CHAPTER 4
SUGGESTED SOLUTIONS
SOLUTION TO MULTIPLE CHOICE QUESTIONS 4.1
(d)
4.6
(c)
4.11
(d)
4.2
(a)
4.7
(d)
4.12
(c)
4.3
(e)
4.8
(c)
4.13
(d)
4.4
(d)
4.9
(a)
4.14
(c)
4.5
(b)
4.10 (b)
4.15
(a)
END OF CHAPTER QUESTIONS
4.1 Source documents, recorded in General and Subsidiary Journals, posted to General and Subsidiary Ledgers, verified by Trial Balance and other Controls, which include •
Agreeing balance of Control accounts with Debtors and Creditors lists
•
Reconciling the Cash Journals with the Bank Statement
4.2 The general journal facilitates the recording of salient facts about transactions and adjustments. Previously, transaction entries have been made directly from source documents into the general ledger. The general journal was introduced as an accounting record to form a link between the source documents and the general ledger. In instances where adjusting entries do not arise from source documents, the general journal serves as the initial record of these adjusting entries. The general journal permits more details about transactions and adjustments to be recorded than can be done in the general ledger.
4.3 A general journal is an adequate book of prime entry for a small business with a limited number of transactions. The general journal, however, has limitations because it is time consuming, in terms of the amount of detail to be recorded. Moreover, if it is the only journal being used, and a manual system is in operation, only one employee at a time can be engaged in journalising and posting. These shortcomings can be overcome by using several specialised journals, each designed to record similar types of transactions, instead of only one general journal.
4.4 Whenever transactions can be classified into categories with one common account, such as all cash payment, or all credit sales, it follows that the general ledger account that makes them common will always have the entry on the same side. All cash payments for example will result in a credit entry in the Bank account in the ledger. All credit sales for example will result in a credit to the Sales account in the ledger (and a debit to the Debtors Control account). As a result, these transactions are not recorded in the General Journal, which will require at least two General Ledger entries for each General Journal entry. By recording these transactions in a separate Journal (a subsidiary journal), the entries can be listed in date order and only the total needs to be posted to the general ledger account, which is common to the transaction. Further use of columns in subsidiary ledgers, to classify the results of similar transactions, reduces the number of postings required even further.
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
1
4.5 The cash receipts journal has a number of advantages over a general journal for recording cash received. Because of the columnar nature of this specialised journal, adequate space is provided for details such as a document number, which may be a receipt or a cash slip, the date, the purpose for which the cash was received and the amount of money which must ultimately be deposited in the bank. A major advantage of a cash receipts journal is the possibility of using analysis columns. These columns facilitate greater efficiency in posting to the general ledger; instead of posting each item of cash received, the totals of the analysis columns can be posted to the various general ledger accounts. If required, an analysis column can also be used for sundry ledger accounts, that is, to record cash received which must be posted to accounts not often used. The use of columns enables control to be exercised over the accuracy of the figures recorded in the cash receipts journal, through the use of cross casting. A cash receipts journal is thus a considerably more efficient and effective means of recording transactions than the general journal.
4.6 As the name implies, a subsidiary ledger is secondary (or supplementary) to the general ledger. Debtors' and creditors' subsidiary ledgers contain accounts for each debtor and creditor. The general ledger, on the other hand, contains only a summary - in control accounts - of what has transpired in the individual debtors' and creditors' accounts. The purpose of a subsidiary ledger is to ensure that the general ledger contains only the most important information and does not become cluttered with detail. The detail relating to amounts owed to or by individual creditors or debtors is, however, of vital importance for the smooth running of the business - hence the need for subsidiary ledgers. The use of subsidiary ledgers also provides a check on the accuracy of the recording and posting of debtors' and creditors' transactions. For reporting purposes, a single figure for debtors and one for creditors is deemed to be sufficient. These amounts are provided by the control accounts and will appear in the trial balance and ultimately the balance sheet. The full list of all the debtors and creditors is not required for reporting purposes.
4.7 It would be appropriate to use separate journals for returns and allowances in two particular circumstances. Firstly, if the quantity of returns and allowances is such that they would tend to obscure the contents of the sales and purchases journals. Secondly, if the returns and allowances are considered to be useful information, a separate returns and allowances subsidiary journal (or two journals) is appropriate. This would enable the total of returns and allowances to be separately established, recorded and posted.
4.8 Discount allowed is recorded in the cash receipts journal if the discount is granted only at the time when the cash is received. The transaction of allowing discount, however, does not involve the receipt of cash. The double entry for allowing discount to a debtor is to debit discount allowed (a nominal account) and to credit the debtor. There is no reason why this financial event should not be recorded in the general journal. However, because discount allowed takes place only when cash is received, it is convenient to include one additional column in the cash receipts journal in which to record the discount.
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
2
4.9 The columns in a cash receipts journal assist in the recording and processing of information by summarising and grouping similar transactions. If there were no columns, every individual transaction would need to be posted to the credit side of the appropriate account. With analysis columns, however, only the total of each analysis column needs to be posted to the appropriate ledger account. In this way, considerable efficiencies with regard to posting are obtained. Moreover, by cross casting the column totals, it is possible to ensure that numerical errors have not been made in the cash receipts journal.
4.10 WALICO LTD GENERAL JOURNAL GJ01 Month Day 1
Details
Folio
Debit
Bank
1
500,000
Share capital
2
Credit 500,000
Issued 250 000 shares of R2 cents each and deposited the proceeds. Issued receipt number 0001 2
Bank
1
Federated Merchant Bank
7
200,000 200,000
Loan of R200 000 at 12% negotiated per contract number WRT354. Issued receipt number 0002 3
Equipment
3
Bank
1
180,000 180,000
Purchased items as per entry in the Register of Assets. Paid by cheque in favour of XXX 4
Vehicles
4
Rally Motors
8
120,000 120,000
Purchased delivery van XXXXX CA111111 per Register of Assets Invoice YT0987 issued by Rally Motors
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
3
4.11 VENDOR
SELLING PRICE
INPUT TAX PAID
OUTPUT TAX COLLECTED
DUE TO SARS
Farmer
R 120.00
R 0.00
R 16.80
R 16.80
Manufacturer
R 360.00
R 16.80
R 50.40
R 33.60
R 900.00 R 1,500.00
R 50.40 R 126.00
R 126.00 R 210.00
R 75.60 R 84.00
R 193.20
R 403.20
R 210.00
Wholesaler Retailer
4.12 Cost Price per item (excluding VAT)
= = = = = =
Selling Price (excluding VAT) Profit on sale of 20 items (SP - CP) Check Output VAT received on sale Input VAT paid for purchase Net VAT due to SARS
R275 x (100/110) R250 R250 x (120/100 R300 (R300 - R250) x 20 R1 000
= 20 x R30 = 20 x R25
= =
R600 R500 R100
R100 is 10% of the Value Added (Profit) of R1 00 4.13 a) Total Cost Price of Item (including VAT) Input VAT paid on purchase Cost Price of item (excluding VAT) Output VAT Selling Price of R4 290 Net VAT payable to SARS b) Total Cost Price of Item (excluding VAT) Selling Price Marked Price (including VAT)
©
= = = = = = = = = =
R3 168 + R264 R3 432 R3 432 x (10/110) R312 R3 432 x (100/110) R3 120 R4 290 x (10/110) R390 R390 - R312 R78
= = = = =
R750 R750 x (150/1000 R1 125 R1 125 x (110/100) R1 237.50
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
4
4.14 PRONAT(PTY) LTD GENERAL JOURNAL GJ01 Month Day July
1
Details
Fo
Debit
Inventory at cost
18,000
Receiver for VAT
1,800
Bank
Credit
19 800
Issued cheque no XC456 Input VAT included in for goods purchased July
2
J Benato
10 780
Receiver for VAT
980
Sales
9,800
Output VAT charged to J Benato for goods sold as per Invoice no 543 July
2
Cost of sales
6 533
Inventory
6 533
Cost of goods sold as per Invoice no 543 July
3
Stationery expense Receiver for VAT Bank
2,300 230 2,530
Cheque no CX457 for stationery purchased
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
5
4.15 Sesame (Pty) Ltd a)
b)
Trading statement for the period June to August 20.0 June July R'000 R'000 Sales 1 620 1 350 Cost of sales [W1] 1 080 [W2] 900 Gross profit 540 450 Gross profit Closing stock Unit mark-up Mark-up as a %of cost
August R'000 1 764 [W3]1 260 504
540 45 (135-90) 50% (540/1080)
450 450 45 (135-90) 50% (450/900)
504 990 36 (126-90) 40% (504/1260)
1 080 1 080 1 080
1 350 1 350 [W3] 450 900
450 1 800 2 250 [W3] 990] 1 260
1 080 000/12 R90 1 620 000/12 R135 R45
1 350 000/15 R90 1 350 000/10 R135 R45
1 800 000/20 R90 1 764 000/14 R126 R36
12 12 12 0 -
15 15 10 5 450 (5 x 90)
5 20 25 14 11 990 (11 x 90)
Workings: 1.
Opening stock Add: Purchases Less: Closing stock Cost of sales
2.
Unit cost Unit selling price Mark-up
3.
Units on hand Opening stock Purchases Sales Closing stock Cost of closing stock
c)
The cost of the items sold has been deducted from the selling price of those items. This complies with the matching concept which requires income earned in a period to be matched with the expense(s) incurred in generating that income. The unsold items at the end of July and August have been treated as assets, which will become expenses when income is generated from the sale of these items. Sesame (Pty) Ltd has been consistent in its application of the matching concept, by matching cost of sales against sales for each of the months. The consistency concept requires the accounting treatment in respect of a specific item to be consistent from one period to another and within an accounting period.
4.16 COST 1. 2. 3. 4. 5.
©
% MARK UP
R100
50% (on CP) R200 R300 R240
R150
40% (on SP)
SELLING PRICE R150 25% (on CP) 50% (on CP) 20% (on SP) R250
R250 R450 R300
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
6
4.17 Fraser Stores Ltd a) b)
Selling price VAT Selling price Mark-up Cost of goods sold
2 200 200 2 000 333 1 667
(VAT inclusive) (2200 x 10/110) (VAT exclusive) (2000 x 20/120)
4.18 Footlite Ltd a) b) c) d) e)
Actual selling price 2 673 VAT (243) Actual selling price 2 430 Mark-down 270 Normal selling price 2 700 Cost of goods sold 1 800 Gross profit (theoretical) 900 [Actual gross profit is (2430 - 1800) R630]
(VAT inclusive) (2673 x 10/110) (VAT exclusive) (2430 x 10/90) (2700 x 100/150) (2700 x 50/150)
Gross profit represents the difference between the cost of an item and its selling price. The cost includes the purchase price from the supplier and other costs directly related to the item, e.g. import duty. The expenses of the business not directly related to the costs of items sold are then deducted from the gross profit. The resultant figure is the net profit of the business. In a service business, the difference between the income and expenses is the net profit (if the income is higher). As a service business is not normally involved in trading, gross profit is not calculated.
4.19 Cost price R100 R250 R280 R160
% Mark-up on cost 50 40 30 25
Selling price R150 R350 R364 R200
VAT
Marked price R165 R385 R400,40 R220
R15 R35 R36,40 R20
4.20 a) b)
Cost price of goods (excluding VAT) Mark-up percentage on cost
c)
Net liability for VAT Output VAT Input VAT Amount due to SARS
Workings 1. Purchase of goods Additional cost Sales price Gross profit (mark-up)
©
R1 700 [W1] 680/1700 [W1] = 40% 238 [W1] (163) [W1] 75
Total 1 573 290 1 863 2 618
Net 1 430 270 1 700 2 380 680
VAT 143 (1573 x 10/110) 20 163 238
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
7
4.21 Klink Stores Limited a) 1
General journal for February 20.1 Bank Rent received Received cheque from A Poll for store room sublet (Receipt 143) Bank Sales Cash sales of merchandise (CS321-361) Cost of sales Stock Cost of goods sold Bank Discount allowed Biggs Cheque received in settlement of account.(D338) Repairs Tammer (Pty) Ltd. Invoice received for repairs To computersystem (Invoice 99) 4 Telephone Bank Paid telephone account (D345)
854.00 Len Traders Ltd Bank
854.00
1,000.00
Issued cheque (D342) in partial settlement of balance owing at 964.60 1 February 20.1 964.60 Len Traders Ltd Acc. depreciation on delivery van Delivery van, at cost 689.00 Provision of motor vehicle in 689.00 settlement of balance owing at 1 February 20.1 14 Bank60.00 Sales 4.00
400.00 5,240.00 5,640.00
1,750.14 1,750.14
64.00 Cash sales of merchandise(CS201-223)
Cost of sales
1,250.10
Stock 340.00 Cost of goods sold 340.00 Shippe
1,250.10 350.00
Sales Credit sales of merchandise(Inv 76) Cost 64.80 of sales
350.00 250.00
Electricity
64.80 Stock Cost of goods sold 184.70 Stock
Bank
Colt Enterprises184.70 Ltd
3,462.00
Sent cheque to City Treasurer for electricity(D340)
Briggs Distributors Ltd
1,694.00
Stock Len Traders Ltd Bought goods on credit(Inv 213) Bank Hepburn Account settled 5 Drewer Ltd Bank Paid account(D341) Bank Sales Cash sales of merchandise (CS362-400) Cost of sales Stock Cost of goods sold 7 Biggs Sales Credit sale of merchandise (Inv 75) Cost of sales Stock Cost of goods sold
250.00 5,156.00
Bought goods on credit (Invoices 680.00C341 and 786) 19 Stock
680.00
300.00
Bank Bought goods (D343) 440.00 24 Petrol
300.00 78.53
440.00
Bank
78.53
Bought petrol from Windies' Motors 349.00 and paid by cheque (D344) 349.00 Tammer (Pty) Ltd
17,141.00
Bank 846.30 Settled balance 846.30 owing in full(D345) Wages
17,141.00 1,480.00
Bank Paid wages by cheque (D346) 604.50 Drewer Ltd
1,480.00 290.00
604.50
Bank Sent cheque to settle amount still 210.00 outstanding (D347) 210.00 28 Bank
290.00
1,965.60
Sales 150.00 Sold goods for cash. Included were 150.00 goods sold for R616,00 at a discount of 20% on selling price Cost of sales
©
1,000.00
Stock Cost of goods sold [W1] FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
1,965.60
1,514.00 1,514.00
8
Workings: 1.
R1 965,60 - R616,00 Cost of non-sale goods Normal S.P. of sale goods
= R1 349,60 = R1 349,60/1,4 = R616/,8 = R770 = R770/1,4
Cost of sale goods COST OF GOODS SOLD
= R964 = R550 = R1 514
Notes: 1. Insufficient information is provided to remove the related accumulated depreciation. b)
General ledger of Klink Stores Ltd Bank
20.1 Feb
20.1 1
Balance b/d
8,360.00 Feb
4
Telephone
64.80
Electricity
184.70
Rent recived
854.00
Sales
964.60
5
Drewer Ltd
Biggs
60.00
7
Len Traders Ltd
349.00 1,000.00
4
Hepburn
440.00
19 Stock
300.00
5
Sales
846.30
24 Petrol
78.53
14 Sales
1,750.14
Tammer (Pty)Ltd
28 Sales
1,965.60
Wages
17,141.00 1,480.00
Drewer Ltd
290.00
1
Cost of sales
689.00
5
Cost of sales
604.50
7
Cost of sales
150.00
Stock 20.1 Feb
20.1 1
Balance b/d
4
Len Traders Ltd
4,860.00 Feb 680.00
14 Colt Enterprises Ltd
3,462.00
14 Cost of sales
1,250.10
Briggs Distr. Ltd
1,694.00
Cost of sales
250.00
300.00
28 Cost of sales
19 Bank
1,514.00 [See W1 in section a)]
Len Traders Ltd 20.1 Feb
20 7
Bank
1,000.00 Feb
1
Balance b/d
Delivery van
5,640.00
4
Stock
7
Acc. depreciation
1,400.00 680.00
on delivery van
5,240.00
Drewer Ltd 20.1 Feb
20.1 5
Bank
24 Bank
©
349.00 Feb
1
Balance
b/d
639.00
290.00
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
9
Tammer (Pty) Ltd 20.1 Feb
20.1 24 Bank
17,141.00 Feb
1
Balance b/d
1
Repairs
16,801.00 340.00
Biggs 20.1 Feb
20.1 1
Balance
7
Sales
b/d
64.00
### Bank
210.00
60.00
Discount allowed
4.00
Hepburn 20.1 Feb
20.1 1
Balance
b/d
440.00 Feb
4
Bank
440.00
Shippe 20.1 Feb
20.1 1
Balance
b/d
14 Sales
320.00 350.00
Accumulated depreciation on delivery van 20.1 Feb
20.1 7
Len Traders Ltd
5,240.00 Feb
1
Balanceb/d
5 240,00
Colt Enterprises Ltd 20.1 Feb
14 Stock
3,462.00
Briggs Distributors Ltd 20.1 Feb
14 Stock
1,694.00
7
Len Traders Ltd
5,640.00
1
Balance b/d
Delivery van 20.1 Feb
20.1 1
Balance b/d
5,640.00 Feb Sales 20.1 Feb
48,566.00
Bank
964.60
5
Bank
846.30
7
Biggs
210.00
14 Bank
1,750.14
Shippe 28 Bank
350.00 1,965.60
Electricity 20.1 Feb
4
Bank
184.70 Cost of sales
20.1 Feb
©
1
Balance b/d
34,690.00
Stock
689.00
5
Stock
604.50
7
Stock
150.00
14 Stock
1,250.10
Stock
250.00
28 Stock
1,514.00
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
10
Petrol 20.1 Feb
24 Bank
78.53 Repairs
20.1 Feb
1
Tammer (Pty) Ltd
340.00
Telephone 20.1 Feb
4
Bank
64.80 Wages
20.1 Feb
24 Bank
1,480.00
Additional workings and comments Trading statement of Klink Stores Ltd for February 20.1 Sales 6 086,64 Less: Cost of sales 4 457,60 Gross profit 1 629,04 A gross profit of R1 629,04 has been achieved for February 20.1. The normal mark-up of 40% on cost has dropped to 36,5% (1629/4458). This is because of the goods sold on 28February20.1 at a reduced price.
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
11
4.22 Dolphin Retailers Ltd a) General Journal for February 20.1. 3 Stock 2,000 Creditors (Sinclair Manufacturers) 2,000 Bank 1,200 Sales 1,200 Cost of sales 1,000 Stock 1,000 8 Equipment 16,000 Bank 16,000 9 Debtors (P. Downs) 2,520 Sales 2,520 Cost of sales 2,100 Stock 2,100 Repairs 700 Bank 700 14 Stock 2,000 Creditors (P.M. Wholesalers - 800; 1,400 Brierly Wholesalers - 600) Bank 600 17 Salaries and wages 800 Bank 800 Stationery 80 Creditors (Coastal Printers) 80 18 Creditors (Brierly Wholesalers) 3,100 Bank 3,000 Discount received 100 21 Debtors (R Keyes) 900 Sales 900 Cost of sales 750 Stock 750 Bank 2,900 Debtors (R Keyes) 2,900 Bank 600 Sales 600 Cost of sales 500 Stock 500 Debtors (P. Downs) 840 Sales 840 Cost of sales 700 Stock 700 26 Bank 4,360 Debtors (P. Downs) 4,360
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
12
b)
General ledger of Dolphin Retailers Ltd for February 20.1 Note: The closing journal entries have also been posted to the ledger accounts. Creditors 20.1 Feb
18 Bank Discount received 28 Balance
c/d
20.1 3,000 Feb 1 100 3 8,720 14 17 11,820 Mar 1
Balance Stock Stock Stationery
b/d
Balance
b/d
8,340 2,000 1,400 80 11,820 8,720
Bank 20.1 Feb
Mar
1 3 21 21 26
1
Balance Sales Debtors Sales Debtors
Balance
b/d
c/d
20.1 48,750 Feb 8 1,200 9 2,900 14 600 17 4,360 18 28 57,810 36,710
Equipment Repairs Stock Salaries and wages Creditors Balance
16,000 700 600 800 c/d
3,000 36,710 57,810
Debtors 20.1 Feb
Mar
1 Balance 9 Sales 21 Sales Sales
b/d
1
b/d
Balance
20.1 4,000 Feb 21 2,520 26 900 28 840 8,260 1,000
Bank Bank Balance
c/d
2,900 4,360 1,000 8,260
Equipment, at cost 20.1 Feb
Mar
1 8
Balance Bank
b/d
1
Balance
b/d
20.1 3,400 Feb 28 16,000 19,400 19,400
Balance
c/d
19,400 19,400
Stock 991 Feb
1 Balance 3 Creditors 14 Creditors Bank
b/d
20.1 34,260 Feb 3 2,000 9 1,400 21 600 28
Mar
1
Balance
b/d
Cost of sales Cost of sales Cost of sales Cost of sales Cost of sales Balance
c/d
38,260 33,210
1,000 2,100 750 500 700 33,210 38,260
Stationery 20.1 Feb
1 Balance 17 Creditors
b/d
20.1 540 Feb 28 80 620
Profit and loss
620 620
Rent received 20.1 Feb
20.1 12,000 Feb 1
28 Profit and loss
Balance
b/d
12,000
Cost of sales 20.1 Feb
©
1 3 9 21 21 21
Balance Stock Stock Stock Stock Stock
b/d
20.1 32,000 Feb 28 1,000 2,100 750 500 700 37,050
Trading account
37,050
37,050
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
13
Electricity 20.1 Feb
1
Balance
b/d
20.1 800 Feb 28
Profit and loss
800
Salaries and wages 20.1 Feb
1 Balance 17 Bank
b/d
20.1 22,000 Feb 28 800 22,800
Profit and loss
22,800 22,800
Repairs 20.1 Feb
1 9
Balance Bank
b/d
20.1 1,000 Feb 28 700 1,700
Profit and loss
1,700 1,700
Interest on loan 20.1 Feb
1
Balance
b/d
20.1 1,200 Feb 28
Profit and loss
1,200
Discount received 20.1 Feb
20.1 100 Feb 18
28 Profit and loss
Creditors
100
Sales 20.1 Feb
20.1 44,460 Feb 1 3 9 21
28 Trading
Balance Bank Debtors Debtors Bank Debtors
b/d
38,400 1,200 2,520 900 600 840 44,460
Balance Balance
b/d c/d
12,460 9,150 21,610
44,460 Retained income 20.1 Feb
28 Profit and loss
Mar
1
Balance
b/d
20.1 21,610 Feb 1 28 21,610 9,150 Trading account
20.1 Feb
28 Cost of sales Profit and loss
20.1 37,050 Feb 28 7,410 44,460
Sales
44,460 44,460
Profit and loss account 20.1 Feb
28 Interest on loan Repairs Rent paid Salaries and wages Stationery Consumable stores Electricity
20.1 1,200 Feb 28 1,700 6,000 22,800 620 8,000 800 41,120
Trading account Rent received Discount received Retained income
7,410 12,000 100 21,610
41,120
Note:
Consumable stores and stationery have been treated as nominal accounts in this question.
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
14
c) Post-adjustment trial balance of Dolphin Retailers Ltd at 28 February 20.1 Retained income Motor vehicles Equipment 15% Fixed deposit (Allied B.Society) 18% Loan (Unlimited B.Society) Share capital Creditors Debtors Bank Stock VAT Sales Cost of sales Stationery Consumable stores Electricity Salaries and wages Rent received Rent paid Repairs Interest on loan Discount received
12,460 7,250 19,400 10,000 15,000 90,000 8,720 1,000 36,710 33,210 3,000 44,460 37,050 620 8,000 800 22,800 12,000 6,000 1,700 1,200 100 185,740 185,740
4.23 Cash receipts journal of Ostrobly Ltd 20.1 Date May 1 2 3 4 5 6 7
©
Account credited Share capital Sales/VAT Debtors Rent received/VAT Sales/VAT Electricity Debtors
Doc. no
Folio
Amount 15,000 3,080 4,400 1,540 2,398 132 567 27,117
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
15
4.24 Oaks Retail Stores Ltd Cash Receipts Jounral of Oaks Retail Stores Ltd for March 20.1 Date 1 3 4 11 21 27
Particulars
Sales
Sales J Jones Sales Sales Sales D Dowling
VAT
2,400
Debtors
240 (2) 96 36 200 (2) 568
960 360 2,000 5,720
Discount Allowed
1,022
Sundried
Bank 2,640 1,000 1,056 396 2,200 311 7,603
(20)
333 1,355
(20) (40)
0
Cost of Sales 2,000 800 300 1,667 4,767
Cash Payments Jounral of Oaks Retail Stores Ltd for March 20.1
Date 2 8
14 17 20 22 28
Particulars
Stock
Stock Stationery Rent Wages Office Equipment Stock A. Caruso SARS Stock
*
VAT
1,500
Creditors
Discount Sundried Received
150 4 80
40 800 1,800 400
40 205 (2) 3,000 140 3,617
2,050
1,400 4,950
330
(19)
330
(19)
3,040
Bank 1,650 44 880 1,800 440 2,255 309 3,000 1,540 11,918
Correct to the nearest R1 General ledger of Oaks Retail Stores Ltd for March 20.1
Stock 20.1 Mar
Apr
1 Balance 31 Bank
b/d
1
b/d
Balance
20 5,000 Mar 4,950 9,950 5,183
31 31
Cost of sales Balance
c/d
4,767 5,183 9,950
31 31
Bank/discount Balance
c/d
1,355 1,645 3,000
1
Balance
b/d
2,000
20 1
Balance
b/d
4,000
1
Balance
b/d
4,000 3,670
Debtors 20.1 Mar
Apr
20 1
1
Balance
Balance
b/d
b/d
3,000 3,000 1,645
Retained income 20 Mar Creditors 20.1 Mar
©
31 Bank 31 Balance
c/d
330 Mar 3,670 4,000 Apr
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
16
Sales 20 Mar
31
Bank
1
Balance
5,720
Share capital 20 Mar
b/d
10,000
Rent 20.1 Mar
31 Bank
800 Stationery
20.1 Mar
31 Bank
40 Cost of sales
20.1 Mar
31 Stock
4,767 Discount allowed
20.1 Mar
31 Debtors
40 Discount received 20 Mar
31
Creditors
19
Value added tax (VAT) 20.1 Mar
Apr
31 Bank
20 3,617 Mar
1
3,617 49
Balance
b/d
1 31
Balance Bank Balance
b/d c/d
3,000 568 49 3,617
Wages 20.1 Mar
31 Bank
1,800 Office equipment
20.1 Mar
31 Bank
400 Bank
20.1 Mar
Apr
©
1 Balance 31 Receipts
b/d
1
b/d
Balance
20 11,000 Mar 7,603 18,603 6,685
31 31
Payments Balance
c/d
11,918 6,685 18,603
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
17
Trial balance of Oaks Retail Stores Ltd at 31 March 20.1 Stock [Inventory] Debtors Creditors Sales Share capital Retained income Rent Stationery Cost of sales Discount allowed Discount received Receiver of Revenue Wages Office equipment Bank
5,183 1,645 3,670 5,720 10,000 2,000 800 40 4,767 40 19 49 1,800 400 6,685 21,409
21,409
4.25 Oswaldo Limited Extract from cash receipts journal - June 20.1 Bank Pencil total 11 690 Rent received 500 12190
b)
Extract from cash payments journal - June 20.1 Bank Pencil total 12325 Bank charges 28 Interest on overdraft 32 Donations 100 Debtors' control (R/D cheque) 140 12 625 Ledger of Oswaldo Limited Bank account 20.1 Jun
20.1 1
Balance
b/d
30 Receipts Balance
135 Jun
c/d
12,625
300 12,625
12,625 Jul
c)
30 Payments
12,190
1
Balance
b/d
300
Bank reconciliation statement at 30 June 20.1 Balance as per bank statement 450 (favourable) Add: outstanding deposits 360 810 (favourable) Less: outstanding cheques: 511 105 1007 1 005 1 110 Adjusted balance as per bank account 300 (unfavourable)
As the reconciliation statement agrees, it is unlikely that numerical errors have been made in either Oswald Ltd's records or in the bank's records. (Note: the reconciliation statement would have been equally correct if outstanding cheques, rather than outstanding deposits, were adjusted for first.)
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
18
4.26 Clan Enterprises Limited a) Adjusted month-end bank account balance Credit (overdraft) balance as per bank account Less:Credit transfer (not in CRJ) 4 500 Debit balance per bank account Less: R/D cheque 169 Interest on overdraft 196 Bank charges 321 Adjusted debit balance as per bank account
3 460 1 040 686 354
b) Closing balance on bank statement Debit balance as per bank acount 354 Add: Outstanding cheques 2 876 3 230 Less: Outstanding deposit 2 584 Credit balance as per bank statement 646
4.27 A Company Limited Credit balance (overdraft) as per Bank account in the General Ledger 3 960 Add Bank Charges (which we have not yet recorded, but the bank has) 60 Correct Balance based on all transactions 4 020 Less Outstanding cheques (the bank does not yet know about these) (265) Add outstanding deposits (when the bank records these overdraft will be smaller) 150 Balance currently reflected on the Bank Statement 3 905 [To check this] Balance (Overdraft) as per Bank Statement Add Outstanding Cheques (when the bank records, overdraft will be bigger) Less Outstanding Deposits (when the bank records, overdraft will be smaller) Correct balance as per Bank account in the General Ledger
3 905 265 (150) 4 020
4.28 Recce Limited Reconciliation Statement for the month ended 30 November 20.5 Credit balance as per Bank Statement 4 783 Less: Cheques drawn but not yet presented for payment No VC266 324 No VC289 1 358 No VC2980314 549 2 231 2 552 Add: Deposits not yet recorded by the Bank 2 000 As it was possible to reconcile the two different balances, with items that explain the difference, it offers confidence that no errors or omissions have occurred. The differences are timing differences and will be recorded by the bank in the very near future.
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
19
4.29 Crazy Cash Stores (Pty) Ltd Bank reconciliation statement at 31 May 20.1 Balance per bank statement 241,16 unfavourable Add: Outstanding cheques 210,04 451,20 unfavourable Less: Bank error 15,00 436,20 unfavourable Less: Outstanding deposit 440,00 Adjusted cash book balance 3,80 favourable Insufficient details are provided to enable the adjusted Cash Book [Bank account in the General Ledger] balance to be calculated separately; it is therefore obtained by working from the bank statement balance.
4.30 SASWISS SPARKLE (PTY) LTD Analysis of transactions SASWISS SPARKLE (PTY) LTD for the SIX MONTH PERIOD ENDED 30 JUNE 20.2 SHORT DESCRIPTION OF TRANSACTION
+ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Deposited cash into the bank 15% Loan from Investec Bank Office equipment on credit from Optiplan Ltd Paid rent Purchased office equipment and paid cash Purchased motor vehicle for cash Purchased materials by cheque Clients for finished goods on credit Clients cash for jewellery and payment Payment received from clients Paid salaries to staff Short term loan from the bank Paid general expenses Paid interest Payments to creditors TOTALS BALANCES [ASSETS = EQUITY + LIABILITIES]
=
ASSETS
-
-
350,000 50,000 40,000 260,000 59,000 269,000 54,500 152,000
+
EQUITY
+
LIABILITIES
-
+
350,000 50,000 40,000 39,000 260,000 59,000 95,000
39,000
95,000 269,000 54,500
152,000 82,000
82,000
10,000
1,244,500
10,000 14,500 8,250 30,000
14,500 8,250
739,750
238,750
30,000
504,750
673,500
30,000
434,750
100,000 70,000
0
PROFIT(LOSS) before adjustments R 84,750
a) a) b) c) d) e)
Adjustments before reporting Depr Equipment for half year Depr Vehicles for a half year Materials still on hand Salaries due to staff Work not yet invoiced Bad debt written off TOTALS BALANCES [ASSETS = EQUITY + LIABILITIES] NET PROFIT(LOSS) Return on equity [annualised]
©
50,000 6,500
50,000 6,500
8,000
8,000 4,500
12,500 525,250 462,350
4,500 12,500
6,400
6,400
62,900
67,400
455,250 387,850
0
74,500 74,500
0 R 37,850 21.6%
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
20
(a) and (b)
General Ledger for transactions and Pre-Adjustment Trial Balance SASWISS SPARKLE (PTY) LTD: GENERAL LEDGER
ASSETS
EQUITY
=
+
-
debit
credit
1 O/S Capital
350,000
2 Loan: Investec
+
debit
BANK ACCOUNT
LIABILITIES
+
-
credit
SHARE CAPITAL ACCOUNT
4 Rent
39,000
50,000
5 Equipment
+
debit
credit
LOAN FROM INVESTEC
1 Bank
350,000
2 Bank
50,000
260,000
9 Sales
54,500
6 Vehicles
59,000
10 Debtors
152,000
7 Materials
95,000
12 ST Loan
10,000
11 Salaries
82,000
13 Genl Exp
14,500
14 Interest
8,250
15 Optiplan
30,000
RETAINED INCOME CREDITORS: OPTIPLAN 15 Bank
30,000
3 Equipment
40,000
SALES
10,000
8 Debtors
28,750
269,000
9 Bank
SHORT TERM BANK LOAN
54,500 323,500
12 Bank
10,000
OFFICE EQUIPMENT 3 Optiplan 5 Bank
RENT EXPENSE
40,000 260,000
4 Bank
Pre-Adjustment Trial Balance at 30 June 20.2 Bank
39,000
MOTOR VEHICLES 6 Bank
7 Bank
269,000
300,000
MATERIALS EXPENSE
Vehicles
59,000
95,000
Debtors
117,000
Share Capital
59,000 DEBTORS
8 Sales
28,750
Equipment
300,000
11 Bank
10 Bank
350,000
SALARIES EXPENSE
Loan from Investec
50,000
82,000
Creditors
10,000
Short Term Loand
152,000
117,000 13 Bank
10,000
GENERAL EXPENSES
Sales
14,500
Rent Expense
39,000
Materials Expense
95,000
Salaries Expense
82,000
General Expenses
14,500
INTEREST EXPENSE 14 Bank
8,250
323,500
Interest Expense
8,250 743,500
(c) and (d)
743,500
General Ledger for adjustments and Post-Adjustment Trial Balance SUGGESTED SOLUTION: SASWISS SPARKLE (PTY) LTD: GENERAL LEDGER
ASSETS +
1 2 9 10
=
EQUITY
-
-
debit credit BANK ACCOUNT O/S Capital 350,000 4 Rent 39,000 Loan: Investec 50,000 5 Equipment 260,000 Sales 54,500 6 Vehicles 59,000 Debtors 152,000 7 Materials 95,000
12 ST Loan
10,000 11 Salaries 13 Genl Exp 14 Interest 15 Optiplan
debit credit SHARE CAPITAL ACCOUNT 1 Bank 350,000
3 Optiplan 5 Bank
8,250 30,000
SALES 8 Debtors 9 Bank iv Debtors
+
debit LOAN FROM INVESTEC 2 Bank
50,000
credit
CREDITORS: OPTIPLAN 15 Bank 30,000 3 Equipment
40,000 10,000
269,000 54,500 12500
SHORT TERM BANK LOAN 12 Bank
10,000
336,000 50,000
MOTOR VEHICLES 59,000 I Depr 6,500 52,500 DEBTORS 8 Sales 269,000 10 Bank 152,000 iv Sales 12500 v Bad Debts 6,400 123,100 MATERIAL INVENTORY ON HAND II Mat Exp 8,000
4 Bank
RENT EXPENSE 39,000 SALARIES ACCRUED [OWING AT THIS MOMENT] iii Sal Exp 4,500
6 Bank
7 Bank
11 Bank iii Sal due
13 Bank
I i
V
MATERIALS EXPENSE 95,000 ii Mat stock 87,000
SALARIES EXPENSE 82,000 4,500 86,500 GENERAL EXPENSES 14,500
INTEREST EXPENSE 8,250 DEPRECIATION EXPENSE Equip 50,000 Vehicles 6,500 56,500 BAD DEBTS Debtors 6,400
14 Bank
©
LIABILITIES -
RETAINED INCOME
82,000 14,500
28,750 OFFICE EQUIPMENT 40,000 I Deprec 260,000 250,000
+ +
8000
Post-Adjustment Trial Balance at 30 June 20.2 Bank Equipment Vehicles Debtors Material Inventory Share Capital Loan from Investec Creditors Short Term Loan Salaries Accrued Sales Rent Expense Materials Expense Salaries Expense General Expenses Interest Expense Depreciation Bad Debts
28,750 250,000 52,500 123,100 8,000 350,000 50,000 10,000 10,000 4,500 336,000 39,000 87,000 86,500 14,500 8,250 56,500 6,400 760,500
760,500
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
21
(e)
Income Statement and Balance Sheet
Income Statement of Sasswiss Sparkle (Pty) Ltd for the half year ended 30 June 20.2 Sales Less Materials Expense Gross Profit
336,000 87,000 249,000
Less Expenses Rent Expense General Expenses Salaries Expense Depreciation Bad Debts Net Operating Profit before Interest Interest Expense Net Profit to shareholders
202,900 39,000 14,500 86,500 56,500 6,400 46,100 8,250 37,850
Balance Sheet of Sasswiss Sparkle (Pty) Ltd at 30 June 20.2 ASSETS Non-Current Assets [Note 1] Office Equipment at cost less depreciation Motor Vehicles at cost less depreciation
302,500 250,000 52,500
Current Assets Material Inventory Debtors [Accounts Receivable] Bank
159,850 8,000 123,100 28,750 462,350
EQUITY AND LIABILITIES Shareholders Equity Ordinary Share Capital (70 000 shares of R5) Retained Income (Profit for 6 months)
387,850 350,000 37,850
Long Term Liabilities Loan from Investec Bank (15%)
50,000 50,000
Current Liabilities Short Term Bank Loan Creditors [Accounts Payable] Salaries Accrued
24,500 10,000 10,000 4,500 462,350
NOTE 1 COST
Office Equipment Motor Vehicles
©
300,000 59,000 359,000
ACCUMULATED BOOK VALUE DEPRECIATION
50,000 6,500 56,500
250,000 52,500 302,500
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
22
(f) The Return on Investment (Return on Equity) for the six-month period is calculated as follows: ROE = =
R37 850 / 350 000 x 100 10.8%
Returns are always annualised for the purpose of comparison. We thus make the assumption that the same return will be earned in the second half year, thus the equivalent annual return is 21.6%. (We understand that these are heroic assumptions and that it is all something of an approximation - but it is the best method we have available. (g)
For a business which has just commenced operations, the shareholders must be pleased with the results to date. An equivalent return on the shareholder investment of above 20% is well above the risk free rate. Note that company tax has not yet been taken into account, and this will reduce the return to shareholders. The Income Statement should now be analysed and each revenue and expense item should now be considered against the budget which must have been set up prior to commencement of business. Strategic thinking should result in even better performance in the second half of the year, by containing costs and aiming to boost sales. Considering the figures reported in the Balance Sheet, the financial position also seems healthy at this stage. The non-current assets are being depreciated quite conservatively (ie probably faster than they need to be) and the materials inventory and cash are well managed, evidenced from the relatively small balances on hand. Debtors should be monitored as there is a relatively large investment in this asset. An unforeseen bad debt could have serious consequences. The use of the loan to assist in financing seems like a good idea, as the interest rate being paid is 15% p. and Sasswiss is earning well above that rate, so shareholder profits are being levered up by the use of funds from other sources.
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
23
4.31
CUTAWAY LTD
a)
Subsidiary Journals
Day 2 15 20 21 24 28 29
Account Credited Sales A Cruxley Sales B Sukele Vehicles Rent rec L Mondeno
CASH RECEIPTS JOURNAL FOR DECEMBER 20.9 Doc Fo Amount Sales VAT Debtors Other No Bank Control a/c’s CS786 9,900 9,000 900 Rec XX D1 8,800 8,800 CS788 9,240 8,400 840 Rec XX D2 3,400 3,400 Rec XX 45,000 45,000 Rec XX 2,310 210 2,100 Rec XX D3 4,400 4,400 83,050 17,400 1,950 16,600 47,100 B1 N1 N2 B12 B9 B8
Account Credited
1 4 8 8 18 25 25 27 29
SARS (VAT) Loan Std Bank Stationery E Fragio Inventory Electricity Telephone D Nadeem Wages
1567 1568 1569 1570 C2 1571 1572 1573 1574 C1 1575
8,700 3,200 528 4,500 1,023 770 935 8,600 9,600 37,856 B1
15 15 15 18 10 18 19
Debtor A Cruxley B Sukele L Mondeno L Mondeno B Sukele B Sukele A Cruxley
8,700 48
D1 D2 D3 D3 D2 D2 D1
Discount Received
B12 3,200 B11 480 N7 170
930
93 70 85
700 N9 850 N6 190
8,600 930
13,100
8,996
B10
B12
9,600 14,830
1,023 891 759 1,320 2,376 429 1,700 8,498
930 810 690 1,200 2,160 390 6,180 N1
93 81 69 120 216 39 618 B12
360 N4 B10
DEBTORS’ JOURNAL FOR DECEMBER 20.9 DJ6 Doc Fo Amount Sales VAT Other Fo No Debtors a/c’s 20 21 22 23 24 25 26
420 N2 B8
4,500
N8
B9
©
11,600 N2 B9
CASH PAYMENTS JOURNAL FOR DECEMBER 20.9 CPJ6 Doc Fo Amnt Inven- Creditors’ VAT Other Fo No Bank tory control accounts
Day
Day
CRJ6 Fo Cost of Discount sales Allowed 6,000 200 5,600 220 B6 N10
Cost of sales 620 540 460 800 1,440 260
1,700 B7 1,700
4,120 N2 B8
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
24
CREDITORS’ JOURNAL FOR DECEMBER 20.9 Day 3 7 15 23
Creditor D Nadeem E Fragio Papers Parks Mo
Doc No 141 142 143 144
Fo C1 C2 C3 C4
Amount Creditor 1,980 1,540 660 70,840 75,020 B10
Inventory 1,800 1,080
2,880 B8
Stationery
CJ6 VAT
320 600 920 B12
180 140 60 6,440 6,820 N7
DEBTORS’ ALLOWANCES JOURNAL FOR DECEMBER 20.9 Day
Debtor
Doc Fo Amount Sales No Debtor 26 L Mondeno CNX1 D3 495 450 26 B Sukele CNX2 D2 594 540 1,089 990 B9 N1
VAT 45 54 99 B12
Other a/c’s
Other a/c’s
Fo
64,400 B6 64,400
DAJ6 Fo Cost of sales 300 360 660 B8 N2
CREDITORS’ ALLOWANCES JOURNAL FOR JUNE 19.9 CAJ6 Day Creditor Doc Fo Amount InvenStatioVAT No Creditor tory nery 16 E Fragio CN1 C2 396 360 36 30 Papers CN2 C3 275 250 25 671 360 250 61 B10 B8 B12 N7
CUTAWAY LTD GENERAL JOURNAL FOR NOVEMBER 20.9 GJ6 Day Details Fo Debit Credit 17 Donations N11 2,500 Inventory B8 2,500 Donation of goods to Indigent Hostels 19 Debtors (B Sukele D2) B9 90 Interest N12 90 Charged interest on overdue account 29 Interest N13 55 Creditors (E Fragio C2) B10 55 Notified that we were charged interest on overdue account
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
25
b) and c) General Ledger with postings and balanced B Dr June
31 Balance 30 Cash receiptsDr
June July Dr
31 Balance
Dr Dr June Dr June Dr June
Dr June
BANK B1 June 30 Cash payments CPJ6 8,700 30 Balance SALES c/d 83,050
30 Debtors’ 91,750 b/d allowances 53,894
DAJ6
Dr June
31 30 30 30
Dr
b/d b/d
Dr June
b/d
July Dr June
Dr June
Dr June
July
©
31 30 19 30
34 30
31 30 30
31
1,050
DAJ6
Cr 660
233,100
b/d
30 30 30 b/d 30
CPJ6
GJ6 Cost of108,300 sales CRJ6 Cost ofTELEPHONE sales DJ6 Creditors’ CAJ6 3,450 allowances Balance c/d
850
4,300
B8
Cr
45,000 889,400 934,400
N4 b/d CPJ6
Cr 560 360 920
N5
Cr
N6
Cr
Cr 2,500 11,600 4,120 360 183,890 202,470
183,890 PRINTING AND STATIONERY DEBTORS B9 Cr 31 Balance b/d 30 Creditors 2,540 June Balance b/d CRJ6 23,500 June 30 Cash receipts 16,600 allowances 38 Cash payments CPJ6 480 Interest GJ6 30 Discount allowed CRJ6 90 420 30 Creditors CJ6 Debtors’ journal DJ6 30 Debtors’ 920 DAJ6 8,498 1,089 allowances 30 Balance c/d 3,690 13,979 32,088 32,088 Dr BANK CHARGES Balance b/d Balance 13,979 June 31 b/d 350 CREDITORS B1 Cr Dr ELECTRICITY AND WATER 0 Cash payments CPJ6 June 31 Balance b/d 13,100 13,460 June 31 Balance b/d 2,780 Discount received CPJ6 29 Interest GJ6 360 55 25 Cash payments CPJ6 700 Creditors’ CAJ6 30 Creditors’ journal CJ6 671 75,020 3,480 allowances Balance c/d 74,404 Dr RENT RECEIVED 88,535 88,535 June July 31 Balance 74,404 b/d 28 Cash receipts 20% LOAN FROM STANDARD B1 Cr Dr DONATIONS Cash payments 31 Balance 2,500 b/d 1 June CPJ6 25 Inventory 3,200 JuneGJ6 90,000 Balance c/d 86,800 Dr INTEREST RECEIVED 90,000 90,000 June 19 Debtors July 31 Balance 86,800 b/d Dr INTEREST EXPENSE RECEIVER OF REVENUE (VAT) B1 Cr June 29 Creditors GJ6 55 Cash payments CPJ6 b/d 2 8,996 June 31 Balance 8,700 Creditors CJ6 30 Cash received CRJ6 6,820 1,950 Debtors DAJ6 30 Creditors’ CAJ6 99 61 allowances 30 Debtors’ DJ6 618 July 31 allowances Balance c/d 4,586 15,915 15,915 Balance b/d 4,586
Dr June
N3
Cr
WAGES AND SALARIES
31 Balance 98,700 INVENTORY b/d 29 payments JuneCPJ6 b/d Cash 198,000 17 Donations 9,600
202,470
31 19 30
697,990
N2
Cr
889,400 DISCOUNT RECEIVED OFFICE EQUIPMENT B7 Cr June 31 Balance DJ6 234,800 June 19 Debtors 1,700 30 Creditors 30 Balance c/d 233,100 234,800 234,800
Balance Cash payments CPJ6 930 Creditors CJ6 2,880 Dr Debtors’ June DAJ6 31 Balance 660 allowances
30 Balance
B5
Cr 675,400 17,400 6,180
allowances
Dr June
25 Cash payments
Dr June
N1 b/d CRJ6 DJ6
b/d
31 Balance
30 Balance
11,600 4,120
302,560 85,000 DISCOUNT ALLOWEDB6 VEHICLES 31 b/d b/d Balance June 24 Cash receipts CPJ6 630 870,000 CJ6 30 Balance c/d 30 Debtors CRJ6 64,400 420
31 Balance
31 Balance
37,856 53,894 June 31 Balance 91,750
CAPITAL June 31 Balance b/d 400,000 RETAINED INCOME Cr COST OF SALES B3 June 31 Balance b/d 777,830 31 Balance b/d 287,500 June 30 Debtors’ PREMISES B4 Cr
934,400 July Dr June
990
Cr
30 Cash receipts 30B2Debtors Cr
30 Inventory CRJ6 150,000 30 Inventory DJ6 SHARES IN DE BEERS
31 Balance b/d
31 Balance 30 Creditors
b/d CRJ6
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
N7 CAJ6
Cr 250
N8
Cr
N9
Cr
N1 CRJ6 0 N1 1
2,100 Cr
GJ6
N1 2 N1 3
26
Cr
Cr 90 Cr
©
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
27
( c)
Trial Balance
CUTAWAY LTD TRIAL BALANCE AT 30 DECEMBER 20.9 BALANCE SHEET ACCOUNTS Bank Capital Retained income Premises Shares in De Beers Vehicles Office equipment Inventory Debtors Creditors 20% loan from Standard Receiver of Revenue INCOME STATEMENT ACCOUNTS Sales Cost of sales Discount allowed Discount received Wages and salaries Telephone Printing and stationery Bank charges Electricity and water Rent received Donations Interest received Interest expense
©
B1 B2 B3 B4 B5 B6 B7 B8 B10 B11 B12 B13 N1 N2 N3 N4 N5 N6 N7 N8 N9 N10 N11 N12 N13
53,894 400,000 777,830 150,000 85,000 889,400 233,100 183,890 13,979 74,404 86,800 4,586 697,990 302,560 1,050 920 108,300 4,300 3,690 350 3,480 2,100 2,500 90 55 2,040,134 2,040,134
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
28
DEBTORS SUBSIDIARY LEDGER A CRUXLEY ACCOUNT Doc Day Details I20 R721 I26
1 5 15 19
Balance Sales Bank/Discount Office equipment
B SUKELE ACCOUNT Doc Day Details
b/d DJ6 CRJ6 CRJ6 Fo
Balance Sales Sales Sales Interest Bank/Discounts Sales returns
b/d DJ6 DJ6 DJ6 GJ6 CRJ6 DAJ6
L MONDENO ACCOUNT Doc Day Details
Fo
I21 I24 I25 XX R722 CNX2
I22 I22 CNX1 R725
1 5 10 18 19 21 26
Fo
5 8 26 29
Sales Sales Sales returns Bank/Discount allowed Debtors’ list A Cruxley B Sukele L Mondeno
DJ6 DJ6 DA66 CRJ6
Debit
Credit
9,000 1,023 9,000 1,700 Debit
Credit
14,500 891 2,376 429 90 3,620 594 Debit
Credit
759 1,320 495 4,400
D1 Balance 9,000 10,023 1,023 2,723 D2 Balance 14,500 15,391 17,767 18,196 18,286 14,666 14,072 D3 Balance 759 2,079 1,584 -2,816
2,723 14,072 -2,816 Credit balance in debtors a/c 13,979
CREDITORS SUBSIDIARY LEDGER D NADEEM ACCOUNT Doc Day Details I41 Z32
1 Balance 3 Inventory 27 Bank
E FRAGIO ACCOUNT Doc Day Details I42 Z28 CN2 XX
1 7 8 16 29
Balance Inventory/Stationery Bank/Discount Inventory Interest expense
PAPERS STATIONERS ACCOUNT Doc Day Details I43 CN2
15 Stationery 30 Stationery
PARKS MOTORS ACCOUNT Doc Day Details I44
23 Motor vehicles Creditors’ list D Nadeem E Fragio Papers Stationers Parks Motors
©
Fo b/d CJ6 CPJ6 Fo b/d CJ6 CPJ6 CAJ6 GJ6
Debit
Credit 8,790 1,980
8,790 Debit
Credit 4,670 1,540
4,670 396 55 C3
Fo CJ6 CAJ6 Fo CJ6
Debit
Credit 660
275 Debit
Credit 70,840
C1 Balance 8,790 10,770 1,980 C2 Balance 4,670 6,210 1,540 1,144 1,199 C3 Balance 660 385 C4 Balance 70,840
1,980 1,199 385 70,840 74,404
FLYNN D K: UNDERSTANDING FINANCE AND ACOUNTING: 2ND EDITION: SUGGESTED SOLUTIONS
29