·.

n Am I BI A U n IV ERS I TY
OF SCIEnCE AnD TECHnOLOGY

FACUL TV OF MANAGEMENT SCIENCES

DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE

QUAliFICATION: BACHELOR OF ACCOUNTING

QUAliFICATION CODE: 07BACC LEVEL: 5

COURSE: FINANCIAL ACCOUNTING 101 COURSE CODE: FAC511S

DATE: JULY/AUGUST 2016 SESSION: Theory

DURATION: 3 Hours MARKS: 100

SECOND OPPORTUNITY EXAMINATION QUESTION PAPER

EXAMINER:
Mr. G Jansen, Mr. C Mahindi, Mrs. M Dikuua, Mrs. Z Maritz and Mr. S Boamah

MODERATOR:
Mr. E Mushonga

THIS QUESTION PAPER CONSISTS OF 6 PAGES

(Excluding this front page)

INSTRUCTIONS

1. This question paper is made up of four (4) questions.

2. Answer ALL the questions and in blue or black ink.
3. Start each question on a new page in your answer booklet & show all your workings
4. Questions relating to this test may be raised in the initial 30 minutes after the start
of the paper. Thereafter, candidates must use their initiative to deal with any
perceived error or ambiguities & any assumption made by the candidate should be
clearly stated.
QUESTION 1 (50 MARKS)
MY REPUBLIC manufactures and sells designer children's clothing for the Namibian market. MY
REPUBLIC as well as all of its suppliers is registered VAT vendors. The applicable VAT rate is 14%.
The company's current reporting date is 31 December 2015 and the owner will probably approve the
2015 financial statements for distribution on 20 February 2016.
On 31 December 2015 the following balances appeared in Clothing Entity's records:
Additional Dr Cr
information
N$ N$

~~~~~~~- !?.~I~In~~:-=~--~~-=====~::~::===:=-.=~~===:~== ==-===-~ :-.=:=~~=cf.~9:~ooo~:=~==~=--=~=

___E_g_~!P.f!l_e.~!__________________ ________________________________________________ _______________ -~ --- ___ --- - ---~ -~9.-~ --~q_o__ ___________________
_!::9_~~~0-~!e._9_ de_pr~~~-~~'?~-~~~.9-~!P._"!le_~------------------ ----~ - __ __________________ -----~96 ~9.9._
Trade inventories 4 1 718 750
--------------------------------·-···-------------------------------------------------------- --------- ----------------- --------------------------
Trade receivables 4 104 456
------------------------------------------------------------------ -------· ----------------------------------
Allowance for doubtful debts 7 183 540
·--·---------------------·---·-·--···---...··-·-·------···-·---------··----··---·--···-·-·---·--···-·-·- ·--·------·-·-·-· -----·-··------·-···--····---·--··- --------···---·
Prepaid rent expense (31 December 2014) 60 000
---·--·-··-··-··-----·-·-----·-···----·-··--·--·-----··-·---·--·-···---·-···----·--·-·--··-···-...-··--·-···---··--·--···---··-···--·-·-··-···-··-···-··----- ·-·- --------·-·-·--·-·-····· ···-···--·----··-·--···- - - · · · · -··----·---·-·········-
Rent deposit (the lease agreement expires 31 Dec 2019) 100 000
----------------------··-··-··----------------------------·-·--··--------------------------··-------------- -------·-····-··-·---- -----------------·-c·- ·· ··-------------
VAT input 412 433
-t!.~~~~~~n~~~!b~-~:J?~-~~~s--~====-~~~~=:~:~~==~==~~=~~~==:~--- ==}--=~ =~=~~=--~~=~:~~~~ ~-~]4_6_4~~=
VAT output 589 190
-----·------··-·-·--·-··--·--···----··-··-·--·-···--·-··-·-----·-··---·---·----··------··---···---·-·--------· ---·---·-·-·--·-·-·· ·-···-----··--··--·--------··-···--· ·-···---------
Bank 2 2 287 158
-··-··-·-··-··--·-·--··--·-···-·-···-··-·-·-···---···---···---··---·---·--·--··---··---··-··---··-···-·--···-··---··---··----··--··-···--···---·--·----·--· ·-·-·······--··--·-·--···-··· ·---··--·--···--··--···-·-··-··-···---- ·-··----· - - - - - · -·--·
Capital 2 000 000
--·-------·--·------··-·-··---·-·-·-··------··---·---- ·-----· ··-·------- - · - - - - - - -------------·
-~e~ain_e._~~~!.:l_in~~--------------------- ----- ----- _______________ ~ 859 30~-
Sales safes __
-Cost-aT 8 450--------
_____________________________________________________ ----- ------2 4326o0"---------- 000
- ------·-·--·-·---·--·-·-··--·-·-···-·--···-·--------·----·--·-··---··--·-·--·------···-···-·-----··-·---··-··-·--- ··---------··-- ---···-·-··-·----··------·--·- -·---··--·---··---·-
Interest income 56 275
-------·-·-----···-··-··--··-··----·--··------·---·-·---··-----·- -----··-·------- ··----·-- - -··--·--·---- ·------·------
Employee benefits 1 3 256 400
--------·-----···--·--·--·---··-·---··--·--·----·--·-·-----·-···--·-·---·-···-·---·--· -------··--·---· --····---·-----·-··--···- -----··------
Rent expense 660 000
- ---··--···-·------------·---------------·· -·------- ·-----·-----· . ·- ·-------·---
Water and electricity 6 629 695
DouEittuicfei>ts_______________________________________ ------------- ---------1881-9o- ------------
s _a_r1_i<__char9-es·----------- -------------------------------------- ----------- ----------e//"576---- ----------
--------------------------------------------------------------------------------------------- --------------- ------------~ -------------------
Donations 4 17 100
__Q~~~~iat!?.~~~~:9uTe~=~~~-t ~======~-====~=~~~-=== _3____ =~=~=-
-~E~-c.~~~~~-~--~-~~- ?.L~.9~~P-~~~~J.!e...t!2.I.~---------------------- ----~ ---
=--- 92~-~-o _~--==-=-====
34 200
30 409 358 30 409 358
-------------------------------------------------- --------------------------------------------· -- ------------ 1 - - - - - - - + - - - - - - l

Page 1 of 6
Additional information
Unless the contrary is indicated, the following transactions and events still have to be appropriately
recognised in MY REPUBLIC's accounting records.
1 On 30 December 2015 a bonus of N$400 000 to the manager was approved. On this day, an
amount of N$288 000 was paid to the manager by means of an EFT. The payment has already
been appropriately recognised. The difference, namely N$112 000, represents taxation (PAYE)
which was retained by MY REPUBLIC in order to pay Receiver of Revenue (ROR) on 7 January
2016.
2 The bank statement for the last day of December 2015 was received on 3 January 2016 and
reflects the following items:
FNB Bank
Cheque account statement for MY REPUBLIC
.g_~~ _ _!_r:-a(1~actiof1~e~~r:!Qtion _-----·----- _ _ _ Deb]!______ Cred!!__. Balance
--~_:ILL?___§_§)anc~_(S:I) __···------·---- --·--·--- __ . 1 887 908 _
31/:11_ _Deeo§lL______________ D~e3j_Q_ _ v________________351250 ~421~?__
31/12 Card settlement SW1178 / 45 000
------ 5 2 287 158
---·----·--- -·- -----------··-----·--- -·---··--···----·-- ·-·--·--·--·
-------------------·---"----~---------··-

-~.1!.1_?__ _!3a!.:!~-~J:l-~~g-~~-------------------- _H~ ----- _ ------~?._~_9__ ----·----- --~L~'!Q~--

31/12 ACB Credit Interest HK 5 650 2 284 058
-·-·-··--- ----·------·--·-··-----···---·-------·-····--· ----··------ - · - - - - - - -·-----·------ - - - - - - · · · -
31/12 Refer to drawer- Receivable D HK
- - - -·--
31 350
- -----·---- -·---·-
2 252 708
_]_1/12__ Dir~1 dees>sit_:- Receivable B EFT409 21 168 2 273 876
-31/12
- - - - -A0922
- - - - -Debit Rent
· - --··--- -A0922
- - - - - - - - - -75 240 2 198 636
·-··-- -----------------

Remarks:
i) The items ticked off with a "/" have already been recognised in MY REPUBLIC's accounting
records.
i) In accordance with the lease agreement signed with the lessor the lease instalment for a
specific month is payable on the last day of the previous month and the lease payments
increase every year at the beginning of the year with 10%.
3 The following amounts in respect of equipment item T9 are included in the balances in respect of
equipment as at 31 December 2015:

This equipment item (T9) was sold for N$34 200 cash on 31 December 2015. The only entry
recognised in respect of this sale, was to debit the amount received on this day by means of an
EFT against the bank account and to credit the account "Proceeds on the sale of equipment item
T9".
4 During the morning of 31 December 2015, MY REPUBLIC delivered trade inventories with a cost
price of N$24 000 to a local non-profit organisation ("NGO") as a donation to this organisation.

Page 2 of 6
5 On 15 December 2015, MY REPUBLIC ordered trade inventories from Payable L, a new supplier
from whom no other inventories had been purchased during the year. Since the trade inventories
are of a specialised nature, MY REPUBLIC had to pay a deposit of N$146 205 with the placing of
the order of the goods. This transaction has already been recognised by debiting Payable L's
account with N$146 205 and crediting the bank account with the same amount. This amount is
included in the balance in respect of trade and other payables, as set out in the list of balances on
31 December 2015. On 15 January 2016 Payable L delivered the trade inventories at an invoice
price of N$324 900. According to the VAT Act, MY REPUBLIC was not allowed to claim a VAT
input when the deposit was paid and therefore did not account for VAT in its accounting records
for the period ended 31 December 2015.
6 The water and electricity account for December 2015 to the amount of N$67 37 4 was received
electronically from Payable CoW on 8 January 2016 and is payable on 28 January 2016.
7 On 31 December 2015 the owner provided authorisation that the allowance for doubtful debt
should be stated at 5% of the trade receivables balance.

YOU ARE REQUIRED TO:

a) After taking the abovementioned additional information into account, present the applicable
balances in the statement of profit or loss of MY REPUBLIC for the reporting period ended
31 December 2015. (20)
b) After taking the abovementioned additional information into account, present the applicable
balances in the statement of financial position of MY REPUBLIC for the reporting period ended
31 December 2015. (30)
Note:
-Notes to the financial statements are not required .
-Amounts must be presented next to the correct line item and under the correct heading.
-Show the calculations of all the line items between brackets, either directly after or directly
underneath the wording of the relevant line item.
-VAT should be accounted for.
-Where applicable. round off amounts to the nearest Dollar.

Page 3 of6
QUESTION 2
Waltons Namibia is a company that manufactures and sells stationery directly to the public. Part of the
company's business activities is the sale of vouchers and gift cards for any value requested by the
customer, which can be redeemed later on by the holder of the voucher, for stationery to the value of
the voucher. The vouchers do not expire.

On 1 March 2016, one of the regular customers of Waltons Namibia, Mr M Patel acquired such a
voucher to the value of N$1 500 in cash for his daughter who is a student at NUST. Mr Patel is certain
she will redeem the voucher at the beginning of the second semester when she will need new
stationery.

The accountant of Waltons Namibia posted the following entry on 1 March 2016:
2016 Dr Cr
------------- -----------· --·-----·--·----··-·--------------------------------- - - - - - -
01 March Bank (SFP) 1 500
Voucher Income (P/L) 1 500
- - - - - - · ------------------------------·--····---·-·--------·-·-·-------·-·-----------
Recognise income from voucher sold

On 31 August 2016, the reporting date, Mr Patel's daughter had not yet had an opportunity to redeem
the voucher.

YOU ARE REQUIRED TO:

With reference to the accrual basis of accounting, and the definition of both income and a liability in
terms of the Conceptual Framework, explain whether you agree with the accounting treatment of the
transaction as recorded by the accountant of Waltons Namibia on 01 March 2016. Present your answer
in columnar format as indicated below.

I Definition of Element I Application

(20)

Page 4 of 6
'·

QUESTION 3 (20 Marks)

Decora Investments runs a business that sells building material and related products to customers.
Decora uses the periodic inventory system .
On 3 April 2016, Namic (Pty) Ltd electronically sent the following order to Decora Investments:
N$
5 000 bricks (type alpha) 79,800
·--
100 bags cement 6,840
---··-·-·----·-------·---·--···---·------·----------------·--··- -·--·----------- -------·---··----,-
14m3 building sand 684
---··· ----·-----·--·-----····-·--------------·---·-----------··-------------···· ---·-··-··----··-----·-
87, 324
----
(Note: the prices at which the goods are ordered are in agreement with Decora's
price list and include VAT)
--

On 5 April 2016 the goods were delivered to Namic (Pty) Ltd's premises. The accompanying invoice,
issued by Decora Investments, amount to N$87,324 (including VAT) and is payable on or before 30
April 2016. Both parties to the contract are registered VAT vendors in accordance with the VAT Act of
Namibia.
Namic (Pty) Ltd is a customer with an excellent payment record.
YOU ARE REQUIRED TO:
a.) Provide the requirements that a contract with a customer must satisfy in accordance with
International Financial Reporting Standards (IFRS) 15. (5)
b.) Recognise the revenue (sales) by applying the five (5) step model of IFRS 15. (15)
Note: Accept that the contract between the two parties satisfies the requirements of step 1.

Page 5 of 6
QUESTION 4 (10 marks)
The Conceptual Framework refers to "Qualitative characteristics", qualities that should characterize
financial information in order to be useful to users of the financial statements.
Namwandi Trading is busy preparing his financial statements for the reporting period ended
30 June 2015. You are the bookkeeper of Namwandi Trading and are required to advise the CFO
(Chief Financial Officer) which qualitative characteristics will have an impact on his financial
statements.
The following is a list of issues that you have identified during your investigation:
1. In order to be as transparent as possible, the owner would like to disclose his date of birth and
home address in the financial statements.
2. The CFO decided to only show the current reporting period's information as he could not find last
year's file on his computer.
3. The CFO decided to take sabbatical leave for 7 months and will only release the financial
statements upon his return .
4. The CFO will be in Japan for the 7 months of his sabbatical leave and informed you that he is
planning to learn Japanese while on holiday and then to report the financial statements in Japanese
only.
5. One of the company's largest receivables, Receivable Z, encountered financial problems and can
therefore settle only 25% of the outstanding debt. With the preparation of financial statements of
Namwandi Trading, the entity decided not to take this information into account. This may influence
the user's decisions.

YOU ARE REQUIRED TO:

In each case listed, indicate which qualitative characteristic is at risk of not being adhered to and also
indicate the respective group in which it is classified . (1 0)

END OF EXAMINATION PAPER

Page 6 of 6