Financial Acounting 1 Assignment

Financial Accounting I / © ICG / Page 41
ASSIGNMENT 3
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Subject: Financial Accounting 1 Assignment Code: D20059486-C Edition: 2
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Recommended time: 3 hours Total marks: 160
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Financial Accounting I / © ICG / Page 42
Additional instructions
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Certain information and page references differ from edition to edition.
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Financial Accounting I / © ICG / Page 43
Question 1
The following is the bank reconciliation statement of Newton Stores at 31 August 2003:

R	R
Overdraft per bank statement	2 000
Add:	Cheques not yet presented
No	0004	800
0006	300
0011	1 000

AssignmentTutorOnline

0017 950 3 050
5 050
Less: Deposit not yet credited 6 200
Balance per bank account 1 150
The following is a summary of the cash receipts and payments journals for
September 2003, before posting to the bank account in the general ledger:

Receipts	Payments
Date	Amount	Date	Cheque	Amount
9	Deposit	R 2 900	2	0021	Freight	R 500
13	Deposit	1 500	10	0022	Stationery	270
16	Deposit	2 500	17	0023	Purchases	3 800
23	Deposit	3 000	21	0024	Freight	200
25	Deposit	5 000	23	0025	Purchases	5 750
30	Deposit	1 950	27	0026	T. Timberman	3 530
30	0027	Cash: wages	5 300
16 850	19 350

The bank statement for September 2003 is as follows:

Date	Debits	Credits	Balance
Sept.	1	Balance	R	R	R 2 000	Dr.
Deposit	6 200	4 200	Cr.
3	Cheque 0006	300	3 900
7	Cheque R/D (D. Doubtful)	720	3 180
10	Deposit	2 900	6 080
13	Deposit	1 500	7 580
17	Deposit	2 500	10 080
19	Cheque 0023	3 800	6 280
21	Cheque 0017	950	5 330
22	Cheque 0024	200	5 130
24	Deposit	3 000	8 130
25	Deposit	5 000	13 130
26	Cheque 0025	5 750	7 380
28	Transfer	250	7 630
Cheque 0021	500	7 130
30	Magtape debit M & F
99012	250	6 880
Cheque 0027	3 500	3 380
Service fees	100	3 280
Interest	20	3 260
Commission	5	3 255

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Financial Accounting I / © ICG / Page 44
Here is some additional information:
1. Cheque 0027 was incorrectly entered in the cash payments journal.
2. Cheque 0004 issued for goods bought for cash had become stale and must be
written back.
3. The transfer into the bank on 28 September is for interest on a fixed deposit.
4. The Magtape debit on 30 September is for insurance.
Required
(a) Complete the cash receipts and payments journals for September 2003.
(b) Prepare the bank account as it would appear in the general ledger at
30 September 2003.
(c) Explain what a bank reconciliation statement is, and why it is necessary to
prepare such a statement periodically.
(d) Prepare a bank reconciliation statement at 30 September 2003 in
vertical format. [15]Question 2
The bookkeeper of J. Stevenson’s business prepares the following trial balance for the
financial year ended 28 February 2005.
TRIAL BALANCE

R	c	R	c
Capital	43 000	00
Mortgage on premises at 8% p.a.	10 000	00
Freehold premises	20 000	00
Machinery	15 000	00
Motor vehicles	5 627	00
Purchases	13 429	00
Returns inwards	374	00
Sundry debtors	4 682	00
Drawings	1 486	00
Sales	23 108	00
Returns outwards	421	00
Discount allowed	168	00
Sundry creditors	3 809	00
Rent receivable	600	00
Rates	465	00
Telephone	372	00
Stationery	629	00
Licences	243	00
Stock	4 782	00
Interest on mortgage	800	00
Salaries & wages	5 782	00
Carriage inwards	275	00
Petrol	387	00
Repairs to motor vehicle	462	00
70 273	00	85 628	00

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Financial Accounting I / © ICG / Page 45
Knowing that you have been studying bookkeeping diligently, Mr Stevenson hands you
the above trial balance asking you to make it balance, prepare a new one, and
afterwards prepare final accounts. He tells you that the closing stock is valued by him
at R4 983. Closing journals are not required.
On going through his books, you find that the purchases account total is R13 492 and
not as shown. The total sales for September which have not been posted to the ledger
amount to R2 509, and discount received of R479 has not been posted from the cash
book. Furthermore, the bookkeeper has made the common mistake of not including
the cash balance of R156 and the bank balance of R8 744.

Required Show, by means of a statement, the adjustments necessary to balance the trial balance. Then prepare a new trial balance.	[15]
Question 3	DROP OUT STORES BANK RECONCILIATION STATEMENT AT 30 APRIL 2007

R	R
Cr. balance per bank statement	1 324
Add: outstanding deposit	180
1 504
Less: outstanding cheques: No. 361	84
366	265
367	80
368	50
370	35	514
Dr. balance per cash book	990

Balances at 31 May 2007: bank statement (favourable)	324
cash book (dr.)	383

Items on May bank statement, but not in May cash book:
1. Deposit: R180.
2. Telegraphic transfer on 20 May by debtor, W. Pay, to settle rent for part of the
building, R205.
3. Cheques no: 361 – R48
367 – R80
724 – R16
4. Bank charges, R14. Interest on overdraft, R10.
5. Cheque from D. Hans (a debtor) dishonoured, R125.
Items in May cash book, but not on May bank statement:
1. Deposit R560
2. Cheques no. 401 – R30
403 – R45
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Financial Accounting I / © ICG / Page 46
The following became apparent from answers to queries:
1. Cheque no. 361 was issued for wages and the correct amount is R48.
2. Cheque no. 368 was issued to a debtor who had duplicated his payment. The
debtor returned the cheque and requested that the overpayment be held against
his June account.
3. Cheque no. 366 was issued to pay a creditor, Fox Ltd. It was lost in the post and
a new cheque, no. 372, was issued and again debited to Fox Ltd.
4. Cheque no. 724 was drawn by Drop Inn Stores. The bank will make the
correction in June.
Required
(a) Draw up the bank reconciliation statement at 31 May 2007; and
(b) complete the cash book. [15]Question 4
The following information has been extracted from the accounting records of Osmond
Brothers, who use a manual accounting system that includes a debtors and creditors
ledger.

Balances:	R
Debtors control account at 01/03/2007	25 000
Creditors control account at 01/03/2007	21 100
Cash receipt journal columns:
Sales column	46 900
Discount allowed column	6 900
Debtors column	69 200
Cash payments journal columns:
Purchases column	37 380
Discount received column	2 400
Creditors column	47 460
Totals of other subsidiary journals:
Sales journal	99 500
Purchases journal	71 600
Returns inwards journal	6 280
Returns outwards journal	4 300

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Financial Accounting I / © ICG / Page 47
Other information:
1. The balance of R200 on B. King’s account, which was previously written off as
bad, was recovered and included in the debtors column of the cash receipts
journal and posted to the debtors ledger.
2. Included in the creditors column of the cash payments journal is an amount of
R4 000 in respect of an R/D (return to drawer) cheque received from debtor B.
Bounce. The amount was correctly posted to his account in the debtors ledger.
3. The sales journal was overcast by R1 000.
4. A credit note for R120 issued to K. Paton was not entered in the sales returns
journal.
5. A transaction for goods to the value of R1 100, sold on credit to N. Nair, was
correctly entered in the sales journal but posted as R1 000 to Nair’s account in
the debtors ledger.
6. The returns outwards journal was undercast by R300.
Required
(a) Record the adjusting journal entries necessary to rectify the debtors and
creditors control accounts.
(b) Draw up the debtors and creditors control accounts at 31 March 2007
incorporating the adjustments. [20]Question 5
The following debtors control account of Mario Traders was prepared at
30 September 2005.

2005	2005
R	R
Sept. 1	Balance	b/d	24 900	Sept. 30	Bank (J. de Villiers
30	Bank	CRJ	80 960	cheque dishonoured)	CPJ	60
Sales	SJ	82 854	Sales returns	SRJ	322
Sundry accounts	Sundry accounts
(general journal	(general journal
debits i.r.o. debtors)	J	150	credits i.r.o. debtors)	J	130
Bills payable	BPJ	21 000
Balance	c/d	167 352
188 864	188 864
Sept. 30	Balance	b/d	167 352

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Additional information:
At 30 September 2005 the total of the list of individual debtors balances was
R22 552. This total did not agree with the balance of the above control account
and an investigation revealed the following errors and omissions:
i. Various posting errors were made in writing up the control account. These
mistakes must be corrected.
ii. The R60 cheque of a debtor, J. de Villiers, was returned by the bank marked
‘refer to drawer’. De Villiers had previously settled his account of R70 with this
cheque. No entry was made in respect of the discount to be written back.
iii. M. Robinson, a debtor, is insolvent and the balance of R80 on his account
must be written off as bad.
iv. The sales journal was undercast by R200.
v. An item of R28 in the sales returns journal was incorrectly posted as R228 to
debtor B. Blythe’s account.
vi. A debit note for R106, in respect of goods returned to A. Townsin, was
inadvertently entered in the sales returns journal and posted to the account of
M. Wyatt in the debtors ledger.
vii. The total of the bills receivable journal on 30 September 2005, R4 000, must
still be posted.
Required
(a) Redraft the debtors control account for September 2005, in which the above
errors and omissions have been corrected.
(b) Reconcile the list of debtors balances with the final balance on the debtors
control account in (a). [15]Question 6
A. Albertyn holds a three-fifth share in a business. His capital is R120 000 and
out of the half-yearly profits he is entitled to 9% interest per annum on his capital,
a bonus of 20% of the profit remaining after charging all interest, and three-fifths
of the balance remaining after deducting bonuses and interest.
B. Bonthuis whose capital is R80 000 is entitled to interest on his capital of 9% p.a.,
a bonus of 10% of the profit remaining after charging all interest and two-fifths
of the balance remaining after deducting bonuses and interest.
Drawings: A. Albertyn draws R2 500 and B. Bonthuis R1 500 at the end of each
month.
The profits for the half year ended 31 December 2005 before charging the above
items amounted to R50 286.
The partners decide to transfer to reserve R25 000 of their shares of the balance
of the profits.
Prepare journal entries in respect of the above items, prepare the appropriation
account and show the partners’ current accounts.
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Financial Accounting I / © ICG / Page 49
The credit balances on the partners’ current accounts at 30 June 2005 were:
A. Albertyn R10 000
B. Bonthuis R 600

Work to the nearest cent.	[20]
Question 7
A merchant, G. Green, conducts his business in three departments:

· outfitting;
· drapery; and
· sports goods.
Required
From the following information extracted from his books at 30 June 2002, you are
required to:
(a) compile his income statement showing the gross margin and the net income
made in each department; and
(b) calculate the percentage of gross margin to turnover in each department.

R	R	R	R
Stock 1 July 2001	77 380	45 160	32 220
Purchases	166 820	91 730	67 820	7 270
Returns outwards	990	470	520
Sales	248 810	133 600	104 100	11 110
Returns inwards	3 410	600	2 300	510
Salaries	21 000
Rent	8 400
General expenses	5 600
Stock 30 June 2002	67 930	43 320	23 170	1 440

Expenses not charged directly to departments are to be allocated as follows:
1. Salaries – the first R18 000 is to be allocated to the outfitting, drapery and sports
departments in the ratio 2:2:1 respectively, and the balance equally to the three
departments.
2. Rent is to be allocated according to floor space. The floor space occupied by the
departments is:
· outfitting: one-half;
· drapery: one-third; and
· sports: one-sixth.
3. The managers of the departments are paid commission as follows:

·	outfitting and drapery: 10% of the net income in their departments
before charging commission; and

· sports: 5% on turnover.
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4. General expenses must be allocated to the outfitting, drapery and sports
departments in the ratio 3:3:1. [20]Question 8
A. Smith and B. Jones are in partnership, trading as A. Smith & Co., retail drapers.
The following trial balance is extracted from their books at 30 June 2002:

Accumulated depreciation	R	R 1 600
Advertising	1 000
Barclays Bank	6 600
Building, at cost	40 000
Capital A. Smith – Balance at 31 Dec. 2001	60 000
Capital B. Jones – Balance at 31 Dec. 2001	36 000
Creditors	13 000
Customs duty	7 600
Debtors	16 000
Delivery charges	2 200
Drawings A. Smith	16 800
Furniture & fittings at cost	9 600
General expenses	4 800
Goods in transit at 30 June 2002	4 200
Purchases	51 000
Railage inwards	6 600
Salaries & wages	9 600
Sales	97 000
Stock on hand at 31 Dec. 2001	34 400
214 200	214 200

· They share profits and losses: A. Smith two-thirds and B. Jones one-third.
Interest at 10% p.a. must be allowed on capital, but no interest is to be charged
on drawings.
· A provision of 5% of the debtors must be created to cover doubtful debts.
· Furniture and fittings must be depreciated at the rate of 20% p.a. on cost.
· Stock on hand at 30 June 2002, is valued at R38 600.
Required

Prepare the financial statements.	[20]
Question 9
Mr X commenced business on 1 January 2005 with the following assets.

Stock	Dept. A	R3 000
Dept. B	R5 000
Fixtures	R4 000
Cash	R6 000

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The transactions during the first three months were as follows:

R
Purchases Dept. A	31 000
Dept. B	29 000
Receipts from debtors	52 000
Discounts allowed to debtors	2 100
Payments to creditors	47 200
Cash sales Dept. A	3 800
Dept. B	9 200
Credit sales Dept. A	37 000
Dept. B	29 000
General expenses Dept. A	3 000
Dept. B	4 200
Unallocated expenses	4 800
Drawings	4 000
Cash in hand at end of period	5 700
Selling expenses	2 100
Cartons purchased	3 500
Creditors outstanding at end of period	16 300
Stock at 31 March 2005 Dept. A	4 200
Dept. B	5 800
Cartons in stock 31 March 2005	1 400
Debtors outstanding at end of period	11 900

Selling expenses and discounts are to be apportioned on the basis of cartons sold,
namely:
Dept. A R60 000
Dept. B R45 000
Sales of cartons are included in the sales figures. Unallocated expenses are to be
charged to departments on the basis of floor area, which is:
· Dept. A: 1 000 m2; and
· Dept. B: 600 m2.
Required
(a) Write up the cash book and all necessary ledger accounts, including control
accounts for debtors and creditors.
(b) Prepare the trial balance at 31 March 2005.
(c) Prepare the departmental trading account and departmental income statement.
(d) Prepare the balance sheet at 31 March 2005. Ignore depreciation.

Note: Draft the cash book as if it was a ledger account. Journal entries need not be shown. Ignore cents.

[20]TOTAL: [160]