Professional Documents
Culture Documents
BANK
2019
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BFC1010: Fundamentals of Accounting
Table of Contents
2. JOURNALS.....................................................................................................................14
3. CONTROL ACCOUNTS.................................................................................................47
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BFC1010: Fundamentals of Accounting
Every business at some time will borrow or invest money. If you wish to borrow money you must
pay for the use of that money (interest expense). If you invest money you will earn income on the
money invested (interest income), because you are giving up the right to use that money for a
certain period.
i = Pxrxt
The price paid for using the money is called interest ( i ) in Rand
The capital you borrowed is the principal (P) or present value (Pv)
The time period (t) or (n) is always expressed in terms of a year
The sum to be repaid (equal to the principal/present value plus interest) is called the
amount (A) or future value (Fv).
The interest rate is ( r).
Example 1
Find the simple interest on R600 for 4 years at 2% per annum.
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BFC1010: Fundamentals of Accounting
Example 2
Find the simple interest on R10 000 invested for 9 months at 15% p.a..
9
Note: Time (t or n) is always expressed in terms of a year, therefore 12
Example 3
Find the simple interest on R350.60 for 82 days at 5% p.a.
82
Note: Time (t or n) is always expressed in terms of a year, therefore 365
82
Do not round off t or n in a sum. Thus 365 stays that, you do not use 0.22.
Note: The first day is not counted, but the last day is counted.
Example 1
Find the number of days from 2nd March to 3rd July
April ………………..
May ………………..
June ………………..
July ………………..
August ………………..
September ………………..
Total ………………..
i = Pxrxt
= R15 000 x ………. x ……….
= ………………..
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BFC1010: Fundamentals of Accounting
Note: In a leap year February has 29 days and then there are 366 days in the year. A leap
year occurs every four years. (The year 2000 was a leap year therefore the next leap
year would occur in 2004, then 2008, then 2012 etc.)
i = Px r x t or i = Pv x r x n
Example 1
An investment is made at the bank for 2 years at a simple interest rate of 20% per annum.
The interest received is R2 000. How much money was originally invested?
i = R2 000
r = 20%
t = 2
P = ?
i = Prt (to find the principal, make P the subject of the formula)
i
P = rxt
R2 000
P = 0. 20 x 2
P = R5 000
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BFC1010: Fundamentals of Accounting
1.1.3 Finding the principal (P)/present value (Pv), amount and (A)/future value (Fv),
The principal (P)/present value (Pv) is the original amount borrowed or invested.
The amount (A)/future value (Fv) is equal to the principal (P)/present value (Pv) plus
interest.
Example 1
Find the principal that will amount to R628.50 in 5 years, at 6.5% per annum simple
interest.
Therefore:
A = P + (P x r x t), or
A = P(1 + {r x t}), or
A = P(1 + rt)
Example 2
Invest R10 000 at 15% simple interest per annum. What will the value of the investment be
after 2 years?
A = P+i
A = P + (P x r x t)
A = R10 000 + (R10 000 x 0.15 x 2)
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BFC1010: Fundamentals of Accounting
A = R13 000
Example 3
Invest R10 000 at 15% simple interest per annum. What will the value of the investment be
after 9 months?
………………………………….
………………………………….
………………………………….
………………………………….
Example 4
Invest R10 000 at 15% simple interest per annum. What will the value of the investment be
after 200 days?
………………………………….
………………………………….
………………………………….
………………………………….
When money is invested at simple interest rate, the investor draws the interest due to him at the
end of each year. Therefore, the interest for the following year is again calculated on the same
capital. Some investors, however, prefer to re-invest that interest so that the principal for the
following year may be greater. This means: interest is added to the initial investment (or loan) and
interest for the following period is calculated on the initial amount plus interest earned in the
previous period. The interest has been compounded.
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BFC1010: Fundamentals of Accounting
When money is borrowed for longer periods the interest is compounded, meaning interest is
calculated more than once during the term of the loan/investment and this interest is added to the
original principal. The new amount then becomes the principal for the next calculation of interest.
Example 1
Find the compound interest on R150.40 for 2 years at 6% per annum.
Therefore,
compound interest is equal to amount (A) - principal (P) or,
compound interest is equal to future value (Fv) - present value (Pv)
Example 2
Find the compound interest on R5 000 for 3 years at 15% per annum.
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BFC1010: Fundamentals of Accounting
Amount (A) / Present value (Pv) at the end of 2 years = (R1 x 1.05) x 1.05
= R1 (1.05) 2
Formula:
A = P(1 + r)t and Compound interest = A – P
or
Fv = Pv(1 + r)n and Compound interest = Fv – Pv
Example 1
Find the amount (future value) and compound interest on R150.40 for 2 years at 6%per
annum.
A = P(1 + r)t
A = R150.40(1 + 0.06)2
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BFC1010: Fundamentals of Accounting
A = R168.99
Compound interest = A – P
= R168.99 – R150.40
= R18.59
Example 2
Find the amount (future value) and compound interest on R5 000 for 3 years at 15%per
annum.
A = …………………………
= …………………………
= …………………………
= …………………………
= …………………………
Example 3
Find the amount (future value) and compound interest on R800 for 3 years at 13% per
annum.
A = …………………………
= …………………………
= …………………………
= …………………………
= …………………………
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BFC1010: Fundamentals of Accounting
To find the amount/future value of any principal/present value invested at 5% for 1 year the
principal/present value is multiplied by 1.05. Therefore, if the amount/future value is known and we
are asked to find the principal/present value, the amount/future value must be decreased in the
same ratio as the principal/present value was increased previously:
1 1
For 1 year the ratio is 1 . 05 ; for two tears the ratio is 1 . 052 and for t years the ratio is
1
1 . 05t
1
P = A x 1 . 05t
A
P = 1 . 05t
A
P = (1 + r )t
By changing the subject of the formula A = P(1 + r)t, the principal/present value can
also be calculated.
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BFC1010: Fundamentals of Accounting
Example 1
Find the value a man has to invest now at 5% per annum compound interest for it to
produce a future value of R3 500 in 8 years.
A
P = (1 + r )t
R3 500
P = (1 + 0 .05)8
P = R2 368.94
Example 2
Jasper wants to buy a car for R22 350 in five years time. What sum must be invested now at
5% per annum compound interest?
………………………………….
………………………………….
………………………………….
QUESTION BANK
1.1 If you invest R28 400 on the principle of simple interest at 7% p.a. for the period 7 May
to 4 October 2014, calculate the interest earned.
1.2 Mrs Abrahams made an investment of R22 000 at a simple interest rate of 6% per
annum for 28 months. How much money will she have at the end of the investment?
1.3 You decided to borrow R54 900 from the bank at a simple interest rate of 4.5% per
annum to purchase a VW Polo on Gumtree. What is the amount payable to the bank
after 6 months?
1.4 Mrs Chalmers invested R40 000 at a compound interest rate of 6% per annum. The
investment was for 40 months. How much money will she have at the end of the
investment?
1.5 An investment of R2 500 is made at a compound interest rate of 11% per annum, for 4
years. How much interest is earned?
2. JOURNALS
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BFC1010: Fundamentals of Accounting
Source documents capture the transactions between a business and those with whom it trades.
The books of first entry, also known as subsidiary journals, consist of multiple journals used to
record information provided by the source documents. Each journal is dedicated to the recording
of specific transactions.
The following is a summary of the Books of First entry and the transactions specific to each:
The Cash Receipts Journal records all money received by a business that is subsequently
deposited into the business’s banking account. Customers will pay for their purchases or
pay their accounts with cash, cheques, postal orders and credit card vouchers. The
business will deposit the cash, cheques, postal orders and credit card vouchers into its
banking account. At the end of each trading month the bank provides the business with a
bank statement which the business compares with the Cash Receipts Journal to ensure that
all deposits are recorded and accounted for.
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BFC1010: Fundamentals of Accounting
The format for the Cash Receipts Journal is not exactly the same for each business. It varies
from one business to another depending on the needs and preferences of each. The
following is an example of a typical Cash Receipts Journal. An explanation of each column
follows:
Totals
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BFC1010: Fundamentals of Accounting
Document Number
This column records the source document number that initially captured the transaction.
As stated before source documents are filed after they have been recorded in the
journals for future reference.
Date
This column records the date of the source document.
Details
This column records the name of the other party involved in the transaction.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Cash Receipts Journal.
Sales
This column represents the sales account in the accounting records and records the
amount received for cash sales.
Cost of sales
This column represents the cost price for each sales transaction.
Accounts Receivable
This column represents the debtors account in the accounting records and records the
amount received for account payments.
Bank
This column represents the bank account in the accounting records and records the
amount deposited into the business’s banking account. The totals of the sundries, sales
and accounts receivable column equals the total of the bank column.
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BFC1010: Fundamentals of Accounting
Class Example
Use the example of the Cash Receipts Journal above to record the following
transactions, which occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 1st trading goods to the value of R7000.00 were sold for cash, cash sale 201,
cost of sales R5600.00.
2. On the 5th a debtor, Mr. B Habana paid R3000.00 in part settlement of his account,
receipt 101.
3. On the 15th a debtor, Mr. V. Matfield paid R360.00 in settlement of his account,
receipt 102.
4. On the 17th the owner, Mr. F. du Preez contributed R10 000.00 capital to the
business, receipt 103.
5. On the 25th trading goods to the value of R8000.00 less 10% trade discount were
sold for cash, cash sale 202, cost of sales R6400.
The Cash Payments Journal records all money paid by a business out of its
banking account. A business will issue cheques when paying for goods or services
or when paying its supplier accounts. The recipients will submit the cheques to the
business’s bank in exchange for cash. At the end of each trading month the bank
provides the business with a bank statement which the business compares with the
Cash Payments Journal to ensure that all issued cheques are recorded and have
been submitted.
The format for the Cash Payments Journal is not exactly the same for each
business. It varies from one business to another depending on the needs and
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BFC1010: Fundamentals of Accounting
Totals
Document Number
This column records the cheque number issued. As stated before source documents
are filed after they have been recorded in the journals for future reference.
Date
This column records the date the cheque was issued.
Details
This column records the name of the party to whom the cheque was issued.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
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BFC1010: Fundamentals of Accounting
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Cash Payments Journal.
Inventory
This column represents the purchase of inventory account (purchases = goods for
resale) in the accounting records and records the amount paid for cash purchases.
Accounts Payable
This column represents the creditors account in the accounting records and records the
amount paid towards supplier accounts.
Bank
This column represents the bank account in the accounting records and records the
amount paid out of the business’s banking account. The totals of the sundries, inventory
and accounts payable column equals the total of the bank column.
Class Example
Use the example of the Cash Payments Journal above to record the following
transactions that occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 2nd cheque no. 0011 was issued to Mr. S. Burger for the rental of business
premises, R3000.00.
2. On the 7th cheque no. 0012 was issued to Telkom for the rental and usage of
telephone, R900.00 and cheque no. 0013 was issued to the Nelson Mandela
Metropolitan Municipality for water and lights, R500.00.
3. On the 15th cheque no. 0014 was issued to Small Wholesalers in full settlement of
the account balance, R9000.00.
4. On the 20th cheque no. 0015 was issued to The Best Suppliers for the purchase of
trading goods for resale, R5000.00.
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BFC1010: Fundamentals of Accounting
5. On the 31st cheque no. 0016 was issued to replenish petty cash, R1000.00.
The Purchases Journal records all goods and services purchased by the business
on credit. The supplier from whom the business obtains goods or services on credit
will issue an invoice to the business. The business will record all supplier invoices
in its Purchases Journal.
The format for the Purchases Journal is not exactly the same for each business. It
varies from one business to another depending on the needs and preferences of
each. The following is an example of a typical Purchases Journal. An explanation
of each column follows:
Totals
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BFC1010: Fundamentals of Accounting
Document Number
This column records the invoice number issued by the supplier. As stated before source
documents are filed after they have been recorded in the journals for future reference.
Date
This column records the date the invoice was issued by the supplier.
Details
This column records the name of the supplier.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Accounts Payable
This column represents the creditors account in the accounting records and records the
total amount appearing on each supplier invoice. The total of inventory and sundries
columns equals the total of the accounts payable column.
Inventory
This column represents the purchase of inventory account (purchases = goods for
resale) in the accounting records and records the amount for goods for resale
purchased.
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Purchases Journal.
Class Example
Use the example of the Purchases Journal above to record the following transactions
which occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 1st trading goods for resale to the value of R12 000.00 was purchased on
credit from Small Wholesalers, supplier invoice 731.
2. On the 8th stationery to the value of R1500.00 was purchased from Just Stop
Stationers on credit, supplier invoice 012.
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BFC1010: Fundamentals of Accounting
3. On the 19th a new desk and chair for the office to the value of R3000.00 was
purchased from Smart Furnishers, supplier invoice 62.
5. On the 29th Pink Plumbers provided plumbing services costing R300.00, supplier
invoice 829.
The format for the Purchases Returns Journal is not exactly the same for each
business. It varies from one business to another depending on the needs and
preferences of each. The following is an example of a typical Purchases Returns
Journal. An explanation of each column follows:
Totals
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BFC1010: Fundamentals of Accounting
Document Number
This column records the credit note number issued by the supplier. As stated before
source documents are filed after they have been recorded in the journals for future
reference.
Date
This column records the date the credit note was issued by the supplier.
Details
This column records the name of the supplier.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Accounts Payable
This column represents the creditors account in the accounting records and records the
total amount appearing on each supplier credit note. The totals of the inventory and
sundries column equal the accounts payable column.
Inventory
This column represents the purchase of inventory account (purchases = trading goods
for resale) in the accounting records and records the amount for trading goods returned
to suppliers or the amount of the price reduction claimed from the supplier.
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Purchases Returns Journal.
Class Example
Use the example of the Purchases Returns Journal above to record the following
transactions which occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 2nd damaged trading goods to the value of R2000.00 was returned to Small
Wholesalers, supplier credit note 241.
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BFC1010: Fundamentals of Accounting
2. On the 8th Just Stop Stationers overcharged by R100.00 for stationery supplied on
credit, supplier credit note 03.
3. On the 21st The Weekly Advertiser misspelled the Business’s name in the
advertisement and agreed to a full refund, supplier credit note 141, R500.
The Sales Journal records all goods and services sold by the business on credit to
customers. The business will issue an invoice to the customers who buy goods and
services on credit. The business will record all customer invoices in its Sales
Journal.
The format for the Sales Journal is not exactly the same for each business. It
varies from one business to another depending on the needs and preferences of
each. The following is an example of a typical Sales Journal. An explanation of
each column follows:
Totals
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BFC1010: Fundamentals of Accounting
Document Number
This column records the invoice number issued to the customer. As stated before
source documents are filed after they have been recorded in the journals for future
reference.
Date
This column records the date the invoice was issued to the customer.
Details
This column records the name of the customer.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Accounts Receivable
This column represents the debtors account in the accounting records and records the
total amount appearing on each customer invoice. The totals of the sales and sundries
column equal the accounts receivable column.
Sales
This column represents the sales account in the accounting records and records the
amount for trading goods and services sold to customers on credit.
Cost of Sales
This column represents the cost price for each sales transaction.
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Sales Journal.
Class Example
Use the example of the Sales Journal above to record the following transactions which
occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 3rd trading goods to the value of R3000.00 were sold on credit to Pink Panther
and Partners, customer invoice 101, cost price R2400.00.
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BFC1010: Fundamentals of Accounting
2. On the 25th trading goods to the value of R4500.00 were sold on credit to Mr. B.
Botha, customer invoice 102, cost price R3600.00.
The Sales Returns Journal records all goods and services previously sold on credit
that are returned to the business or claims for a reduction in the price at which
goods and services were originally sold. The business will issue a credit note to the
customer. The business will record all customer credit notes in its Sales Returns
Journal.
The format for the Sales Returns Journal is not exactly the same for each
business. It varies from one business to another depending on the needs and
preferences of each. The following is an example of a typical Sales Returns
Journal. An explanation of each column follows:
Totals
Document Number
This column records the credit note number issued to the customer. As stated before
source documents are filed after they have been recorded in the journals for future
reference.
Date
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BFC1010: Fundamentals of Accounting
This column records the date the credit note was issued to the customer.
Details
This column records the name of the customer.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Accounts Receivable
This column represents the debtors account in the accounting records and records the
total amount appearing on each customer credit note. The totals of the sales and
sundries column equals the accounts receivable column.
Sales Returns
This column represents the sales returns account in the accounting records and records
the amount for trading goods and services returned by customers or the price reduction
claimed by the customer.
Cost of sales
This column represents the cost price of the sales return transaction.
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Sales Journal.
Class Example
Use the example of the Sales Returns Journal above to record the following transactions
which occurred during the March 2010 trading month of Blue Bull Traders:
1. On the 4th Pink Panther and Partners claimed a price reduction of R300.00 for goods
sold on credit to them on the 3 rd as the original quote was for R2700.00, customer
credit note 51.
2. On the 26th Mr. B. Botha returned goods to the value of R1000.00 sold to him on the
25th, customer credit note 52 was issued to him.
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BFC1010: Fundamentals of Accounting
The Petty Cash Journal records all incoming money paid into petty cash and all
outgoing money paid out of petty cash. Petty cash is a small amount of cash kept
by the business on the business premises, which it uses to pay for small petty
items e.g. postage stamps, tea, coffee. As and when required a cash cheque is
issued by the business and paid into petty cash. When petty cash is paid out a
petty cash voucher is completed by the business. The business records the petty
cash vouchers in the Petty Cash Journal. Petty cash which is on hand at the
beginning of each month will always be the same. This is called the imprest
system, the amount which is restored every month (at the end of the month) is
known as the imprest amount.
The format for the Petty Cash Journal is not exactly the same for each
business. It varies from one business to another depending on the needs and
preferences of each. The following is an example of a typical Petty Cash Journal.
An explanation of each column follows:
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BFC1010: Fundamentals of Accounting
Totals
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BFC1010: Fundamentals of Accounting
Document Number
This column records the petty cash voucher completed when petty cash is paid out. As
stated before source documents are filed after they have been recorded in the journals
for future reference.
Date
This column records the date the petty cash voucher was completed
Details
This column records the items paid for with petty cash.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Petty Cash
This column represents the petty cash account in the accounting records and records
the amount paid out of petty cash. The total of the sundries column will equal the total
of the petty cash column.
Sundries
As it is impossible to have a column for each account in the accounting records, the
sundries column allows the recording of the account name and the amount not
otherwise provided for in the Petty Cash Journal.
Class Example
Use the example of the Petty Cash Journal above to record the following transactions
which occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 3rd used R130.00 petty cash to buy tea. Coffee and milk, petty cash voucher
98.
2. On the 13th used R70.00 petty cash to buy a new scissors from CNA, petty cash
voucher 99.
3. On the 23rd used R30.00 petty cash to buy postage stamps, petty cash voucher 100.
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BFC1010: Fundamentals of Accounting
4. On the 31st used R500.00 petty cash to pay casual wages, petty cash voucher 101.
The General Journal is used to record any transaction that cannot be recorded in
any one of the other journals and for year-end adjustments. Such transactions are
usually not captured on source documents and can include the following:
Depreciation of assets
The values of the business’s assets are reduced at the end of each year so that
they are more representative of market values.
Discount Allowed
A debtor may settle the amount it owes to the business sooner than agreed; in
such cases the business will allow the debtor a discount. Although discount
allowed is not a cash transaction it is associated with cash received from a debtor
and can be recorded in the Cash Receipts Journal. For the purposes of this
course discount allowed will be recorded in the General Journal.
Discount Received
The business may settle the amount it owes to a creditor sooner than agreed; in
such cases the business will receive a discount from the creditor. Although
discount received is not a cash transaction it is associated with cash paid to a
creditor and can be recorded in the Cash Payments Journal. For the purposes of
this course discount received will be recorded in the General Journal.
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BFC1010: Fundamentals of Accounting
The format for the General Journal is not exactly the same for each business. It varies
from one business to another depending on the needs and preferences of each. The
following is an example of a typical General Journal. An explanation of each column
follows:
Date
This column records the date the general journal transaction is occurs.
Details
This column records the name of the accounts affected by the transaction. The account
to be debited is shown first followed by the account to be credited.
Folio
This is a reference column that will be used later when posting transactions to the
general ledger.
Debit
The amount to be debited is shown here.
Credit
The amount to be credited is shown here.
N.B
Every transaction must be in balance i.e. the amount debited must equal the amount
credited.
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BFC1010: Fundamentals of Accounting
Every transaction must be followed by a narration that explains the reason for the
transaction.
Every transaction must be ruled off before the next transaction is recorded.
Class Example
Use the example of the General Journal above to record the following transactions
which occurred during the March 2010 trading month of Blue Bull Traders.
1. On the 15th the business allowed Mr. V. Matfield R80.00 for early settlement of his
account.
2. On the 15th the business received R1000.00 discount from Small Wholesalers for
early settlement of its account.
3. On the 31st a long outstanding amount of R700.00 owed to the business by Mr. P.
Peter was written off as bad debt.
QUESTION BANK
QUESTION 1
The following transactions are for Tannie Tracy's Traders during December 2009 :
3. Purchased goods on credit from T. Leo for R10 700, less 10% trade discount.
4. Sold stock to L. Bester for cash. The stock was marked at R1 500 (5% trade discount
was allowed). (Cost price R750)
8. Receive a cheque from A. Bricknell for R5 200 in full settlement of her account.
10. Sold stock on account to T. Beck for R1 800. (cost price R1 250)
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BFC1010: Fundamentals of Accounting
20. Pay T. Leo the amount owing to him, less 5% settlement discount.
27. The owner took cash of R500, and stock valued at R1 250 (cost price) for her own use.
29. Received R10 800 from cash sales. (cost price R8 700)
31. T. Beck was declared insolvent. We received 50c in the rand, and the balance
of her account is to be written off as irrecoverable.
REQUIRED :
QUESTION 2
You are required to prepare the relevant subsidiary journals for Brown Traders for May
2015. (Create own document numbers)
Transactions:
1. R. Brown introduced R93 000 as his capital contribution.
2. Cash purchases of merchandise from ABC Suppliers, R37 600.
3. Credit sales to R. Black, R31 200. Cost price of 25% on cost.
4. Purchase goods on credit from A. Green for R72 000, less
25% trade discount.
5. Bought a motor vehicle on account from Reds Garage for R73 600.
6. Wages paid in cash, R1 170.
7. R. Brown took cash for own use, R130.
8. Paid Mr. Min Repairers for repairs to building by cheque, R1 388.
9. Cash sales to P. White, R21 000. Cost price, R13 788.
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BFC1010: Fundamentals of Accounting
QUESTION 3
Computer Traders sell all types of computer hardware and software. On 1 March 2010,
Computer Traders had R73 600 in its bank account. The following information is an
extract from their books:
Accounts Receivable Accounts Payable
K. Slater R28 000 D. Worry R9 968
P. Honda R6 926.40 C. Door R3 200
The following transactions took place during March 2010, a mark-up of 25% on
cost is used, enter the transactions in the relevant subsidiary journals:
2 Sold goods to K. Slater on credit for R4 560.
Bought merchandise from SA Suppliers and paid R7 296 by cheque.
Purchased furniture on credit from D. Worry for R5 107.20.
3 Paid wages for R800 by cheque.
Paid D. Worry the amount owing to him on 2 March.
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BFC1010: Fundamentals of Accounting
ANSWER SHEETS
Exercise 1
______________________________________________________
Cash Receipts Journal for the month ending …………………………………………………….. CRJ____
Sundries
Doc Cost
No. Date Details Fol. Bank Sales of Accounts Amount Details
Sales Receivable
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BFC1010: Fundamentals of Accounting
Totals
________________________________________________________
Cash Payments Journal for the month ending …………………………………………………….. CPJ___
Doc
No.
Date
Details
Fol.
Bank
Inventory
Accounts Payable
Sundries
Amount Details
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BFC1010: Fundamentals of Accounting
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Totals
_________________________________________________
Purchases Journal for the month ending …………………………………………………. PJ---
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BFC1010: Fundamentals of Accounting
Doc
No.
Date
Details
Fol.
Accounts
Payable
Inventory
Sundries
Amount Details
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Totals
_____________________________________________________________
Sales Journal for the month ending ……………………………………………………………………………. SJ___
Doc
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BFC1010: Fundamentals of Accounting
No.
Date
Details
Fol.
Accounts
Receivable
Sales
Cost of
Sales
Sundries
Amount Details
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Totals
______________________________________________________
Date
Details
Fol.
Debit
Credit
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BFC1010: Fundamentals of Accounting
______________________________________________________________
Purchases Returns Journal for the month ending ………………………………………………. PRJ___
Sundries
Doc
No. Date Details Fol. Accounts Inventory Amount Details
Payable
Totals
_______________________________________________________________________
Sales Returns Journal for the month ending ……………………………………………………………….. SRJx___
Sundries
Doc Accounts Cost
No. Date Details Fol. Receivable Sales of Amount Details
Returns Sales
Totals
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BFC1010: Fundamentals of Accounting
Exercise 2
______________________________________________________
Cash Receipts Journal for the month ending …………………………………………………….. CRJ____
Sundries
Doc Cost
No. Date Details Fol. Bank Sales of Accounts Amount Details
Sales Receivable
Totals
________________________________________________________
Cash Payments Journal for the month ending …………………………………………………….. CPJ___
Sundries
Doc
No. Date Details Fol. Bank Inventory Accounts Payable Amount Details
Totals
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BFC1010: Fundamentals of Accounting
_________________________________________________
Purchases Journal for the month ending …………………………………………………. PJ---
Sundries
Doc
No. Date Details Fol. Accounts Inventory Amount Details
Payable
Totals
_____________________________________________________________
Sales Journal for the month ending ……………………………………………………………………………. SJ___
Sundries
Doc Cost
No. Date Details Fol. Accounts Sales of Amount Details
Receivable Sales
Totals
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BFC1010: Fundamentals of Accounting
______________________________________________________
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BFC1010: Fundamentals of Accounting
______________________________________________________________
Purchases Returns Journal for the month ending ………………………………………………. PRJ___
Sundries
Doc
No. Date Details Fol. Accounts Inventory Amount Details
Payable
Totals
_______________________________________________________________________
Sales Returns Journal for the month ending ……………………………………………………………….. SRJx___
Sundries
Doc Accounts Sales Cost
No. Date Details Fol. Receivable Returns of Amount Details
Sales
Totals
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BFC1010: Fundamentals of Accounting
Exercise 3
______________________________________________________
Cash Receipts Journal for the month ending …………………………………………………….. CRJ____
Sundries
Doc Cost
No. Date Details Fol. Bank Sales of Accounts Amount Details
Sales Receivable
Totals
________________________________________________________
Cash Payments Journal for the month ending …………………………………………………….. CPJ___
Sundries
Doc
No. Date Details Fol. Bank Inventory Accounts Payable Amount Details
Totals
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BFC1010: Fundamentals of Accounting
_________________________________________________
Purchases Journal for the month ending …………………………………………………. PJ---
Sundries
Doc
No. Date Details Fol. Accounts Inventory Amount Details
Payable
Totals
_____________________________________________________________
Sales Journal for the month ending ……………………………………………………………………………. SJ___
Sundries
Doc Cost
No. Date Details Fol. Accounts Sales of Amount Details
Receivable Sales
Totals
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BFC1010: Fundamentals of Accounting
______________________________________________________
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______________________________________________________________
Purchases Returns Journal for the month ending ………………………………………………. PRJ___
Sundries
Doc
No. Date Details Fol. Accounts Inventory Amount Details
Payable
Totals
_______________________________________________________________________
Sales Returns Journal for the month ending ……………………………………………………………….. SRJx___
Sundries
Doc Accounts Cost
No. Date Details Fol. Receivable Sales of Amount Details
Returns Sales
Totals
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BFC1010: Fundamentals of Accounting
3. CONTROL ACCOUNTS
After completion of this section the student must be able to:
All transactions affecting creditors will be posted to this account in the General Ledger:
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BFC1010: Fundamentals of Accounting
QUESTION BANK
QUESTION 1
The following information of World Wide Web Stores is available for November 2014:
REQUIRED:
Prepare the following General ledger accounts for the month of November 2014:
QUESTION 2
From the following information, compile the accounts receivable and accounts payable control
accounts in the general ledger:
Balances as at 1 January 2015: R
Sundry debtors 86 355
Sundry creditors 24 120
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BFC1010: Fundamentals of Accounting
QUESTION 3
Use the information below from the books of Gogo Stores to draw up the following accounts in the general
ledger for March 2014: 1. Accounts receivable control account and
2. Accounts payable control account.
Information: R
Balances 01/03/14
Total due by debtors 8 010
Total due to creditors 6 510
Transactions for March 2014:
Total cash sales of merchandise 40 541
Total credit sales of merchandise 8 085
Cash and cheques received from debtors 6 664
Cheques issued to creditors 4 004
Discount allowed to debtors 332
Discount received from creditors 666
Discount allowed to debtors cancelled (discount should not have been given) 112
Credit purchases: Merchandise 8 741
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BFC1010: Fundamentals of Accounting
Equipment 12 225
Packaging material 1 452
Advertising 2 210
Cash purchases: Merchandise 12 226
: Packaging material 687
Totals in the purchases returns journal: Merchandise 1 112
Equipment 780
Packaging material 323
Sales returns 796
Total of debtors written off as irrecoverable 700
Interest charged on overdue debtors’ accounts 320
Interest charged on overdue creditors’ accounts 150
NAME OF ACCOUNT
Debit side Credit side
An entry on the left hand side is called a debit entry, and on the right hand side is called a
credit entry.
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BFC1010: Fundamentals of Accounting
Example:
Account for vehicles: This account will tell you the “story” or history of the vehicles that is
in the books of the business. All the transactions to do with the vehicles, i.e. bought, sold,
depreciated, etc, as well as the balance at the end of the specific financial period, will be
recorded in this account.
Account for capital: This account tells you how much the business “owes” to the owners,
or stated differently, how many the owners invested in the business.
Account for salaries and wages: This account tells you how much have been paid to the
employees of the business.
Account for interest received: This account tells you how much interest has been
received by the business from any party, i.e. Bank, accounts receivable etc.
If we look at a transaction where the owner deposited R3 000 in the bank account of the business,
the transaction would be recorded in the capital account as follows:
Date
The year, month and date on which the transaction took place must be written in the “date”
column. The year is entered only once at the top of the column and the month and day next to the
particulars of each transaction, e.g. the date of the transaction is for the 1 March 2013.
CAPITAL
Date Details Folio Amount Date Details Folio Amount
2013
01/3
Details
The name of the account in which the corresponding (other half) part of the double entry is entered
must be written in the “details” column, e.g. the corresponding part of the double entry with capital
is the bank.
CAPITAL
Date Details Folio Amount Date Details Folio Amount
2013
01/3 Bank
Folio
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BFC1010: Fundamentals of Accounting
The folio number of the journal (reference where the transaction was recorded) must be written in
the “folio” column, e.g. CRJ1 shows us that the transaction comes from the cash receipts journal
number 1. This gives the source of the transaction.
CAPITAL
Date Details Folio Amount Date Details Folio Amount
2013
01/3 Bank CRJ1
Amount
The amount of the transaction must be written in the “amount” column in rands and cents, e.g. the
amount of the transaction on the 1 March 2013 with the bank is for R3 000.
CAPITAL
Date Details Folio Amount Date Details Folio Amount
2013
01/3 Bank CRJ1 3 000.00
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BFC1010: Fundamentals of Accounting
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BFC1010: Fundamentals of Accounting
Example 1:
Prepare the general ledger for ABC Traders for the month July 2010
On 30 June 2010 the following accounts have the following closing balances:
- Bank (DR) R6 000
- Capital contribution R8 000
- Accounts receivables R2 000
DR CAPITAL B1 CR
2010
July 1 Balance b/d 8000
BANK B2
2010
July 1 Balanceb/d 6 000
ACCOUNTS RECEIVABLE B3
2010
July 1 Balanceb/d 2 000
BANK B2
2010 20.10
July 1 Balanceb/d 6 000 July 1 EquipmentCPJX 4 000
EQUIPMENT B4
20.10
July 1 Bank CPJX 4 000
BANK B2
20.10 20.10
July 1 Balance b/d 6 000 July 1 Equipment 4 000
2 Accounts
Receivable CRJX 100
ACCOUNTS RECEIVABLE B3
20.10 20.10
July 1 Balance b/d 2 000 July 2 Bank CRJX 100
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BFC1010: Fundamentals of Accounting
e.g. 03 July 20.10: Purchase furniture on credit from Furniture Ltd for R1 000
FURNITURE B5
20.10
July 3 Accounts Payable PJX 1000
ACCOUNTS PAYABLE B6
20.10
July 3 Furniture PJX 1 000
e.g. 14 July 20.10: Owner deposits R5 000 into the business bank account
BANK B2
20.10 20.10
July 1 Balance b/d 6 000 July 1 Equipment 4 000
July 2 Accounts 100
Receivable
14 Capital CRJX 5 000
CAPTIAL CONTRIBUTION B1
20.10
July 1 Balance b/d 8 000
July 14 Bank CRJX 5 000
e.g. 18 July 20.10: Owner purchases a bicycle for his son and pays R1 000 with a
business cheque
BANK B2
20.10 20.10
July 1 Balance b/d 6 000 July 1 Equipment 4 000
July 2 Accounts 100 18 DrawingsCPJ 1 000
Receivable X
14 Capital 5 000
DRAWINGS B7
20.10
July 18 Bank CPJX 1 000
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BFC1010: Fundamentals of Accounting
BANK B2
20.10 20.10
July 1 Balance b/d 6 000 July 1 Equipment 4 000
July 2 Accounts 100 18 Drawings 1 000
Receivable
14 Capital 5 000
28 Services 1 900
rendered CRJX
SERVICES RENDERED N3
20.10
July 28 Bank CRJX 1 900
ACCOUNTS PAYABLE B6
20.10
July 30 MaintenanceCPJX 1000
MAINTENANCE COSTS N4
20.10
July 30 Accounts payablePJX 1000
BANK B2
20.10 20.10
July 1 Balance b/d 6 000 July 1 Equipment 4 000 Only adds up to 5000 still need
Accounts 100 18 Drawings 1 000 8000
2 receivable
Capital 5 000 31 Balance 8 000
14 c/d
Services 1 900
28 rendered
13 000 13000
Aug Balance 8 000
01 b/d
Important to remember:
Every transaction affects two accounts – one account is debited and the other is credited.
Assets Liabilities
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BFC1010: Fundamentals of Accounting
+ - - +
Income Expenses
- + + -
Drawings Capital
+ - - +
QUESTION BANK
QUESTION 1
Scott started Scott Traders on 1 January 2015. The following transactions took place
during January 2015:
1. Scott started the business by depositing R150 000 in the firm’s banking
account as his capital contribution.
2. Scott purchased the following from Corcoran Dealers on credit:
Inventory R155 000
Office furniture 25 000
7. Sold goods on credit to R Arthur R25 000 (cost price, R15 000).
9. Paid the weekly wages, R2 500.
11 Sold goods for cash R35 000 (cost price, R21 000).
.
13 Bought goods for cash, R10 500.
.
15 A Dawn repaired equipment on credit, R185.
.
19 Donated R15 to a local charity.
.
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BFC1010: Fundamentals of Accounting
QUESTION 2
The following transactions took place during the first month of business of Ducksberry
Traders:
March 2015:
2. The owner introduces R80 000 as his capital contribution.
4. Bought goods and machinery on credit for R50 000 and R20 000
respectively from Kusak (Pty) Ltd.
7. Sold goods on credit to P Parker R10 000 (cost price, R4 000).
10 Wages paid in cash, R1 763.
.
15 Bought merchandise for cash, R25 100.
.
16 Bought office machines on account from Willey Office Suppliers for
.
R1 750.
18 Received a cheque from P. Parker for R9 800 in full settlement of his
. account.
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BFC1010: Fundamentals of Accounting
QUESTION 3
Crusaders Limited trades from 1 September 2012. The following transactions took place during
September 2012:
DA
DETAILS
Y
1 The owners Mr Dan Carter, made a capital contribution of R75 000.
Buys a second hand vehicle to the value of R40 000 on credit from GM Motors and
2 pay R4 000 deposit by cheque. The remaining balance will be paid MONTHLY over
2 years.
5 Purchased trading inventory for R35 000 and paid by cheque.
6 Sold goods on credit for R12 000. The goods were originally bought for R9 000.
10 Purchased a computer on credit for R21 930 from Computer Bits & Pieces.
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BFC1010: Fundamentals of Accounting
15 Received a bill for the petrol used from Sasol for R770.
25 Sold trading goods for R18 000 cash. The goods were originally bought for R15 000.
Mr Carter took goods for his personal use, R5 000. This was originally bought for
26
R2 500.
28 A physical stock count revealed that unused stationery amounted to R600.
REQUIRED:
1. Open all the accounts in the general ledger and post the transactions for Crusaders
Limited.
2. Balance the accounts at the end of September 2012.
QUESTION 4
Mr. W. Mtwisha started a concern on 2 January 2012 with a capital contribution of
R60 000.00. The service concern is licensed as W.S. Hairdressers.
Jan 2002
2 Issue a receipt for the capital contribution and deposit the amount in the current bank
account.
Pay the trade licence per cheque, R500.00.
3 Buy equipment for the concern and pay by cheque, R14 750.00.
4 Issue a cheque for stationery bought, R1 420.75.
5 Issue a receipt for service rendered, R2 007.50 and deposit the amount in the bank.
7 Cash received for services rendered and deposited, R406.75.
8 Draw a cheque to pay the cleaner’s wages, R300.00
10 Draw up a cheque to pay the assistant’s salary, R2 500.00
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BFC1010: Fundamentals of Accounting
17 Receive the deed of transfer and account for the purchase of the building from the attorney
and handed him a cheque for R40 000.00
The amount received for services rendered is deposited, R821.90.
20 The owner draws a cheque for his private use, R1 700.00.
REQUIRED:
a Post the transactions to the general ledger accounts.
b Balance the accounts properly prepare
c Prepare a trial balance.
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BFC1010: Fundamentals of Accounting
QUESTION 5
The following transactions took place during the month of August 2011, in The Corner Shop.
The owner, Norman Wildschut, made a capital contribution of R80 000 to his
2
business.
Took out a loan for R40 000 from Nedbank at 15% per year. Interest is payable
3
with effect from 1 August 2011.
5 Purchased trading stock for R25 000 and pay it by cheque.
Bought a delivery vehicle from Toyota for R120 000. An amount of R12 000 was
7
paid immediately and the balance will be paid off over the next few months.
9 Sold inventory of R17 000 cash. The goods were originally bought for R15 000.
28 Issued a cheque in favour of Nedbank for the interest payable, 31 August 2011.
REQUIRED
1. Prepare the General Ledger Accounts for The Corner Shop for 31 August 2011.
2. Prepare the trial balance for The Corner Shop at 31 August 2011.
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BFC1010: Fundamentals of Accounting
How to calculate the value of inventory on hand at the end of the financial period?
Do you remember this formula to calculate cost of sales in the Statement of Comprehensive Income?
R’
Let us look at the following information – this is how inventory will be carried in our business.
At the start of the financial period we have what is called opening inventory as it is left over from the
previous period – that means it was not sold.
During the current period we buy in new inventory from our suppliers, which we term purchases.
Purchases:
We sell 2 700 products to our customers during the month of October. This means that there are
1 000 articles left in our business at the end of the month (closing inventory).
Therefore,
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BFC1010: Fundamentals of Accounting
Products: Rands:
Opening Inventory 250 5 000
Add: Purchases 3 450 115 000
= Available to sell 3 700 120 000
Less: units Sold 2 700
= Closing inventory 1 000
Do you notice we only have the number of products for closing inventory, 1 000 products are left at the end
of the month. We now need to give these products a value in Rands.
Purchases:
If we use the First-in-First out (FIFO) method, the products that were available to sell first (purchased = in)
must be sold first (sales = out).
That means that the 250 products were sold off first, then the 1 000 products, next the 800 products and so
on.
The 1 000 products that are left at the end of the month have to come from the batch that was purchased
last, these were valued at R40 each.
Purchases:
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BFC1010: Fundamentals of Accounting
1 000 products left from the batch of 1 650 which were purchased at R40 each
R’
This chapter focuses on how to value the closing inventory – how do we calculate the R32 432.40 in
Example 2?
Let us look at the following information – this is how inventory will be carried in our business.
At the start of the financial period we have what is called opening inventory as it is left over from the
previous period – that means it was not sold.
During the current period we buy in new inventory from our suppliers, which we term purchases.
Purchases:
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BFC1010: Fundamentals of Accounting
We sell 2 700 products to our customers during the month of October. This means that there are
1 000 articles left in our business at the end of the month (closing inventory).
Therefore,
Products: Rands:
Opening Inventory 250 5 000
Add: Purchases 3 450 115 000
= Available to sell 3 700 120 000
Less: units Sold 2 700
= Closing inventory 1 000
Do you notice we only have the number of products for closing inventory, 1 000 products are left at the end
of the month. We now need to give these products a value in Rands.
If we use the Weighted Average method we will use the following formula to calculate a price:
Products: Rands:
Opening Inventory 250 5 000
Add: Purchases 3 450 115 000
= Available to sell 3 700 120 000
Less: units Sold 2 700
= Closing inventory 1 000
The 1 000 products will be valued at R32.4324 each, therefore 1 000 x 32.4324 = R32 432.40
QUESTION BANK
QUESTION 1
Bokke Traders buys and sells goods in bulk. The following transactions took place during the
financial period:
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BFC1010: Fundamentals of Accounting
Unit
Units Cost Amount
Opening Inventory
………………. R5.00 R15 000
Purchases
Sales
10 October 5 100
units
26 October 17 700
units ………………..
Closing inventory
………………..
The selling
REQUIRED:
1.1 Calculate the closing inventory in UNITS.
1.2 Calculate closing inventory (in RANDS) and cost of sales using the FIFO method of
inventory valuation.
1.3 Calculate gross profit for the Bokke Traders.
QUESTION 2
Savvy Ltd. recorded the following transactions regarding a particular inventory item for the month
of January 2015:
Date: Transaction:
1 Opening inventory 90 units at R50 each
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BFC1010: Fundamentals of Accounting
REQUIRED:
2.1 Calculate the closing inventory in UNITS.
2.2 Calculate the VALUE of closing inventory using the following methods of inventory
valuation:
2.2.1 the FIFO method
2.2.2 the Weighted Average method.
2.3 Calculate the gross profit using your answer calculated above.
QUESTION 3
Bay Traders buys and sells goods in bundles. Opening inventory is available on 1 October of 1 000 units at
R2.70 each.
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BFC1010: Fundamentals of Accounting
REQUIRED:
3.1 Calculate closing inventory (units and Rand value) using FIFO.
3.3 If the selling price per unit is R5.00 calculate the gross profit.
3.4 If Bay Traders decides to use the weighted average method, calculate their closing inventory. (Round
the price to four decimal places)
Page 83