ACC100: ONLINE PRACTICAL SESSION for Chapter 5

SUGGESTED SOLUTION

Lebogang started her business “Lebo’s Shoppe” on 1 April 20.16. Her financial year ends annually
on 31 March.

QUESTION 1

The following transactions for January and February 20.18 have not yet been recorded in the
financial records of the entity.

REQUIRED:

a) Present and disclose the following transactions in the General Journal of Lebo’s Shoppe for
January and February 20.18.

1. Sales (profit margin is 25% on cost)

For cash R57 900
For credit 36 475

General Journal of Lebo’s Shoppe for January and February 20.18

Debit Credit
R R
Bank (SFP) 57 900
Sales (P/L) 57 900
Recognition of cash sales for Jan and Feb

Cost of sales (P/L) (R57 900 x 100/125) 46 320

Trade inventories (SFP) 46 320
Derecognition of inventory sold for cash

Trade receivables (SFP) 36 475

Sales (P/L) 36 475
Recognition of credit sales for Jan and Feb

Cost of sales (P/L) (R36 475 x 100/125) 29 180

Trade inventories (SFP) 29 180
Derecognition of inventory sold for credit

Purchases of trade inventories

 For cash R28 760
For credit 37 640

Debit Credit
R R
Trade inventories (SFP) 66 400
Bank (SFP) 28 760
Trade payables (SFP) 37 640
Recognition of cash and credit purchases of trade
inventories for Jan and Feb

Receipts from trade receivables R39 930

Debit Credit
R R
Bank (SFP) 39 930
Trade receivables (SFP) 39 930
Recognition of cash receipts from Receivables for Jan and Feb

Payments to trade payables R32 480

Debit Credit
R R
Trade payables (SFP) 32 480
Bank (SFP) 32 480
Recognition of cash payments to Payables for Jan and Feb

Business expenses paid:

Rent expense R10 980
Bank charges 1 930
Insurance 1 420
ICT expenses 980
Water and electricity 1 530
Advertising 1 970
Stationery 2 750
Motor vehicle expenses 350
 Debit Credit
R R
Rent expense (P/L) 10 980
Bank charges (P/L) 1 930
Insurance (P/L) 1 420
ICT expenses (P/L) 980
Water and electricity (P/L) 1 530
Advertising (P/L) 1 970
Stationery (P/L) 2 750
Bank (SFP) 21 560
Recognition of business expense payments for Jan and Feb

Trade inventories taken by the owner at cost for personal use R2 340

Debit Credit
R R
Drawings (SCE) 2 340
Trade inventories (SFP) 2 340
Recognition of trade inventories taken by the owner
ACC100: ONLINE PRACTICAL SESSION for Chapter 5

SUGGESTED SOLUTION
QUESTION 2

Following the processing of the outstanding transactions in the previous questions, you are provided
with the following list of balances for Lebo’s Shoppe for the period to the end of February 20.18:

Balances up to 28 February 20.18 Note R

Accumulated depreciation: Vehicles (1 March 20.17) 8. 88 000
Advertising 1. 21 720
Bank 135 970
Bank charges 13 320
Capital 169 373
Commission expenses 9. 34 000
Cost of sales 557 720
Discount allowed 13 700
Discount received 21 600
Drawings 78 170
Freight (in) 4 120
ICT expenses 4. 980
Insurance 14 110
Interest income 65 352
Loan to Ms Naidoo 2. 80 000
Rent deposit paid 6 700
Rent expense 3. 76 045
Retained earnings 93 250
Returns (in) 17 200
Returns (out) 16 170
Sales 714 595
Stationery 4. 25 550
Trade and other payables 58 380
Trade and other receivables 89 655
Trade inventories 10. 87 410
Vehicle expenses 6. 350
Vehicles (cost price) 130 000
In addition, the following relevant information is available:

1. The advertising account includes a current payment of R4 950 in respect of a contract for the
period 1 August 20.17 to 30 April 20.18.

2. The loan to Ms Naidoo was made on 1 March 20.17 and is to be repaid in five equal instalments
on 28 March annually. It bears compound interest at a rate of 8,5% per annum.

3. The rental agreement signed on 1 March 201.7 provides for a monthly rental amount, escalating
by 7% every six months. Rent has only been paid for 11 months.

4. Stationery purchased just before year-end amounting to R980, was erroneously entered as ICT
expenses by the accountant. Stationery on hand on 31 March 20.18 amounted to R2 450.

5. Lebo made the following donations. None of these transactions have been recorded in the
entity’s financial records:

• On 1 March 20.18 she donated office equipment worth R24 500 to the entity as an
additional capital contribution.
• On 25 March 20.18 she donated trade inventories marked as R2 340 to a local retirement
village. Profit is maintained at a rate of 25% on cost.

6. Lebo arranged that trade inventories, purchased on credit, were overnight couriered to a
customer. The cost of R350 was however entered as ‘vehicle expenses’ in the entity’s
accounting records.

7. The details of an employee who was employed on 1 March 20.18 were omitted from the
accounting records of the entity. The following details are provided:

• Monthly salary, R9 360

• PAYE-deduction, R2 210
• Pension fund, 7,5% of gross salary
• For every R1 that the employee contributes to the pension fund, the employer contributes
R1,50.
All payments with regards to the above will be made on 31 March.

8. Depreciation expenses for the year still have to be recognised. Vehicles are depreciated at 25%
per annum on the straight-line method whereas office equipment is depreciated at 15% per
annum on the declining balance method.

9. Commission is paid to Lebo’s Shoppe’s sales manager, Reuben. This is calculated at 15% of
the net sales for the year and is always paid on 15 April in the following financial year. During
February 20.18, an advance was made to Reuben in respect of some of the year’s commission
owing to him. This advance was debited to the commission expense account.

10. A physical stock count on 30 March 20.18 revealed trade inventories worth R82 500 on hand.
REQUIRED:

a) Recognise the additional transactions 4., 5., 6., 7., and 10. in the General Journal of Lebo’s
Shoppe for the reporting period ending 31 March 20.18. Appropriate journal narrations are
required.

GENERAL JOURNAL OF LEBO’S SHOPPE

Debit Credit
4.
R R
Stationery (P/L) 980
ICT expenses (P/L) 980
Correction of error

Stationery on hand (SFP) 2 450

Stationery (P/L) 2 450
Recognition of stationery on hand at year-end

Debit Credit
5.
R R
Office equipment (SFP) 24 500
Capital (SFP/SEC) 24 500
Recognition of capital contribution in the form of office
equipment

Donations (P/L) (R2 340 x 100/125) 1 872

Trade inventories (SFP) 1 872
Recognition of donation of trade inventories

Debit Credit
6.
R R
Freight (out) (P/L) 350
Vehicle expenses (P/L) 350
Correction of error

7. Debit Credit
 R R
Employee benefits/Salaries (P/L) 10 413
SARS PAYE (SFP) 2 210
Pension Fund (SFP) ((R9 360 x 7,5%) + (R702 x 1.5)) 1 755
Bank (SFP) 6 448
Recognition of salaries expenses for March 20.18

SARS PAYE (SFP) 2 210

Pension Fund (SFP) 1 755
Bank (SFP) 3 965
Payment of employee benefit deductions for March 20.18

Debit Credit
10.
R R
Loss due to trade inventories shortages (P/L)
3 038
(R85 538 – R82 500)
Trade Inventories (SFP) 3 038
Recognition of trade inventories shortages

b) Recognise the closing transfer for transaction 10. in the General Journal of Lebo’s Shoppe for
the reporting period ending 31 March 20.18. Appropriate journal narrations are required.

Debit Credit
10.
R R
Cost of sales (P/L) 3 038
Loss due to trade inventories shortages (P/L) 3 038
Closing transfer
c) Present and disclose the abovementioned information in the Statement of Profit or Loss of
Lebo’s Shoppe for the year ended 31 March 20.18 by completing the answer sheet below.

LEBO’S SHOPPE
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH 20.18
R
Revenue (R714 595 – R17 200) 697 395
Cost of sales (R557 720 – R16 170 + R4 120 + R3 038) (548 708)
Gross profit 148 687
Other income 86 952
Discount received 21 600
Interest income 65 352
Other expenses (326 445)
Discount allowed 13 700
Rent expense (R76 045 + *R7 169) 83 214
Bank charges 13 320
Insurance 14 110
Advertising (R21 720 – (R4 950 / 9 x 1)) 21 170
Employee benefits/Salaries (See Journal 7.) 10 413
Stationery (R25 550 + R980 – R2 450) 24 080
Freight (out) 350
Commission expenses (Net sales = R697 395 x 15%) 104 609
Donations (See Journal 5.) 1 872
Interest expense (See loan **amortisation table) 6 800
Depreciation on Vehicles (R130 000 x 25%) 32 500
Depreciation on Equipment ((R24 500 – R0) x 15% x 1/12) 306
Profit/(Loss) for the year (90 806)

*6x + 5(1.07)x = R76 045  11.35x = R76 045

x = R6 700; 1.07x = R7 169
**
No. Due date Payment Interest Principal Balance
80 000
1 31 March 20.18 20 301 6 800 13 501 66 499
2 31 March 20.19 20 301 5 652 14 649 51 850
3 31 March 20.20 20 301 4 407 15 894 35 956
4 31 March 20.21 20 301 3 056 17 245 18 711
5 31 March 20.22 20 301 1 590 18 711 0
 LEBO’S SHOPPE
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 MARCH 20.18
R
Revenue 697 395
Cost of sales (548 708)
Gross profit 148 687
Other income 86 952
Income from subsidiary -
Income from other financial assets -
Distribution costs
Administrative expenses (319 645)
Other expenses
Finance costs (6 800)
Loss before tax (90 806)
Income tax expense -
Loss for the year (90 806)

d) Present and disclose the abovementioned information in the Statement of Changes in Equity
of Lebo’s Shoppe for the year ended 31 March 20.18 by completing the answer sheet below.

LEBO’S SHOPPE
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 20.18
Retained
Capital Total
earnings
R R R
Balance at 1 April 20.17 169 373 93 250 262 623
Changes in equity for 20.18
Additional capital contribution by the owner 24 500 24 500
Profit/(Loss) for the year (90 806) (90 806)
Distribution to owner (drawings) (78 170) (78 170)
Balance at 31 March 20.18 193 873 (75 726) 118 148
e) Present and disclose the following sections in the Statement of Financial Position of Lebo’s
Shoppe as at 31 March 20.18: CURRENT ASSETS; NON-CURRENT LIABILITIES and
CURRENT LIABILITIES. Assume any further information you may deem necessary. The notes
relating to corporate information, compliance with IFRS, measurement bases and accounting
policy is not required.

LEBO’S SHOPPE
STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20.18
ASSETS R
Non-current assets
Property, plant & equipment 33 694
Total non-current assets 33 694

Current assets
Inventories (R87 410 – R1 872 – R3 038) 82 500
Other current assets (R2 450 + R6 700) 9 150
Trade and other receivables (R89 655 + R550) 90 205
Cash and cash equivalents (R135 970 – R20 301 – R6 448 – R3 965) 105 256
Total current assets 287 111
Total assets 320 804

EQUITY & LIABILITIES

Equity
Capital 193 873
Retained earnings (75 726)
Total equity 118 148

Non-current liabilities
Long term borrowings (R66 499 – R14 649) 51 850
Total non-current liabilities 51 850

Current liabilities
Trade and other payables (R58 380 + R7 169 + R70 609) 136 158
Current portion of long-term borrowings 14 649
Total current liabilities 150 807
Total liabilities 202 657
Total equity & liabilities 320 804

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