost price of property, plant and
equipment
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11.3 Safeguarding and control of property, plant and

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11.5 The concept of depreciation

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(a) Straight line method

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(a) (1) ASSET AND DEPRECIATION SCHEDULE: STRAIGHT LINE METHOD

Calculation of Annual Accumulated Carrying
Date Cost price depreciation depreciation depreciation amount
(a) Cost price
Lifespan in years (b) (a) ± (b)
or
20%6cost price
May 31 R R R R
? 62 7 460000
5
? 62 7 460000
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? 62 7 460000
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? 62 7 460000 */5
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(a) (2) JOURNAL ENTRIES FOR THE FIVE YEARS

GENERAL JOURNAL
20.1 R R
May 31 Depreciation: machinery 92 000
Accumulated depreciation: machinery 92 000
Provision for depreciation on the straight
line method (year 1)
Profit or loss 92 000

Depreciation: machinery 92 000
Closing entry
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&' ( 232

(a) (3) GENERAL LEDGER
Dr $ 6
7 Cr
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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
R R
Carrying amount:
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Carrying amount:
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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.
&' ( 234

(b) Diminishing balance method
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(b) (1) ASSET AND DEPRECIATION SCHEDULE: DIMINISHING BALANCE METHOD

Calculation of Annual Accumulated Carrying
Date Cost price depreciation depreciation depreciation amount
(a) 100 x carrying
20 (b) (a) ± (b)
amount
May 31 R R R R
? 62 7 20 D 460000
100 1
? 62 7 20 368000
D 1
100
? 62 7 20 D 294400
100 1
? 62 7 20 235520
D 1
100
? 62 7 20 D 188416
100 1
, "
, ; 6 7

; #
"

6
"7
?
; ; A ;;
# ; ?
,
;

" # ; 6

7
#

#
#

"
; "

; ?
235
&' (
(b) (2) JOURNAL ENTRIES FOR THE FIVE YEARS
GENERAL JOURNAL
20.1 R R
$ -" 0 ;
; " 0 ;
Provision for depreciation at 20% pa on the
diminishing balance method (year 1)
!

-" 0 ;
Closing entry
20.2
$ -" 0 ;
; " 0 ;
!

-" 0 ;
Closing entry
20.3
$ -" 0 ;
; " 0 ;
!

-" 0 ;
Closing entry
20.4
$ -" 0 ;
; " 0 ;
!

-" 0 ;
Closing entry
20.5
$ -" 0 ;
; " 0 ;
!

-" 0 ;
Closing entry
&' ( 236

(b) (3) GENERAL LEDGER
Dr $ 6
7 Cr
20.1 R
8 )%
Dr ; " 0 ; Cr

20.1 R 20.1 R
$ ) ( $ -" ?
20.2 20.1
$ ) ( 8 ) #(
20.2
$ -" ?

20.3 20.2
$ ) ( 8 ) #(
20.3
$ -" ?

20.4 20.3
$ ) ( 8 ) #(
20.4
$ -" ?

20.5 20.4
$ ) ( 8 ) #(
20.5
$ -" ?

20.5
8 ) #(
Dr -" 0 ; Cr

20.1 R 20.1 R
$ ; $ !
"

20.2 20.2
$ ; $ !
"

20.3 20.3
$ ; $ !
"

20.4 20.4
$ ; $ !
"

20.5 20.5
$ ; $ !
"

237
&' (
Dr !
6D 7 Cr
20.1 R
$ -" 0
;
20.2
$ -" 0
;
20.3
$ -" 0
;
20.4
$ -" 0
;
20.5
$ -" 0
;
BILGREDON
20.5 20.4 20.3 20.2 20.1
! " "
<";
BILGREDON
R R
Carrying amount:
)

'

; " 6 7 6 7
-" 6 7 6 7
Carrying amount:
2

'

; " 6 7 6 7
(c) Production unit method

/

" # ; A
"

;
D" "

"? ! K

K
K
K
K
? ,
;#
D" # " # ; K
?
&' ( 238

(c) (1) ASSET AND DEPRECIATION SCHEDULE: PRODUCTION VOLUME METHOD
Calculation of Anual Accumulated Carrying
Date Cost price depreciation* depreciation depreciation amount
(a) (b) (a) 7 (b)
May 31 R R R R
? 62 7 500 6
2 000
? 62 7 550 6
2 000
? 62 7 300 6
2 000
? 62 7 200 6
2 000
? 62 7 450 6 */5
2 000
, "
P & ; "

"
K D '
"
D" ;#
# "

"
(c) (2) THE JOURNAL ENTRIES ARE SIMILAR TO THOSE IN (b) (2).
(c) (3) GENERAL LEDGER

Dr $ 6
7 Cr
20.1 R
8 )%
Dr ; " 0 ; Cr

20.1 R 20.1 R
$ ) ( $ -" ?
20.2 20.1
$ ) ( 8 ) #(
20.2
$ -" ?

20.3 20.2
$ ) ( 8 ) #(
20.3
$ -" ?

20.4 20.3
$ ) ( 8 ) #(
20.4
$ -" ?

239
&' (
Dr ; " 0 ; 6 7 Cr
20.5 R 20.4 R
$ ) ( 8 ) #(
20.5
$ -" ?

20.5
8 ) #(
Dr -" 0 ; Cr

20.1 R 20.1 R
$ ; $ !
"

20.2 20.2
$ ; $ !
"

20.3 20.3
$ ; $ !
"

20.4 20.4
$ ; $ !
"

20.5 20.5
$ ; $ !
"

Dr !
6D 7 Cr
20.1 R
$ -" 0
;
20.2
$ -" 0
;
20.3
$ -" 0
;
20.4
$ -" 0
;
20.5
$ -" 0
;
BILGREDON
20.5 20.4 20.3 20.2 20.1
! " "
<"; */5
&' ( 240

BILGREDON
R R
Carrying amount:
)

'

; " 6 7 6 7
-" 6 7 6 7
Carrying amount:
2

'

; " 6 7 6 7
Study " "

?? ?? ? "
# # %?
11.8 Acquisition of property, plant and equipment during the

financial year
""
;
"

D ;
# ? , "

"
;
# ; " A

6 F ?

12
/
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"
F "
" # "
A #0
20 6 6
6 100 12
K ?
Study " "

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# # %?
11.9 Disposal of property, plant and equipment

Study " " ? "
# # %?
@

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;
# ; ;
# %

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.
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.
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A
241
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; "

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Exercise 11.2
""

# A ? 6,
;
"
?7
""
)

+ ; "
"
;

?
Required:
A B

?
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 )% $ ;
"
Dr ; " 0 ; Cr

20.5 R 20.1 R
$ $ 6
7 $ -"
20.2
$ -"
20.3
$ -"
20.4
$ -"
20.5
$ -"

&' ( 242

Exercise 11.3
""
6 7 A

# A
6" 7 ?
""
) # ;
* ;# ?? ,

" ; $ ? A ; "
; ? 6*
D
"

" ; ; "

?7
Required:
67 A B

?
6#7 A " " " <";?
(a) GENERAL JOURNAL

20.5 R R
May 31 *Realisation of machinery 460 000
Transfer machinery at cost to
realisation account

Realisation of machinery 402 500
Transfer depreciation to realisation account
Loss on disposal of machinery 57 500

Loss on scrapping of machine
*NOTE: The account ``Realisation of machinery'' is used to capture the entries regarding the
disposal of the machinery.
GENERAL LEDGER
Dr $ 6
7 Cr
20.0 R 20.5 R
* )% $

;
243
&' (
Dr ; " 0 ; Cr
20.5 R 20.1 R
$
$ -"
; 6" 7
20.2
$ -"
20.3
$ -"
20.4
$ -"
20.5
$ -"

Dr
; Cr
20.5 R 20.5 R
$ $
$ ;
"
5

"

;

Dr 5

"
; Cr
20.5 R
$

;
BILGREDON
(b) NOTES FOR THE YEAR ENDED 31 MAY 20.5

R R
Carrying amount:
)

'

; " P 6 7 6 7
-" 6 7 6 7
-
"

6 7 6 7
'
6 7 6 7
; "
Carrying amount:
2 N N
'
N N
; " N N
P L L L
&' ( 244

Study " " ? "
# # %?
Exercise 11.4
""
)
; D
?

"" ?
Required:
! " B

?
GENERAL JOURNAL
20.5 R R
May 31 Realisation of machinery 460 000
Transfer machine at cost to
realisation account

Transfer depreciation to realisation account
Bank* 60 000
Cash received for machinery

Profit on sale of machinery 2 500
Sold machinery at a profit
P,
A ; #
"
B ?
GENERAL LEDGER
Dr $ 6
7 Cr
20.0 R 20.5 R
* )% $

;
245
&' (
Dr ; " 0 ; Cr
20.5 R 20.1 R
$
$ -"
; 20.2
$ -"
20.3
$ -"
20.4
$ -"
20.5
$ -"

Dr
; Cr
20.5 R 20.5 R
$ $
$ ;
!
"
; )%

Dr !
; Cr
20.5 R
$

;
Dr )% Cr
20.5 R
$

;
Pro rata depreciation:

@

#
D"
"
" " " ; # "

;
# %
" ; " ? & D;"

";#

-;#

#

;
34 ? / "
F "
9 6 F
?
"

A # 12
Summary
, A
D 67
"

# A A A
"

0
1. Record the depreciation of the current period up until the date of disposal (general
journal):
-#0 -"
' 0 ; "
* A ; "
"

?
&' ( 246

2. Transfer the total accumulated depreciation of the disposed asset to the realisation
account (general journal):
-#0 ; "
' 0

3. Transfer the cost price of the disposed asset to the realisation account (general
journal):
-#0

' 0 , "
6:
2<"; ?7
4. Record the amount earned on the realisation (note that the realisation account is
credited in all three cases):
?
6'870
-#0 )%
' 0

? 6 B 70
-#0 -# 6 -#
7
' 0

?
6 B 70

-#0 ,
6
"
" A
7
' 0

5. Determine the profit or loss on the disposed asset:

? / #

#

A

"

?
? /

# #

A

"
" ?
6. Transfer the profit or loss to the profit or loss account on disposal of that type of
asset (general journal):
? ! 0
-#0

' 0 !
"
???
? 5
0
-#0 5

"
???
' 0

GOLDEN RULE
!

"

;
#

"
;
"
;"

;?
247
&' (
The following information relates to Bacinis:
Balances as at 31 August 20.3: R R

Plant and machinery (at cost) 85 000
Accumulated depreciation: plant and machinery 46 600
67

" ;

A M # ;

< ? ) ;
A "

; ?
6#7 -"
A F " ; # ;
# ; ?
67 3 8 ? ; ;
" " "

8 B ; ; $D 5; ? 3 M # ;
A
; A $D 5 ?

67 3 &# ?

A ; ; A
"
?
Required:
6 7 ! " B
#

D

??
67 A A

? " " #0
67 ; "
6#7 $

67 ! " " " " <";

?

(1) GENERAL JOURNAL
20.4 R R
Jan 31 Plant and machinery (at cost) 90 000
Maxi Ltd 90 000
Jojo machine purchased on credit
Depreciation (1) 1 600

Accumulated depreciation 1 600
Depreciation written off on machine
traded in
Machinery realisation 42 500

Plant and machinery (at cost) 42 500
Transfer cost price of machine traded in
&' ( 248

Accumulated depreciation (1) 24 900
Transferring depreciation of
machine traded in
Maxi Ltd (2) 19 500

Recording trade-in value of Zobo machine

Profit on sale of machinery 1 900
Transferring profit on machine
traded in
Aug 31 Depreciation (3) 15 040

Accumulated depreciation 15 040
Depreciation on plant and machinery
(2) GENERAL LEDGER

67
Dr ; " Cr
20.4 R 20.3 R
8 $ ) #(

20.4
8 -"
20.4 -"
) (

20.4
" ) #(
6#7
Dr $
Cr
20.4 R 20.4 R
8 ! 8 ;
; "
!
$D 5
;

CALCULATIONS:
Depreciation on machine traded in R
,
? 6 6 12 7

? J 8 ?
20 5
1006 126 6 7 7

249
&' (
Trade-in value
7
Depreciation on machinery still in use
M # ;
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
R R
Carrying amount:
)

'

; " 6 7 6 7

6 L 7
-" 6 L 7 6 7 6 7
-
"

6 7 6 7
'
6 7 6 7
; " 6 7 6 7
Carrying amount:
2
'
6 L J 7
; " 6 L J 7 6 7 6 7

3 8 ? ) ) %
)) !
# " ; M#

?
3 3 # ? # " ; 8 ; )

$ " "
?
, M# ; #; #

)) !
"
'
; ; M.! ' ;" ? , M# ; A
"
+
? , ' ; A

8 ? )) !
"

?
67 -" M# 8 ;

" F " ;

; ?
6#7 ,
;
" ' ;

; +
;
?
&' ( 250

Required:
! " A

" " #

-;# ?0
6 7 $

67 -"
67 ; "
67 $


GENERAL LEDGER
6 7
Dr $ 6
7 Cr
20.3 R 20.3 R
8 ) #( 8 $
8 M.! ' ;"

8 )% - ) (

20.4
8 ) #(
67
Dr -" Cr
20.3 R 20.3 R
8 ; - !

"
- ;
"

67
Dr ; " Cr
20.3 R 20.3 R
8 $ 8 ) #(

8 -"
- ) ( - -"

20.4
8 ) #(
251
&' (
67
Dr $
Cr
20.3 R 20.3 R
8 $ 6
7 8 ;
"
M.! ' ;"
5

"

;

CALCULATIONS
Balances on 31 December 20.2: R
$ 0 M#
8

; " 0

M# 0 F 6 6
8 0 F 6 3
6 12

Depreciation:
M# 8 ? J 8 ?

F6 6 6
12
M# 8 ? J 8 ?

6 L 7
8 -;# ?0
F6 6
' -;# ?0
6 J 7 6 7 6
12


) ) D A ) D ,
# A ; 8 ?? 1
A " F " ;

+ 6D
;7
; ?
3 3 # ? "

;

; " "
# ?
3 8 ? ; # ? A

?
Required:
! " A

""#
# %
) D
,
" " #(
$ 6
A

70
&' ( 252

6 7 $

67 -"
67 ; "
67 $


GENERAL LEDGER
6 7
Dr $ 6
7 Cr
20.0 R 20.3 R
8 )% $ ) (
20.2
3 )%

20.3 20.3
" ) #( 8 $

20.4
$ ) (

20.4
" ) #(
67
Dr -" Cr
20.1 R 20.1 R
$ ; $ !
" 6 7

20.2 20.2
$ ; $ !
" 67

20.3 20.3
$ ; $ !
" 67

20.4
8 ; $ !
" 67 6
7
20.4
$ ;
" 67

253
&' (
67
Dr ; " Cr
20.2 R 20.1 R
$ ) ( $ -" 6 7
20.2
$ -" 67

20.3 20.2
$ ) ( " ) #(
20.3
$ -" 67

20.3 20.3
8 $ " ) #(

67 8 -" 67
20.4 20.4
$ ) ( $ -" 67

20.4
" ) #(
67
Dr $
Cr
20.3 R 20.3 R
8 $
8 ;
!
"
; P )%

P )
CALCULATIONS
-" 0 R R
6 7 8 ? $ ? 0 6 25 6 9
100 12
67 " ? $ ?0 6 25 15 000

100
67 &
;
" ? $ ?0 6 25 15 000
100
;
3 # ? $ ?0 6 25 6 6 10 000 25 000
100 12
67 &
; 6
7
" ? 8 ?0 6 25 6 3 3 750
100 12
67 ; 6 7

" ? $ ?0 6 25 20 000
100
67 ; " J &

;
6 L L L 7
&' ( 254

, A ; ;
H .
8 0
Machine X Machine Y
Date of purchase 1 March 20.0 1 September 20.1
Purchase price (cash) R40 000 R88 000
Installation cost R4 000 R4 000
Estimated useful life 4 years 5 years
Scrap value R4 000 R12 000
,

+ 6D
;7 ; " " ? 3

? ; H A

?
Required:
! " A

8
&# ? " " #(
0
6 7 $
6;
H .7
67 $

67 ; "
67 -"

GENERAL LEDGER
6 7
Dr $ 6
7 Cr
20.1 R 20.1 R
$ ) #( $
" )%

20.2
&# ) (

20.2
$ ) #(
67
Dr $
Cr
20.1 R 20.1 R
$ ;
"
)%
5

;

255
&' (
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
; &# !

"
20.2
&# ;
"

CALCULATIONS:
Depreciation to be written off R
Machine X
44 000 4 000 "

4
$ ? J &# ?

$ ? J ? 610 1000 6 12
6 7

Machine Y
92 000 12 000 "

5
" ? J &# ? 616 1000 6 12

6 7
SELF-ASSESSMENT
Having studied this study unit, can you:
. +
E
. D" A
" +

;E
.
"
" " " <";E
.

"
" " " <";E
. " ;
D"

E
&' ( 256

STUDY UNIT
12
Other non-current assets
Learning outcome

# #

+

;
?
Contents
I "

? /
? / #

? &
;

? ,"

; ;
?? '

;

?? /
;

KEY CONCEPTS
. / #
. ;

. 3
. '

;
. 5

. /
;

. 3

. /
; ;
257
&' (
12.1 Introduction
* +

#

#

? , #

6" " " <";7 A

? /

+

6 #

7 A #

?
Study " " ? "

# # %?
12.2 Intangible assets

/ 6' ?7
#

==??? # +;

A
"

#

"
""

;
" "

A #

"

; A ; #
D" A ?>>
Study " " ? "

# # %?
12.3 Financial instruments

Study " " ? "
# # %?
12.4 Types of other financial assets and method of recording

them
@

<

# #%
?
12.4.1 Cash investments

2

#
;
" # A

0
. #

. #

;

;
; A
# ;
" # "
;

;" # A A

" ?
,
; # <
" ?
,

;
; # ;

"

D "

? ,
%
;

D
?
Study " " ?? "

# # %?
&' ( 258

12.4.2 Investments in shares
" " ;
;
"

;"? ,
;

==
>>?
-

;

;

D A
;" A

? , A
# "
? ,
"
#

;

?

D

A

" ;

"
?
Study " "

?? ? "
# # %?
259
&' (
&' ( 260
TOPIC D
ACCOUNTABILITY FOR CURRENT

AND NON-CURRENT LIABILITIES
Learning outcome
,
# # D"

"
+ #
D" A ?
261
&' (
CONTENTS
Study unit Page

'2*, 5/)/5/,/2
*3*+'2*, 5/)/5/,/2
&' ( 262

13
STUDY UNIT
Current liabilities
Learning outcome

# # % A ; #
# %

Contents
I "

? /
? ,

? #

? -

; "

? '

?
D

??
D

??
D

??
D

+
;
263
&' (
KEY CONCEPTS
. ,
. #
. :+ ,D "#

. /
;
"#
# # A
. D"

. !

. -
"#
. !
"#
. ;

13.1 Introduction
#
; A " A (

? /

;
"
#
#
? /
D"
"; # A A

?
5#
#

#
"; A
%
" A D " ;
+ #
A ";

% " D " ;
?
, A ;

#
0
.
. D"

. ;

.
;
"# + ; # A
. :+ ,D "#
. #%
Study " "

? ? "
# # %?
13.2 Trade creditors

,
"

; "

?
@
" A
" " ; ;

?
;

;
"

? ""

D;" 5$ ,
"
;

8 ? ;
)- ""
? 3 8 ? 5$ ,

<

;
)- ""
> ?
,
A #
A
0
&' ( 264

Dr ' 0 )- ""
Cr
20.1 R 20.1 R
8 )% 8 !

;

Dr ;
Cr
20.1 R 20.1 R
- !

8 ' 0 )-
""

COMMENTS
. Settlement discount received is deducted from purchases in determining the cost of

purchases.
. In this specific example we showed two entries on the debit side of the creditors
account. The total of the two amounts is normally recorded in the creditors column of
the cash payments journal. Only one posting, representing both accounts is then
necessary.
. Creditor BAD Suppliers will be one of many creditors. A creditors control account in the
general ledger will then be in use and will represent all individual creditors appearing in
the creditors ledger. A debit to a creditor's individual account will be included in the
debits to the control account and vice versa.
. In study unit 6 we explained the influence of Settlement discount received on VAT. In
this study unit we will be ignoring VAT.
Study " "

? ? "
# # %?
13.3 Sundry current liabilities

,
"
#
? ;

" D"

:, "# ? / ;

#?
,
;; A D"

;

A
A B
;
?
Study " " ? "

# # %?
GOLDEN RULE
, " + ; # # " A D ;
;

#

#
; "
?
265
&' (
13.4 Disclosure in the statement of financial position
/ & "
#

A

; "
0
NAME OF ENTERPRISE
STATEMENT OF FINANCIAL POSITION AS AT ...........
ASSETS R
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
, A #

A % ; "
+B
; # ! ,

-;# ? 0
R
,

)%
:,
/ ;
,
; "
A # A #
A
0
PICNIC TRADERS
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.1 (extract)
ASSETS R
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
Study " " ? "

# # %?
13.5 Creditors control account

,
"

6
#
7 ?
&' ( 266

,

;;
>

#
;
# <
>
#
?
!
"

%
" #

? 3 ;
A

;

#
B
#
; ;
"

?
, " #

;;

A
0
/
"

!
!

6
B
7

% "
,
; !
'
6
"

B
7
;
/
"

!
!

6#

B
7

% "
,
; !
'
6#
7
"

B
;
/

"+ !
!

6#
;
B
7

% "
,
; !
'
6#
7

";
B
;
!
# ; B

;
#

? ,
; B
;

# "

#

"

;

;
?
;

#

;
#
#
A

> #
;"? , #

;
# <

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; A "

>

A
"

B

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, A
A
#A #

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0
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(
"

#

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6

7
. / #
. / ; ;

B
. /
#
. 3;
"
A B 6 ;7 A
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(
267
&' (

# A
#

D" A D
0
Exercise 13.2
, A ;

,"+, " ,
0
6 7 List of creditors' balances as at 30 September 20.2 as per creditors ledger:
R
5 )
/
;
' D
8 M

67 Balance of the creditors control account in the R

?0
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TIP-TOP TRADERS
(1) GENERAL LEDGER
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(2) CREDITORS LEDGER

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Dr Cr Balance
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(3) LIST OF ADJUSTED BALANCES PER CREDITORS LEDGER AS AT

30 SEPTEMBER 20.2:
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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.
Study " "

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&' ( 270

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MY COMPANY
GENERAL LEDGER
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MY COMPANY
ASSETS R
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 portion of long-term borrowings 200 000
COMMENT
We will explain more about non-current liabilities in study unit 14.

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(1) GENERAL LEDGER
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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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&' ( 274

14
STUDY UNIT
Learning outcome

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Contents
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KEY CONCEPTS
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14.1 Introduction
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275
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Study " "
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14.2 Recording of a non-current liability in the books and its

disclosure in the financial statements
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14.2.1 Long-term loans and mortgages (Long-term borrowings)
Study " " ? "

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Exercise 14.1
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ECO
LEDGER ACCOUNTS
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8 5
&' ( 276

ECO
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.1 (EXTRACT)
ASSETS R
Long-term loan from ABC Bank 114 000
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
Study " "
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Exercise 14.2
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A COMPANY
LEDGER ACCOUNTS
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20.1 R 20.1 R
8 ""
8 ""
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A COMPANY
ASSETS R
Non-current liabilities 2 000 000

Long-term borrowings 2 000 000
2 000, 15% R1 000 debentures redeemable on
31 December 20.9 2 000 000
COMMENTS
. The amount received as a result of excess applications is repaid to the unsuccessful

applicants.
. Debentures may also be secured by a mortgage.
. The annual interest expense on the debentures will be shown in the statement of profit
or loss and other comprehensive income.
. On the statement of financial position as at 31 December 20.8 the debentures will be
shown as a current liability since they will be redeemed within the next 12 months.
&' ( 278

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B BOMB ENTERPRISES
(1) LEDGER ACCOUNTS
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F $ 0
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B BOMB ENTERPRISES
THE YEAR ENDED 30 SEPTEMBER 20.1 (extract)
R
Profit from operations xx xxx
Finance costs: (x xxx)
Interest expenses 3 400
&' ( 280

B BOMB ENTERPRISES
(3) STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 20.1 (extract)
ASSETS R
Non-current assets 100 000
Property, plant and equipment 100 000
Total liabilities 83 400
17% Long-term loan secured by a first mortgage over
land. Repayable in annual instalments of R10 000.
The first instalment is payable on 30 June 20.2 70 000
Trade and other payables 3 400
Current portion of long-term borrowings 10 000
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
Now that you have studied this study unit, can you describe the following, record the
necessary entries and calculations in the books and show how they will appear in the
statement of financial position:
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281
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&' ( 282
TOPIC E
ACCOUNTING REPORTING
Learning outcome
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CONTENTS
Study unit Page

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&' ( 284

15
STUDY UNIT
Financial statements of a sole

proprietorship
Learning outcome

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Contents
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15.1 Introduction

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15.2 Establishment of a sole proprietorship

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Exercise 15.1
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JB TELEVISION SERVICES
GENERAL JOURNAL
20.1 R R
$ )%
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Deposit of cash in the bank account of the
entity and recording of other assets brought
into the entity at valuation
&' ( 286

COMMENTS
. On 1 March 20.1 ``Capital'' indicates the interest of J Brewis (the owner) in his
business. Different meanings are attached to the word ``capital'' in the financial and
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.
3 $ ?
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0
STATEMENT OF FINANCIAL POSITION AS AT 1 MARCH 20.1
ASSETS Note R
Non-current assets
! " " <";
Current assets
'

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Total assets
Total equity
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NOTES FOR THE PERIOD ENDED 1 MARCH 20.1
" 0
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2 Property, plant and equipment Vehicles Equipment Total
Carrying amount:
Beginning of year 14 000 8 000 22 000

Cost 14 000 8 000 22 000
Accumulated depreciation (Ð) (Ð) (Ð)
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GENERAL LEDGER
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15.4 Drawings

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&' ( 288

J B TELEVISION SERVICES
GENERAL LEDGER
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20.2
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COMMENT
. 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''.
15.5 The presentation of equity in the statement of changes in

equity and statement of financial position
Study " "
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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 20.2
Capital
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POST-ADJUSTMENT TRIAL BALANCE AS AT 31 DECEMBER 20.1.
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&' ( 290

JEFF'S MAINTENANCE SERVICES

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Revenue
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3 Property, plant and equipment Vehicles Equipment Total

R R R
Carrying amount:

Cost 17 000 13 000 30 000
Accumulated depreciation (3 400) (1 300) (4 700)
Depreciation for the period (3 400) (1 300) (4 700)
Carrying amount:
End of year 10 200 10 400 20 600

Cost 17 000 13 000 30 000
Accumulated depreciation (6 800) (2 600) (9 400)

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&' ( 292

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(1) TRIAL BALANCE OF PETER PUMPKIN AS AT 28 FEBRUARY 20.1
Dr Cr
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293
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PETER PUMPKIN
THE YEAR ENDED 28 FEBRUARY 20.1
Note R
Revenue
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PETER PUMPKIN
28 FEBRUARY 20.1
Capital
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&' ( 294

PETER PUMPKIN
ASSETS Note R
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PETER PUMPKIN
(4) NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.1
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3 Property, plant and equipment Land and Furniture Total

buildings and fittings
R R R
Carrying amount:

Cost 100 000 42 000 142 000
Accumulated depreciation (Ð) (5 000) (5 000)
Depreciation for the period (Ð) (6 300) (6 300)
Carrying amount:
End of year 100 000 30 700 130 700

Cost 100 000 42 000 142 000
Accumulated depreciation (Ð) (11 300) (11 300)
295
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(2) TRANSACTIONS, 10% VAT INCLUSIVE, DURING FEBRUARY 20.1:
20.1 R
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KUMANBUY GENERAL DEALER
(1) RECORDING OF TRANSACTIONS IN THE SUBSIDIARY JOURNALS
CASH RECEIPTS JOURNAL FOR FEBRUARY 20.1 CRJ12
VAT VAT Settlement Sundry accounts
output input discount
granted
Doc Date Details Fol Bank Sales Dr Debtors Dr Amount Fol Details
R R R R R R R
'/ J '

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- -; -5
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&' ( 298

CASH PAYMENTS JOURNAL FOR FEBRUARY 20.1 CPJ12
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PURCHASES JOURNAL FOR FEBRUARY 20.1 PJ12
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SALES JOURNAL FOR FEBRUARY 20.1 SJ12
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PURCHASES RETURNS JOURNAL FOR FEBRUARY 20.1 PRJ12
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299
&' (
SALES RETURNS JOURNAL FOR FEBRUARY 20.1 SRJ12
Credit Sales
Date Details note Fol returns VAT output Debtors
R R R
' ' -5

5 5 5
(2) GENERAL JOURNAL Ð FEBRUARY 20.1

J12

R R
28 Credit losses L27 840
VAT input L12 84
B Barnard/Debtors DL2
control L7 924
B Barnard's account written off
Depreciation L28 9 000

Accumulated depreciation: Vehicles L6 5 000
Furniture and equipment L5 4 000
Depreciation provided at 10%
pa on cost
Telephone expenses L24 240

VAT input L12 24
Accrued expenses L29 264
Telephone account for February outstanding
*VAT control L9 2 048

VAT input L12 2 048
Transfer of VAT input
*VAT output L13 1 416

VAT control L9 1 416
Transfer of VAT output
P / :, "
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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
(5) DEBTORS LEDGER, CREDITORS LEDGER AND APPLICABLE RECONCILIATIONS

DEBTORS LEDGER
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RECONCILIATIONS
R R
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307
&' (
(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
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
Feb 28 Sales L14 100

Sales returns L15 100
Purchases returns L17 150

Purchases L16 150
Trading account L31 237 130

Inventory L3 56 080
Purchases L16 181 050
Closing transfer
Inventory L3 60 000
Sales L14 241 070
Closing transfer
&' ( 308

20.1 R R
Profit or loss L32 63 940
Transfer of gross profit
Feb 28 Profit or loss L32 78 893

Repairs L18 4 650
Petrol L19 3 304
Stationery L20 364
Water and electricity L21 6 748
Rental expenses L22 24 000
Wages and salaries L23 27 600
Telephone expenses L24 2 342
Credit losses L27 840
Depreciation L28 9 000
Bank charges L30 45
Transfer of income and expenses to profit
or loss account
Capital L10 14 993

Profit or loss L32 14 953
Transfer of loss for the period
Capital L10 10 000

Drawings L11 10 000
Transfer of drawings

THE YEAR ENDED 28 FEBRUARY 20.1
Note R
Revenue 2 241 070
Inventory: 1 March 20.0 56 080
Purchases 181 050
237 130
Inventory: 28 February 20.1 (60 000)
Gross profit 63 940
Distribution, administrative and other expenses (78 893)
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
Credit losses 840
Depreciation 9 000
Bank charges 45
Loss for the year (14 953)
Other comprehensive income for the year Ð
Total comprehensive loss for the year (14 953)
309
&' (
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 20.1
Capital
R
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NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.1
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16
STUDY UNIT
Nonprofit entities
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Example
STEAR TENNIS CLUB

RECEIPTS AND PAYMENTS STATEMENT FOR THE YEAR ENDED 30 JUNE 20.2
Receipts R Payments R
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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
&' ( 316

painting of the tennis courts. On the same date the amount was invested as a fixed deposit at
ABC Bank at an interest rate of 10% per annum. The interest is received annually on 30 June.
No tennis courts were painted during the year ended 30 June 20.1. It was decided, as a
general policy, to invest all surplus interest amounts at ABC Bank as fixed deposits for a year.
During the year ended 30 June 20.2, the tennis courts were painted at a cost of R750. The
surplus interest was invested according to general policy at an interest rate of 10% per annum.
Required:
A A

A # #?
Dr Cr
Expend- Non- Expend- Non-
able expendable expend-
(income) able (income) able
(capital) (capital)
20.1 R R 20.0 R R
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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
&

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FUNDS AND LIABILITIES

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Exercise 16.2
SPECIAL FUND
Income from a fund which must be used to purchase property, plant and equipment.
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revenue from the fund may only be

used for the building of tennis courts. On the same date the amount was invested as a fixed
deposit at ABC Bank at an interest rate of 10% per annum. The interest is received annually on
30 June. No tennis courts were built during the year ended 30 June 20.1. It was decided, as a
general policy, to invest all surplus interest amounts at ABC Bank as fixed deposits for a year.
During the year ended 30 June 20.2, the tennis courts were built at a cost of R70 000.
Required:
A A

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&' ( 318

Dr "
Cr
(capital) (capital)
20.1 R R 20.0 R R
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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
ASSETS Note R
Non-current assets
! " " <";
&

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N &D "

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STEAR TENNIS CLUB
NOTES FOR THE PERIOD ENDED 20 JUNE 20.2 (extract)
* 6D 7
Property, plant and equipment Land and buildings

R

6

70
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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
PART OF ACCUMULATED FUND

Income from a fund which must be used to pay general (operational) expenses
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STEAR TENNIS CLUB

INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 30 JUNE 20.2
(extract)
R

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STEAR TENNIS CLUB

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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:
STEAR TENNIS CLUB

INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED 30 JUNE 20.2
(extract)
R

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7
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65
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&' ( 322

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67
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Solution: Comprehensive example

PRETORIA MODELLER'S CLUB
1 GENERAL LEDGER
Dr 8% Cr

(capital) (capital)
20.2 R R 20.1 R R
&# $0 #
N $ ) #( N
) ( 20.2
&# )%0 /

;

20.2
$ ) #(
PRETORIA MODELLERS' CLUB

2(a) REFRESHMENTS: TRADING STATEMENT FOR THE YEAR ENDED
28 FEBRUARY 20.2
R
Revenue
'

6 7
/ 6 &# ? 7

!

/ 6 &# ?7 67
Gross profit
323
&' (
2(b) RECEIPTS AND PAYMENTS STATEMENT FOR THE YEAR ENDED
28 FEBRUARY 20.2
R
)% # &# ? 6 7
"

$;#
"

1 ##
;

/
;

;

!;
6 7
," D"

@

@
$ #

1 ##
D"

;
"

/
D"

)% # &# ? 6 #7

2(c) INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED
28 FEBRUARY 20.2
R
Income
$;#
"
6 7 L L 7 7 7 67

;

6 ##
7
4
"

;

Expenditure 6 7
1 ##
D"

-" <";
/
65 )% # 7
," D"

@

@
Surplus for the year
&' ( 324

ASSETS Note R
Non-current assets
! " " <";
&

N 5 )% F "
8%
Current assets

/ 6
;
7
, #

'

<

Total assets

Funds
; 6#7
"

* D"#

8% ;
2D"#

8% ;
Total liabilities
5 + ; # A N 5 )% 6
#

; #
7
Current liabilities
/ ;
Total funds and liabilities
325
&' (
(4) NOTES FOR THE YEAR ENDED 28 FEBRUARY 20.2
* 6D 7
Land and Furniture

Property, plant and equipment buildings and Total
equipment
R R R
Carrying amount: )
'
"
; " N 6 7 6 7
-" N 67 67
Carrying amount: 2
'
"
; " N 6 7 6 7
CALCULATIONS
67
Dt $;#
"
Cr
20.1 R 20.1 R
$ ) #( $ ) #(
20.2 20.2
&# 2
8 &# )% '8
/ ; D"+ ) (
8 P
) (

20.2 20.2
$ ) #( $ ) #(
P )
Both #
;
#

; "
0 , # #

#?
, # ;;#
"
# " # A
?
&' ( 326

Dt $;#
"
Cr
20.1 R 20.1 R
$ ; 8 $ / ;
8
20.2 20.2
&# 2
8 &# )% '8
/ ; ; 8
8
/ ;
D" 8 P

P )
Dt ; 6$;#

"

7 Cr
20.1 R 20.1 R
$ ) #( $ $;#
"
8
20.2 20.2
&# $;#
"
8 &# ) (

20.2
$ ) #(
,
#

A

;
"
?
Dr / ; 6$;#

"
7 Cr
20.1 R 20.1 R
$ $;#
"
8 $ ) (
20.2 20.2
&# ) ( &# $;#
"
8

20.2
$ ) #(
,
#

A
#
;
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?
6#7 ; K 6 L L 7 K
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.

, A ;
4 4 '#0
BALANCES AS AT 31 DECEMBER 20.4 R
4

)% 6# #7
' %
N -;# ?
#

," D"

- ;0
!

@

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)
6
7
5 ;" ;
6
7
/;";

0

; " N -;# ?
$ D"

2

) 0
!

@

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$;#
"

& 0

; " N -;# ?
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/
D"

6! ; 8 ?7

A

;
F $
/
" " N -;# ?
&' ( 328

67 ) -;# ? ; ?
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# #
;

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67 /;";

;
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;

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67 & ;
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67 /
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? 1
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; #>
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;" A # #%

; ;

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6%7 , ;

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Required:
! " A
;
4 4 '#0
? , ; D"
; -;# ?
6NB: A

" # ;

" ?7
? ,
; "

-;# ??
? , " " " <"; ?
329
&' (
GREEN GOLF CLUB
(1) INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED
31 DECEMBER 20.4
R
Income 7
$;#
"
7
6 L 7 L 7 67
4

7
/ ; ; #

7
" 6#7

@
6 7
/ ; ; ; 7

4
" 67

@
6 7
- 7
Expenses 6 7

A
6 J 7 7
/
; 6 F 6 7 7
$ 7
," D"

6 J 7 7
6 L 7 7
/
6 L J 7 7
-" 7
/;";

6F 6 7 7
& 7
' % 6 N 7 7
Surplus for the year 8 900
&' ( 330

GREEN GOLF CLUB
ASSETS Note R
Non-current assets
! " " <";
Current assets
/ 6
;
7
! ";
6 L 7
, #
6 L 7
'

<

Total assets

Funds
; 67
Total liabilities

5 + ; # A N F ;
6 #
; D " " 7
Current liabilities
, "#
W L 67X

/ ;
331
&' (
GREEN GOLF CLUB
* 6D 7
Property, plant and Land, build-

equipment ing and Crockery and Implements
improve- linen and tools Furniture Total
ments
R R R R R
Carrying amount:
)

'

; " 6N7 6N7 6 7 6 7 6 7
-" " 6N7 6N7 6 7 6 7 6 7

6N7 6 7 6N7 6N7 6 7
Carrying amount:
2

'

; " 6N7 6 7 6 7 6 7 6 7
CALCULATIONS
67
Dr $;#
"
Cr
R R
/ ; D" / ;
/ ; )%
;

6#7 Bar gross profit R R

Less: '

3"
!

Less: '

4
"
67 Dining room gross profit

Less: '

6 6 F7
3"
!

Less: '
6) 7
4
"
&' ( 332

67 Accumulated fund R
) 6 &# ? 7
Add: Surplus for the year 8 900
Entrance fees 10 500

(e) Interest payable R

F
Less0 !
-
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
&' (
, A ;
" ,
'#0
6 7 Statement of financial position items as at 31 December 20.1
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
67 Cash transactions for the year ended 31 December 20.2
Receipts: R
:

$;#
"
0 ?
?
?
2

/
0 &D "

';"
"

-

Payments:
$" D

;

,
#

';"
" D"

1 ;
@

$
0 ,

2<"; 6"
";# ?7
,

&' ( 334

67 2
;
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?
6#7 / -;# ?0
,
#
N

;
N
67

; " ; ?
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"
? #?
67 , #
;;#
;;#
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"

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;
# ; " <"; F " ;
;
#?
6B7 ,
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, #% ; #
;"
"
D"

? , " ;
"
D"#?
Required:
! " A

;
" ,
'#0
? , ;;#
"

? , ; D"
; -;# ?
? ,
; "

-;# ??
? , " " " <";
;
?

SPRING TENNIS CLUB
(1) GENERAL LEDGER
Dt $;#
"
Cr
20.2 R 20.2 R
8 ) #( 8 ) #(
- / ; D+ - )% N ?
" 0 )% N ?
6 6 6 7 )% N ?
) 6" "7 ( '

) 6 +

7 (

20.3 20.3
8 ) #( 8 ) #(
335
&' (
SPRING TENNIS CLUB
(2) INCOME AND EXPENDITURE STATEMENT FOR THE YEAR ENDED
31 DECEMBER 20.2
R
Income 7
:

>
7
$;#
"
7
/
6

7 7
-
7
Expenses 6 7
$" D
7
'

6 J 7 7

;
6 J 7 7
6 L 7 7
,
#
6 L J 7 7

7
1 ; 7
@
6 J L 7 7
$ 7
D"

6 6 7 7
-" 67 7
5

"" <"; 67 7
';"
"0
6#7 7
Deficit for the year 67
&' ( 336

SPRING TENNIS CLUB
ASSETS Note R
Non-current assets
! " " <";
&

&D "
, )% 6 F "7
Current assets
/
6 L 7
, #
W L 67X
'

<
W L 6 7X
Total assets

Funds
; 67
"

* +D"#
';"
"

Current liabilities

, "#
W L L 6 7X

/ ;
SPRING TENNIS CLUB

*
Property, plant and equipment Equipment Total

R R
Carrying amount: )
'
"
; " 6 7 6 7

6 ; A
7
-
"

; 67 67
'
" 6 7 6 7
; "
-" 6 7 6 7
Carrying amount: 2
'
"
; " 6 7 6 7
337
&' (
CALCULATIONS
67 Loss on sale of equipment and depreciation
Accumulated
Cost price depreciation
R R
)
@ 6 7 67

!
" ;# ?

5

"" <"; 6 J 7
K
Depreciation for the year R
6 J 7 6 F

6 F 6

6#7 Championship shortage R
2D"

/ ;0 2
N
/
6 6 F7

67 Interest accrued
/
#
6 6 F7
/

Less:
6 - ? 7

6 - ?7
67 Savings account R

)
Add: -"

67 Bank
)
Add: "

Less: !;

)
67 Accumulated fund
) 6 - ? 7

Add: Entrance fees 864
Less: Shortage for the year 508
) 6 - ?7
6 7 Accrued rental expenses
!# " ; K 6

Less: ; "
) 6 - ?7
Less: ! " -;# ?

&' ( 338

SELF-ASSESSMENT
. " "
E
. " " "
";

;
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. " "
;
E
. " " ; D"
;
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. " "
; "
"

;
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.
<

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339
&' (
17
STUDY UNIT
Incomplete records
Learning outcome

# # #+

; ; ;"
?
Contents
I "

? /
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;"

?? / ;"

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+ #

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&' ( 340

KEY CONCEPTS
. / ;"
. ;

#
. '
#

;
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;;

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+"

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17.2 Disadvantages of using imcomplete records

, ;

;? ,
; #
;;

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0
17.2.1 Incompleteness
/

#

; A
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D" ; # ;

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%"
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* +

+ #
;"

A
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%" A # #

#
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17.2.3 No details of profits and/or losses

)
; "

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341
&' (
17.3 Calculation of profit/loss from incomplete records
& D " "

"
(

#

# ? @

; " (
" # ; #

;
;"
" # " A "
" ?
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- - %"

# %

#

? 3 " ?

#

A
0
R
&

/
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)% 6 #7
!

5 0 -8 )%
&

;

#
;
# " " " ? ?
D DONOVAN
STATEMENT OF ASSETS AND LIABILITIES AS AT 30 APRIL 20.1
ASSETS R
Non-current assets
! " " <";
Current assets
/
, #

'

<
6 L 7
Total assets
Total equity
'" P
Total liabilities
5 + ; # A N -8 )%
Current liabilities
, "#

P )
&' ( 342

3 " ? "
"" #
A
0
R
&

/
#

)%
!

5 0 -8 )%
/ A

- - A A ; ?
&
;
# " # F " ;?
Required:
' "
" "

;

#

" ?
, " " ? ;

# ;
0
Assets R
&

/
#

)%
!

Liabilities 6 7
5 0 -8 )%

Capital
/ ;
; " #A A "
;
;
# ; B
;
; A
" 0
R
'" " 6 " ?7
'" # " 6 " ? 7 6 7

-" 6 7
- A

Estimated profit for the year
343
&' (

;

#

" ? A # " " 0
D DONOVAN
STATEMENT OF ASSETS AND LIABILITIES AS AT 30 APRIL 20.1
ASSETS R
Non-current assets
! " " <"; 6 J 7
Current assets
/
, #

'

<
6 L 7
Total assets
Total equity
'" P
Total liabilities
5 + ; # A N -8 )%
Current liabilities
, "#

R
P )0 " ?
P 2
; "
P 5
A
6 7

,%

; ; " ;
A

/ & "
?
Study " "

? ? "
# # %?
17.4 Conversion from a single entry into a double entry

system
17.4.1 Where subsidiary journals are kept
Step 1
! "
;

#
# " 6

; "
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>>

A

;
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6 B 7 "

? ,
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Step 2
, D
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#
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&' ( 344

,

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)
"

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# %
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; ; ;"

;;
#
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;
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Step 3
! "
;; #% #
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, D
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purchases sales. /
# ;
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345
&' (
"

# ;
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sales
#

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purchases.
Step 6
@
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D
; D" ;
;
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;
#

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< ;
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;
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Exercise 17.2
' '

; #

?
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%

# ?

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A
#

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)

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R
:
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&' ( 346

67 -"
# A ;
F " ;

F " ;
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" ? 0
R
A

! "

/ 0 $

-#

'

Required:
! "

;
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NB: *
< ?
, " " $ ? ;

# ;
0
Assets R
:

&

/
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)%

Liabilities 6 7
'

A

Capital
- ;

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Dr -#
Cr
R R
)0 -#
#( )%0 -#

P '

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(

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347
&' (
Dr '
Cr
R R
)%0 '
)0 '
#(
)0 '
( !

P

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?
Dr /
Cr
R R
)% ! "

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Dr @
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)% A

A
!

,
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&' ( 348

C CAITY
YEAR ENDED 30 APRIL 20.1
R
Revenue
'

6 7
/ 0 $ ?

!

/ 0 " ? 6 7
Gross profit
-
# ;
D"

0 6 7
@

@

D"

," D"

/

3 D"

)%

-" 6 L 7P
Profit for the year
3 ;"
; N
, ;"
;
P :
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
) $ ?
, ;"
;
- A
6 7
) " ?
349
&' (
C CAITY
STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 20.1
ASSETS Note R
Non-current assets
! " " <";P
Current assets

/
, #

! ";

'

<

Total assets

Total equity
'"
Current liabilities
, "#
6 L 7
P 6 7 7 L 6 7 7 K

I I A I ,

%" " "
?
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#
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)

80
20.1 20.2
R R
:
6
7
&
6
7
/ 0 ,
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5 + ; # A
'

D"

! " D"

.

#
A A 8 ?0
67 I I A A
?
6#7 -" F " ;
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F " ;

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67 ; ;
# A
#?
&' ( 350

Required:
6 7 '
; " (
I ,

8 ??
67 ! "
; "
I ,

8 ??

(1) CALCULATION OF PROFIT/LOSS:
KACEY TRADERS
STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 20.1
ASSETS R
Non-current assets
! " " <"; 6 L 7
Current assets
/
, #

! ";

'

<

Total assets
Total equity
'" P
Total liabilities
5 + ; # A

Current liabilities
, "#
6 L 7
P )
- ; "0

Assets R
:

&

/
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(2) KACEY TRADERS

STATEMENT OF FINANCIAL POSITION AS AT 31 JULY 20.2
ASSETS R
Non-current assets
! " " <"; 6 L J 7
Current assets
/
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Total assets
Total equity
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CALCULATIONS
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M MANDOSA
YEAR ENDED 30 JUNE 20.2
R
Revenue
'

6 7
/ 0 8 ?
!

/ 0 8 ? 6 7
Gross profit

3 ;
;
/
#

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Profit for the year

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M MANDOSA
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 20.2
Capital
R
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' # "
, ;"
;
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6 7
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M MANDOSA
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 20.2
ASSETS R
Non-current assets
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Current assets
/
, #

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Total assets

Total equity
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, "#

P L 6 7 7 L 6 7 7 K
SELF-ASSESSMENT
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357
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# 

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Introduction and overview of the module (v)

Topic A THE BASIC PRINCIPLES AND SPHERES OF ACCOUNTING

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Topic B COLLECTING AND PROCESSING THE ACCOUNTING DATA OF

Topic C ACCOUNTABILITY FOR CURRENT AND NON-CURRENT ASSETS 

Topic D ACCOUNTABILITY FOR CURRENT AND NON-CURRENT LIABILITIES 

Topic E ACCOUNTING REPORTING 

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Meaning of action words

THE BASIC PRINCIPLES AND

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The nature of accounting theory,

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1.2 What is accounting?

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1.2.2 The nature of accounting

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1.3 Universal accounting denominator

1.4 Forms of ownership

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1.5 Users of financial information

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1.6 The fields of accounting

1.6.1 Financial accounting

1.6.2 Management accounting

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1.8 Accounting policy

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1.9 Disclosure of accounting policy

1.10 International Financial Reporting Standards (IFRS)

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1.11.2.2 Underlying assumption

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1.12 Exercise and solution

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The financial position

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Topic C ACCOUNTABILITY FOR CURRENT AND NON-CURRENT ASSETS

Topic D ACCOUNTABILITY FOR CURRENT AND NON-CURRENT LIABILITIES

Topic E ACCOUNTING REPORTING

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