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Diploma in Information Technology – Accounting Assignment 2 Question and Answer

Diploma in Information Technology (Accounting) Assignment 2

Words: 2000

 

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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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