Diploma in Information Technology (Accounting) Assignment 2

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Question One                                        [5 Marks]

 

1).  Which of the following is not a current liability?

a).  A bank overdraft

b).  Trade and Other Payables

c).  Prepaid expense

d).  Accrued expense

2).  Which of the following statements regarding the Statement of Financial Position is true?

a).  The Statement of Financial Position reflects the financial position of an enterprise for the entire financial period being reported.

b).  The Statement of Financial Position reflects the financial position of an enterprise only on a specific date.

c).  The Statement of Financial Position is a measure of the profit or loss that the enterprise has made over a certain period, usually one year.

d).  The Statement of Financial Position does not take into account transactions in respect of the owners of the enterprise.

3).  Which of the following errors will NOT be revealed by the trial balance?

a).  Inventory to the value of 5 000 was incorrectly posted to the Equipment account.

b).  The Prepaid Expense account of R4 500 was incorrectly entered on the credit side of the trial balance.

c).  The balance on Trade Creditors was incorrectly calculated to be 56 000 instead of 54 000 and entered on the credit side of the trial balance.

d).  The balance of accrued expense account of 12 000 was omitted in full.

4).  Which of the following statements is true?

a).  All accounts are debited when they increase and credited when they decrease

b).  Asset accounts increase on the debit side

c).  Asset accounts increase on the credit side

d).  Liability accounts increase on the debit side

5).  Orange Traders had Cost of Sales of 19 000, Opening Stock of 5 000 and Closing Stock of 10 How much were their Purchases?

a) 24 000

b) 29 000

c).  None of the above

d).  Cannot be determined by the information given

 

Question Two                [60 Marks]

Use the given information for Xitshe Traders (owner Ibani Xitshe) to prepare the:

• Income statement for the year ended 28 February 2021
• Balance sheet on 28 February 2021
• Statement of changes in equity for the year ended 28 February 2021

 

Xitshe Traders

Pre Adjustment Trial Balance 28 February 2021

	Debit (R)	Credit (R)
Balance Sheet Section
Capital		395 700
Drawings	87 000
Land and Buildings	400 000
Equipment	90 000
Equipment Accumulated Depreciation (1 March 2020)		22 000
Fixed Deposit-Ben Bank (12% pa)	40 000
Loan-Zen Bank (16% pa)		40 000
Trading Stock	70 220
Debtors Control	34 420
Provision for Bad Debts		1 900
Creditors Control		49 600
Bank	12 480
Cash Float	1 000

 

 

Nominal Accounts Section
Sales		563 000
Cost of Sales	298 000
Sales Returns	4 000
Rent Income		52 800
Interest on Fixed Deposit		3 200
Bank Charges	1 800
Water and Electricity	12 540
Telephone	3 500
Insurance	3 900
Interest on Loan	7 500
Rates and Taxes	16 400
Salaries and Wages	40 640
Consumable Stores	1 600
Advertising	3 200
	1 128 200	1 128 200

 

Additional Information

 

1.  Xitshe Traders uses the perpetual inventory system

According to a physical stock taking the following stocks were on hand on 28 February 2021:

-Merchandise 69 000

-Consumable Stores 200

2.  Rates and Taxes included a payment of 4 080 for the period 1 January 2021 to 30 June 2021

3.  Depreciation is provided annually on equipment at 10% pa using the diminishing balance method

• Equipment costing 30 000 was purchased on credit on 1 February The purchase has NOT been recorded

4.  The rent for February 2021 is still outstanding

5.  A portion of the interest on loan has been paid in The unsecured loan was obtained on 28 February 2021. Equal annual repayments of 10 000 will commence on 1 March 2021.

6.  On February 2021 a cheque of 500 was received from Henry whose account was previously written off as irrecoverable. No entry has been made for this.

7.  A debtor Donald who owed 800 is declared insolvent. His estate paid Xitshe Traders a first and final dividend of 60 cents in the Rand. This has been recorded. The balance of his account must now be written off.

8.  The provision for bad debts must be adjusted to 5% of trade debtors

9.  The fixed deposit at Ben Bank was made on 1 March 2020 and matures on 30 June Provide for outstanding interest on fixed deposit

10.  Service fees according to the bank statement for February 2021 have not yet been recorded, 160

11.  The telephone account for February 2021 has not yet been paid, 320

 

Question Three                            [30 Marks]

 

The following information was taken from the books of Wacky Whirl for July 2019 and August 2019:

Table of items appearing on the bank reconciliation statement of Wacky Whirl as at 31 July 2019

Details	Amount (R)
Balance as per bank statement (favourable)	478 259.15
Outstanding cheque: CC259	10 467.59
Outstanding cheque: CC291	20 935.19
Outstanding cheque: CC292	31 402.78
Outstanding deposit: DS173	18 318.29
Correction of bank error on deposit DS170 where Bank of Athens understated the amount of the deposit on the bank statement	26 168.99
Balance as per bank account (favourable)	459 940.87

 

Cheque counterfoils of Wacky Whirl – August 2019

Date	Cheque counterfoil no.	Amount (R)
1	CC293	65
3	CC294	49
6	CC295	7
10	CC296	76
13	CC297	93
18	CC298	10
22	CC299	41
26	CC300	10
28	CC301	32
31	CC302	160
		549

 

Deposit slips of Wacky Whirl – August 2019

Date	Deposit slip no.	Amount (R)
1	DS174	17 657.28
6	DS175	28 893.73
12	DS176	51 366.64
19	DS177	27 288.53
27	DS178	16 052.07
31	DS179	19 262.49
		160 520.74

 

Bank statement from Bank of Athens for Wacky Whirl – August 2019

Date	Description	Debit (R)	Credit (R)	Balance (R)
1	Balance			478 259.15 Cr
1	CC291	20 935.19		457 323.96 Cr
1	Deposit		18 318.29	475 642.25 Cr
1	Correction of error on deposit		26 168.99	501 811.24 Cr
1	Deposit		17 657.28	519 468.52 Cr
2	CC293	65 946.62		453 521.90 Cr
4	CC294	49 459.97		404 061.93 Cr
6	Deposit		28 893.73	432 955.66 Cr
7	CC295	10 293.37		422 662.29 Cr
7	Service fees	2 433.72		420 228.57 Cr
7	Direct deposit – B.Arden		20 993.81	441 222.38 Cr
11	CC296	76 937.73		364 284.65 Cr
12	Deposit		51 366.64	415 651.29 Cr
12	ATM fees	1 000.70		414 650.59 Cr
14	CC297	93 424.38		321 226.21 Cr
14	CC297	93 424.38		227 801.83 Cr
15	R/D – T.Aerys	51 366.64		176 435.19 Cr
19	CC298	10 414.07		166 021.12 Cr
19	Deposit		19 863.34	185 884.46 Cr
21	Direct deposit – SARS		41 870.38	227 754.84 Cr
23	CC299	41 711.24		186 043.60 Cr
23	Chequebook fees	1 636.08		184 407.52 Cr
26	BPE749	15 178.01		169 229.51 Cr
27	CC300	10 591.44		158 638.07 Cr
28	Interest on credit balance		4 778.46	163 416.53 Cr
31	Debit order – Thor Securities	26 168.99		137 247.54 Cr
31	Debit order – DSTV	47 769.91		89 477.63 Cr

 

Additional information:

 

1. Cheque CC259 is now stale and must be cancelled.
2. The bank has recorded cheque CC295 at the incorrect amount.
3. The deposit corresponding with DS177 was credited on the bank statement at the correct amount of R 19 863.34.
4. The deposit corresponding with DS176 was for a cheque received from a debtor, Aerys. The cheque was returned by the bank marked – ‘Return to drawer’.
5. The direct deposit on 7 August was from a debtor, Arden, in settlement of her account.
6. The direct deposit on 21 August was VAT refund from
7. The debit order in favour of DSTV is for the business
8. The debit order in favour of Thor Securities is for the business
9. Cheque BPE749 was incorrectly debited to the business’s account.
10. Cheque CC297 was erroneously debited twice on the bank statement.

 

Required:

Use the information given above to complete the following for August 2019:

2.1.	Record any differences identified in the bank reconciliation process in a supplementary cashbook
	receipts and payments with columns for details and amount. Begin with the totals before any
	amendments.
2.2.	Open, post to and balance the bank account (B5) in the general ledger.
2.3.	Compile the bank reconciliation statement as at 31 August 2019.

 

 

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