telematics 2020 accounting

Directorate: Curriculum FET

TELEMATICS 2020

ACCOUNTING Grade 10

Activities & Work Book

1

Accounting Gr 10 Telematics 2020

Dear Grade 10 Accounting learner Welcome to the Telematics project. The 2020 Gr 10 programme aims to strengthen your understanding of the Accounting process and focuses on the basic knowledge and skills necessary to be successful in Accounting. This is an opportunity for you to consolidate what you were taught in class. The Telematics lessons will focus on the accounting cycle, accounting equation and basic cash and credit transactions of a sole trader. Please take note that you will be writing ONE exam paper in the 2020 Midyear exam, but TWO papers in your Final exam. You should ensure that you know exactly what content will be assessed in each paper and exam.

Tips for success in Accounting

▪ Start working from day ONE.

▪ Complete class- and homework activities EVERY DAY to the best of your ability so that you know exactly what you understand and what your teacher can help you with.

▪ Keep your classwork books neat and organised as it will be your only resource to study for tests and exams.

▪ PRACTICE…PRACTICE…PRACTICE those aspects that you struggle with. ASK your teacher for help. If you do not ask, your teacher will assume you know it all.

▪ Show calculations where applicable. It becomes a good habit that can earn you part marks in tests and exams.

▪ Read instructions in questions/activities carefully to ensure you know what is being asked.

▪ Complete ALL SBA tasks diligently as if preparing for your final examination.

▪ Refine your examination technique: when you revise, choose past paper questions that will extend you in your weaker areas. Use the time allocations provided in the question to judge whether you are completing the question in the time allocated.

Good luck with your Grade 10 year and future Accounting studies.

Mrs E Eksteen Senior Curriculum Planner: Accounting

TELEMATICS TEACHING: ACCOUNTING TIME TABLE – GRADE 10

Date Time Topic By the end of this lesson you should understand:

Tuesday, 11 February 2020

15:00 – 16:00 Accounting cycle Accounting equation

▪ Basic Accounting concepts

▪ The Accounting cycle

▪ The Accounting equation

Tuesday,

18 February 2020

15:00 – 16:00 Sole trader:

Basic and new

CASH transactions

▪ Bookkeeping of cash transactions

(basic and extended transactions)

Tuesday, 25 February 2020

15:00 – 16:00 Sole trader:

Basic and new

CREDIT transactions

▪ Bookkeeping of credit transactions

▪ Reconciliation of Debtors and/or Creditors control with the list

2


BASIC ACCOUNTING CONCEPTS

Activity 1

Match the concept to the correct definition. Write the letter of the correct definition next to the concept.

Concept Answer Definition / Description

1. Assets A A long term saving made on certain terms and at a higher interest rate

2. Debtors B Amounts due to another person or business

3. Profit C All outstanding long term and short term business debts

4. Creditors D When income exceed expenses

5. Owners’ Equity E Amounts spent in operating the business

6. Income F Safekeeping of unspent cash for future use

7. Expenses G Customers who owe money to the business

8. Savings account H Money/Cash generating items, e.g. interest earned on savings

9. Fixed Deposit I The interest of the owner in the business

10. Liabilities J Business possessions that can be sold for cash and are used to generate income

NB: Ensure that you are able to explain these concepts in your own words!

Activity 2 Give TWO examples for each of the following concepts:

Concept Two examples

2.1 Source documents

2.2 Journals

2.3 General ledger accounts

2.4 Financial statements

3


ACCOUNTING CYCLE ALL transactions need to be recorded carefully and regularly. The recording process will eventually result in the preparation of the financial statements which report to the owners about the financial result (Income Statement) and financial position (Balance Sheet) of the business. Therefore the main focus of the recording process is to be well organised in order to provide accurate information for preparing accurate and trustworthy financial statements. The recording process is referred to as the ACCOUNTING CYCE as it starts on the first day of the financial year and ends on the last day of the financial year. The process can be divided into daily, monthly and annual 'activities'.

4


Activity 3

Complete the table below.

TRANSACTION DOCUMENT

Subsidiary JOURNAL

E.G. Cash received by the business Receipt / Cash register roll CRJ

3.1 Payments made by the business

3.2 Small cash payments made

3.3 Goods sold for cash

3.4 Goods sold on credit

3.5 Goods returned by unhappy debtors

3.6 Items bought and paid for

3.7 Items bought, but paid for in future

3.8 Items, not according to order, returned to suppliers

Activity 4 Name the accounting process(es) taking place on a daily, monthly and annual basis:

DAILY

MONTHLY

ANNUAL

5


ACCOUNTING EQUATION

ASSETS = OWNER’S EQUITY + LIABILITY

Or Owner's Equity = Assets - Liabilities

The Accounting Equation is a BASIC summary of the Balance Sheet (Statement of Financial Position). The Accounting Equation will quickly show the effect of any transaction on the financial position. Even a profit or loss eventually affects the Owner's equity in the Balance Sheet. NB: EACH transaction has an effect on the financial position of the business

CLASSIFICATION OF ACCOUNTS

BA

LA

NC

E S

HE

ET

S

tate

me

nt

of

Fin

an

cia

l P

osit

ion

ASSETS

Non-Current Assets Current assets

Fixed (Tangible) Assets Financial Assets

(Investments)

▪ Land & Buildings ▪ Equipment ▪ Vehicles

▪ Fixed Deposit

▪ Trading Stock ▪ Debtors’ Control ▪ Bank ▪ Savings account ▪ Cash Float ▪ Petty Cash

LIABILITIES

Non-Current liabilities (Long-term) Current liabilities (Short term)

▪ Mortgage / Longterm Loan ▪ Creditors’ Control

▪ Bank Overdraft

OWNERS’ EQUITY

▪ Capital + Profit - Drawings

INC

OM

E S

TA

TE

ME

NT

S

tate

men

t o

f C

om

pre

hen

siv

e I

nco

me

Profit = Income - Expenses

Income (or Profits) Expenses (or Losses)

▪ Sales ▪ Current Income ▪ Rent Income ▪ Commission Income (received) ▪ Donations (received) ▪ Interest on Current Bank a/c ▪ Interest on Savings a/c ▪ Interest on overdue (debtors') accounts ▪ Interest on fixed deposit

▪ Cost of Sales ▪ Rates ▪ Water & Electricity ▪ Insurance ▪ Rent Expense ▪ Salaries & Wages ▪ Stationery ▪ Donations (made) ▪ Bank Charges ▪ Repairs ▪ Packing Material ▪ Interest on bank bverdraft ▪ Interest on overdue (creditors') accounts ▪ Interest on loan

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ACCOUNTING PRINCIPLES

Dr ASSETS (A) Cr Dr LIABILITIES (L) Cr Increase with a debit

entry

+

Decrease with a credit entry

-

Decrease wit a debit entry

-

Increase with a credit entry

+

Dr OWNERS’ EQUITY (OE) Cr Decreases with a debit entry

-

Increases with a credit entry

+

INCOME ACCOUNTS

Credited (Income increases OE)

EXPENSE ACCOUNTS

Debited (Expenses decrease OE)

Steps when analysing transactions according to the Accounting Equation 1. Identify the TWO accounts to be affected by the transaction

2. Classify these two accounts in A, O or L

3. Analyse the effect on the accounting equation by applying the Accounting principles illustrated above.

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Activity 5

Answer the questions below:

5.1 Name the two main sections in the General Ledger.

5.2 Why is the General Ledger divided into these two sections.

5.3 Briefly explain the difference between the:

Accounting Cycle

Accounting Equation

Activity 6

- Identify the account to be debited and the account to be credit in each transaction.

- Classify each account as an Asset (A), Owner's Equity (OE) or Liability account.

Transaction Account debited A/O/L Account credited

A/O/L

E.G. The owner deposited an amount in a bank account to start his business

Bank A Capital OE

6.1 Bought stationery and paid by cheque

6.2 Bought a vehicle on credit from a supplier

6.3 Bought goods by cheque from a wholesaler

6.4 Received the monthly rent from the tenant

6.5.1 Cash sales for the week

6.5.2 Cost of sales for the week

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EVERY transaction has an effect on the Accounting Equation (Balance Sheet / Statment of Financial Position).

The elementary analysis of transactions below may help to understand the more complex analysis of the effect on the Accounting Equation.

EXAMPLE

Transations:

1. The owner invested R100 000 in the business as his capital contribution. 2. Bought equipment from ABC Stores for R10 000 and paid by cheque. 3. Bought stock from Ringo Stores on credit, R50 000. 4. Paid R3 000 to the newspaper for advertising. 5. Cash received for goods sold, R25 000. (cost of these items, R15 000) 6. Sold goods on credit to a custormer, R2 000 (cost of sales, R1 200)

CUMULATIVE EFFECT on the Balance Sheet:

No ASSETS OWNER'S EQUITY & LIABILITIES

1. Cash 100 000 Capital contribution / O 100 000

100 000 100 000

2. Cash (- 10 000)

Equipment (+10 000)

90 000

10 000

Owner's Equity (O) 100 000

100 000 100 000

3. Cash

Equipment

Trading Stock (+50 000)

90 000

10 000

50 000

Owner's Equity

Creditors (+50 000)

100 000

50 000

150 000 150 000

4. Cash (-3 000)

Equipment

Trading Stock

87 000

10 000

50 000

Owner's Equity (- 3000)

Creditors

97 000

50 000

147 000 147 000

5. Cash (+25 000)

Equipment

Trading Stock (-15 000)

112 000

10 000

35 000

Owner's Equity (+25 000

- 15 000)

Creditors

107 000

50 000

157 000 157 000

6. Cash Equipment Trading Stock (-1 200) Debtors (+2 000)

112 000 10 000 33 800 2 000

Owner's Equity (+2 000 -1 200) Creditors

107 800

50 000

157 800 157 800

'Reports' to the owner

BALANCE SHEET INCOME STATEMENT

'Profit' on

sales

INCOME: Sales 27 000 EXPENSE: Cost of Sales (16 200) Advertising ( 3 000) Net Profit 7 800

Assets Cash in Bank 112 000 Equipment 10 000 Trading stock 33 800 Debtors owe the business 2 000 157 800 Less Liabilities Creditors (50 000) = Owner's Equity 107 800

Owner's Equity (after transactions) 107 800 Owner's Equity (at the start) 100 000 Net increase in O (=net profit) 7 800

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Activity 7

Prepare a cumulative summary for the following transactions of KIPI Traders:

E.G. B. Kipi started her business with a contribution of R300 000 paid into the current

account of the business. Other transactions were:

7.1 Bought office furniture and shop shelves from Mikko on credit, R40 000

7.2 Paid by cheque for stock purchased from BB Suppliers, R80 000

7.3 Cash received for sales, R12 000. (they use a mark-up of 50%)

7.4 Paid R14 000 montly rent for the shop to City Mall.

7.5 Paid R15 000 to Mikko as part payment on their debt.

7.6 A customer who bought goods, R3 000, promised to pay for it by the end of the month.

The cost of these goods was R2 000.

No ASSETS OWNER'S EQUITY & LIABILITIES

E.G. Cash 300 000 Capital contribution / O 300 000

300 000 300 000

7.1

7.2

7.3

7.4

7.5

7.6

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Activity 8 Use the same transactions as in Activity 7 to show the effect on the Accounting Equation.

Show the effect AND the amount in the 'Effect' column.

Show the item/account that is affected in the 'Reason' column.

E.G. B Kipi started her business with a contribution of R300 000 paid into the current account of

the business. Other transactions were:

8.1 Bought office furniture and shop shelves from Mikko on credit, R40 000

8.2 Paid by cheque for stock purchased from BB Suppliers, R80 000

8.3 Cash received for sales, R12 000. (they use a mark-up of 50%)

8.4 Paid R14 000 montly rent of the shop to City Mall.

8.5 Paid R15 000 to Mikko as part payment on their debt.

8.6 A customer who bought goods, R3 000, promised to pay for it by the end of the month.

The cost of these goods was R2 000

No ASSETS OWNER'S EQUITY LIABILITIES

Effect Reason Effect Reason Effect Reason

E.G. +300 000 Cash increase +300 000 Capital contribution increase

0

8.1

8.2

8.3.1

8.3.2

8.4

8.5

8.6.1

8.6.2

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Activity 9

Analyse the effect on the Accounting Equation in the table below. Indicate the effect with a + (increase), - (decrease) or 0 (no effect)

E.G. The owner K. Berry deposited R500 000 as his capital contribution in the bank account of the business. He emailed a copy of the EFT to the bookkeeper.

9.1 Issued a cheque for shop equipment to AA Shopfitters, R40 000 9.5 Paid R7 000 to Telkom for the telephone account.

9.2 Bought stationery on credit from CC Stationers, R8 000 9.6 Paid R6 000 to CC Stationers as part payment on their debt.

9.3 Purchased trading stock by cheque from DD Suppliers, R65 000 9.7 Credit sales to H. Majozi, R3 000. (cost price R1 500)

9.4 Issued a cheque for R200 to the petty cashier to restore the imprest amount.

No Source

document Journal

General Ledger ASSETS

OWNER'S EQUITY

LIABILITIES Account debited Account credited

EG BS

Proof of payment CRJ Bank Capital + 500 000 + 500 000 0

9.1

9.2

9.3

9.4

9.5

9.6

9.7.1

9.7.2

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CASH TRANSACTIONS

Accounting Cycle

Transactions Source Documents Journals Ledger accounts

Cash received for services rendered, donations received, commission earned, etc.

Receipts CRJ

Dr Bank Cr All other contra accounts

Cash Sales Cash register roll/tape (CRR) CRJ

Sales Dr Bank Cr Sales

Cost of Sales Dr Cost of Sales Cr Trading stock

Payments by cheque and/or EFT (internet banking)

Cheque counterfoil

EFT / BS CPJ Dr All other contra accounts Cr Bank

Small amounts CASH payments

Petty Cash voucher PCJ

Dr All other contra accounts Cr Petty Cash

CASH TRANSACTIONS (extended)

1. Credit Card sales / Internet or Online sales via EFT

Description Source Document Journal Ledger accounts

Customer pays by credit card OR EFT via internet banking

CRR BS (Bank statement for EFT/online payment)

CRJ

Sales / Selling price: Dr Bank; Cr Sales

Cost of Sales: Dr Cost of Sales; Cr Trading stock

2. Bank Charges


▪ Costs and levies charged by the bank for services rendered.

▪ Deducted ON the bank statement; NOT paid by cheque.

▪ ALL levies and charges are ADDED and entered as ONE amount.

▪ NB: INTEREST is NOT added to Bank charges!

BS (Bank statement) (No cheque number in the doc. column)

CPJ

Dr Bank charges (TOTAL of service fees, cash

deposit fees, credit card levies, internet banking fee, etc.)

Cr Bank

3. Carriage on Purchases


Extra costs charged by suppliers to deliver trading stock at the premises

Cheque counterfoil CPJ Dr Trading Stock; Cr Bank

Petty Cash voucher PCJ Dr Trading Stock; Cr Petty Cash

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4. Discount Allowed (to Debtors) Description Source Document Journal Ledger accounts

Debtors are allowed to pay a reduced amount as an incentive to pay earlier. This discount is a loss to the business.

Receipt (the same doc

used for the amount received from debtors)

OR BS (Bank statement

for EFT payments)

CRJ

Dr Bank (amount actually received) Dr Discount Allowed (amount of the discount allowed to the debtor) (from the Discount Allowed column) Cr Debtors Control/Debtor in DL (total settled by the debtor)

5. Discount Received (from Creditors)


Creditors allow discount when an outstanding account is settled earlier than agreed. This discount is a profit to the business.

Cheque counterfoil

CPJ

Dr Creditors Control / Creditor in CL (total amount settled by the business on the creditor's account) Cr Bank (with amount actually paid) Cr Discount Received (discount only)

6. Dishonoured cheques received from debtors


▪ A cheque, received from a debtor to pay an outstanding amount, was deposited earlier. It is now returned by the bank, marked 'R/D' (refer to drawer).

▪ The bank has not honoured/paid out the amount of the cheque.

▪ The original entry in the CRJ has to be cancelled in the CPJ.

Dishonoured cheque Bank statement

CPJ

Cheque amount only:

Dr Debtors Control / Debtor in the DL

Cr Bank

▪ Any discount allowed earlier has to be cancelled in the GJ.

Dishonoured cheque / Journal voucher

(as authorisation for the journal entry)

GJ

Discount allowed amount:

Dr Debtors Control / Debtor in DL (also show amount in DL column) Cr Discount Allowed

7. Dishonoured cheques issued to creditors


▪ The cheque issued to a creditor in payment of their account was returned by the bank, marked R/D. It was originally entered in the CPJ.

▪ This payment has to be cancelled in the CRJ

Dishonoured cheque returned by the bank; Bank statement CRJ

Cheque amount only: Dr Bank Cr Creditors Control / Creditor in CL

▪ Discount received earlier (if any) has to be cancelled in the GJ.

Dishonoured cheque / Journal voucher

(as authorisation for the journal entry)

GJ

Discount received amount: Dr Discount Received Cr Creditors Control; Creditor in CL

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8. Interest on overdraft & Interest on current account Description Source Document Journal Ledger accounts

Interest on current account: (Income) ▪ Earned on a positive bank

balance. ▪ Added on the BS at a low

interest rate

BS (Bank statement)

CRJ

Dr Bank (asset) Cr Interest on current a/c (= Income)

Interest on overdraft: (expense) ▪ Charged by the bank on an

overdrawn/negative bank balance.

▪ Subtracted as a payment on the bank statement (at higher interest rates)

BS (Bank statement)

CPJ

Dr Interest on overdraft (expense) Cr Bank (can be a liability, IF the bank balance is credit/negative)

9. Fixed Deposits & Interest on fixed deposit


Cash deposit for a pre-determined period (usually 1 year or more) at a higher interest rate than a cheque a/c. The aim is earn a higher return on this financial asset. Calculation of the interest In Gr 10 is always the 'simple' interest method. Fixed deposit: asset; Interest on fixed deposit: income

Fixed deposit made: Cash deposited in a Fixed Deposit a/c.

Cheque counterfoil OR BS (Bank statement) [EFT]

CPJ

Dr Fixed Deposit: ABC Bank (add

name of the bank to this a/c as each deposit has its own conditions, e.g. % interest and amount invested) Cr Bank

Fixed deposit matured: The term of the investment has expired and the bank will pay out the amount invested.

Receipt OR BS (Bank statement) [EFT]

CRJ

Dr Bank Cr Fixed Deposit: ABC Bank

Interest earned on the fixed deposit:

• Interest is paid into the current bank a/c

• Income earned on Fixed Deposit


CRJ

Dr Bank Cr Interest on fixed deposit (no bank name, as interest from all deposits are credited in this a/c)

Interest Calculation: P x R x T 100

P = principal amount of the investment R = interest rate, e.g. 10% p.a.(per year)

T = term of the investment, e.g. 2 years (or 24/12 months 24/12)

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10. Loans & Interest on loans Description Source Document Journal Ledger accounts

Extra capital /financing can be obtained by making a loan at a bank. Loans are made for 1 year or longer (long term) and MUST be repaid with interest. Non-Current Liabilities: Loans

Current Liabilities: Part of the loan to be repaid in the next financial year

Expense: Interest on loan

Loan made/received from the bank: Cash is received from the bank who granted the loan. It is the Principal amount (capital portion) of the loan.


CRJ

Dr Bank Cr Loan: ABC Bank (add the name of

the bank to distinguish from other loans)

Loan repaid (instalment or full amount)

Cheque counterfoil OR

BS (Bank statement) [EFT] CPJ Dr Loan: ABC Bank Cr Bank

Interest on loan: (simple interest)

Cheque counterfoil BS (Bank statement) [EFT] CPJ

Dr Interest on Loan (no bank name) Cr Bank

Calculation: P x R x T 100

Interest on loan: (capitalised) Total interest for the year is calculated and added to the capital amount of the loan. Repayment will include interest and capital portions

Cheque counterfoil BS (Bank statement) [EFT]

GJ

CPJ

Interest amount: Dr Interest on Loan (no bank name) Cr Loan: ABC Bank Loan repayment with interest Dr Loan: ABC Bank Cr Bank

Calculation: Loan balance (beginning of year) 300 000 + Interest on Loan ?? 25 000 (300 000 - 265 000 - 60 000) - Instalments / Repayments (60 000) = Loan balance (end of year) 265 000

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Activity 10 (Cash Transactions - analysis)

Analyse the transactions in the table below. NOTE: The bank is EITHER favourable (asset) or overdrawn (liability).

Example: Paid stationery by cheque, R500 TRANSACTIONS: (Favourable bank balance)

10.1 Received the bank statement with the following information:

- service fees, R100; levies for credit card transactions, R140

- interest on the favourable bank balance, R60

10.2 A cheque of R1 800, received from P. Kock in settlement of his debt of R2 000, was returned

by the bank, marked R/D.

10.3 R20 000 was invested for 6 months on a fixed deposit account at BOB Bank. They offered

5% interest per annum.

10.4 A loan of R100 000 was made at Tin Bank, at 8% p.a. interest.

10.5 A fixed deposit from Red Bank matured. Received the initial investment amount of R50 000

plus interest at 5% per annum for the 3 months term of this investment.

TRANSACTIONS (Unfavourable / Overdrawn bank balance)

10.6 The bank statement showed interest on an overdrawn balance, R105

10.7 The bank returned a cheque issued to creditor WB Stores, R900, marked R/D.

10.8 Issued a cheque to pay off on the loan at Blue Bank, R2 500. This amount includes R500 interest capitalised on the loan.

10.9 Paid by cheque for the delivery of stock purchased, R1 700.

17


(Activity 10)

No General Ledger Assets Owner's Equity Liabilities

Account debited Account credited Debit Credit Debit Credit Debit Credit

EG Stationery Bank 500 500

10.1

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

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Activity 11 (Cash transactions: Journals & Ledger) The bookkeeper of EQ Stores has omitted a few transactions out of the cash journals on 30 June 2019. The journals were already totalled, but not posted to the ledger yet. REQUIRED: 11.1 Enter the transactions below in the CRJ and CPJ provided. Create your own document

numbers where applicable.

NOTE: Provisional totals have been entered in the journals.

11.2 Calculate the new final totals of the journals after entering the transactions.

11.3 Post the new totals from the journals to the selected ledger accounts on the Answer Sheet.

NOTE: Enter the opening balances in the ledger accounts before posting from the journals.

11.4 DO NOT balance/total the accounts at the end of the month.

INFORMATION:

A. Balances / Totals on 1 June 2019:

Debtors Control R7 200

Creditors Control 10 400

Fixed Deposit: CC Bank 6 000

Loan: GP Bank 80 000

Discount Received 750

Interest on overdraft 650

B. Totals of Cash Receipts Journal of EQ Stores - 30 June 2019

Bank Sales Cost of Sales Debtors

(Receipts) Discount Allowed

Sundry Accounts

23 200 16 000 12 000 5 000 150 2 200

C. Totals of Cash Payments Journal of EQ Stores - 30 June 2019

Bank Trading Stock Consumable

stores Creditors (Payments)

Discount Received

Sundry Accounts

? 19 000 4 500 8 500 600 3 200

D. Transactions to be entered

1. Received a cheque for R1 500 from debtor, R. Jobela, in part settlement of his account. Granted a cash discount of 5%.

2. Paid R9 500 by cheque to PN Suppliers for stock purchased. R1 500 covered the delivery costs of the stock.

3. The bank notified EQ Stores that R. Jobela's cheque (see no. 1) had been dishonoured (marked R/D) due to insufficient funds in his bank account.

4. Received the bank statement from SeQure Bank. The following items have to be entered: - levies and credit card fees, R350 - interest on an overdrawn balance, R120 - an EFT from CC Bank for the fixed deposit that matured, R6 300. This amount included

interest for the year. - a debit order for the monthly instalment on the loan from GP Bank, R2 000. R200

interest is included in this amount. Interest on loan is capitalised.

19


Activity 11 (Answer sheets)

Cash Receipts Journal of EQ Stores – June 2019 CRJ 6

Doc D Details Fol Analysis

of receipts

Bank Sales Cost of Sales

Debtors Control (Receipts)

Discount Allowed

Sundry Accounts

Amount Fol Details

30 Totals 23 200 16 000 12 000 5 000 150 2 200

Cash Payments Journal of EQ Stores – June 2019 CPJ 7

Doc D Details Fol Bank Trading stock

Consumable stores

Creditors Control

(Payments)

Discount Received

Sundry Accounts

Amount Fol Details

30 Totals 19 000 4 500 8 500 600 3 200

20


(Activity 11)

Dr. General Ledger of EQ Stores Cr.

Fixed Deposit: CC Bank B4

Debtors Control B6

Loan: GP Bank B8

Discount Received N17

Interest on overdraft N19

21


CREDIT TRANSACTIONS

Accounting Cycle

Transactions Documents Journals Ledger accounts

Credit Sales Credit invoice (issued to customers)

DJ Sales Dr Debtors Control Cr Sales

Cost of Sales Dr Cost of Sales Cr Trading stock

Dr Individual debtors in the DL

Items returned by dissatisfied debtors

Credit note DAJ Returns @ selling price

Dr Debtors Allowance Cr Debtors control

Cost of Sales

Dr Trading stock Cr Cost of Sales (ONLY where items were returned)

Cr Individual debtors in the DL

Credit purchases of asset items, stock, consumables, etc.

Credit invoice (received from suppliers)

CJ Dr All other contra accounts Cr Creditors Control

Cr Individual creditors in the CL

Returns to creditors Debit note CAJ Dr Creditors Control Cr All other contra accounts Dr Individual creditors are debited in the CL

22


Activity 12 (Credit transactions - Posting to ledgers) REQUIRED: Post from the journals below to the General and Debtors Ledger accounts as shown on the Answer Sheet. ONLY Balance the Balance Sheet accounts. INFORMATION A. Extract from the CASH RECEIPTS JOURNAL OF ABBA TRADERS - MAY 2019

D Details Bank Sales Cost of Sales

Debtors Control (Total)

Discount Allowed

Sundry Accounts

Amount Details

10 R. Rex 1 300 1 450 150

15 T. Tenko 825 855 30

20 Cash 3 000 3 000 2 000

26 T. Tenko 600 600

5 725 3 000 2 000 2 905 180

B. Extract from the CASH PAYMENTS JOURNAL OF ABBA TRADERS - MAY 2019

D Details Bank Trading Stock

Creditors Control

Discount Received

Debtors Control

Sundry Accounts

Amount Details

19 T. Tenko (R/D) 825 825

30 Mango Ltd 7 225 7 225

8 050 7 225 825

C. Extract: DEBTORS JOURNAL D. DEBTORS ALLOWANCES JOURNAL

- MAY 2019 - MAY 2019

D Details Sales Cost of Sales

D Details Debtors

allowance Cost of Sales

22 R. Rex 350 280 23 R. Rex 150 80

22 T. Tenko 900 720 24 T. Tenko 180 0

28 B. Bach 320 250

1 570 1 250 330 80

E. GENERAL JOURNAL- MAY 2019

D Details Dr Cr Debtors Control

Dr Cr

19 T. Tenko 30 30

Discount Allowed 30

(Discount cancelled)

21 T. Tenko 25 25

Interest on overdue a/c 25

(Interest charged on overdue a/c/)

55

23


Activity 12 (Answer sheet)

Dr. General Ledger of ABBA Traders Cr.

Debtors Control B5

2019 May

1 Balance b/d 2 800

Trading Stock B5

2019 May

1 Balance b/d 7 300

Sales N1

2019 May

1 Total b/d 87 000

Debtors Allowances N2

2019 May

1 Total b/d 1 400

Discount Allowed N6

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Activity 13 (Debtors Control) The bookkeeper of Kenwyn Stores completed the Debtors Control Account in the General Ledger for September 2019, as well as the Debtors List. She noticed that the balance and total did not agree.

REQUIRED: 1. Answer the questions on the answer sheet. 2. Calculate on 30 September 2019:

- the correct balance for the Debtors Control Account. Clearly show your calculations. - the correct balance for each debtor and the correct total or the Debtors List.

INFORMATION: A Incorrect Debtors Control balance on 30 September 2019: R15 380.

B Incorrect Debtors List on 30 September 2019: J. James R 8 400 J. Allies 2 500 M. Mbusi 3 800 R14 700

C After an investigation the bookkeeper listed the following errors: a. The Sales column total in the Debtors Journal was overstated (added too much) by R500

and was posted to the control account as such.

b. An invoice for credit sales of R400, issued to J. James, was not entered in any journal.

c. J. James bought goods on credit for R800, but it was incorrectly posted to the account of J. Allies.

d. M. Mbusi returned goods of R350 but it was entered in his account as R530.

e. An old office chair was sold on credit to J. Allies for R1 200. The bookkeeper did not make any entries of this transaction.

ANSWER SHEET:

13.1 Should the owner be concerned about the difference between the Debtors Control balance and the total of the Debtors List? Explain briefly.

13.2 Mention TWO negative implications if these errors are not corrected (the account not reconciled with the list)

A.

B.

13.3 Calculate the correct Debtors control balance

15 380

13.4 Calculate the correct balance of each debtor and the correct total of the Debtors List

J. James (8 400

J. Allies (2 500

M. Mbusi (3 800

25


Activity 14 (Creditors Reconciliation)

The information below relates to Phoza Stores for July 2019.

REQUIRED:

Calculate the correct total of the Creditors List on 31 July 2019.

INFORMATION

31 July 2019:

Creditors Control Balance R51 100

Creditors’ List total R50 240

An investigation revealed the following: A. Goods returned to a creditor, valued at R6 800 was posted as R5 600 to the creditor's

account.

B. Credit purchases of stationery for R605, was posted to the debit side of the relevant creditor's account.

C. A payment of R2 100 was posted to Buys Stores instead of Busy Suppliers.

D. Creditors with debit balances, R850 were transferred to the Debtors Ledger. No entries were made in the relevant creditor's accounts.

ANSWER SHEET:

Correct total of the Creditors List on 31 July 2019.