STUDY UNIT 1

Is the following statement true of false?

The business is seen as an entity completely separate from its owner(s).

ANSWER : TRUE

Is the following statement true or false:

The provision of information in financial statements should be included only if the benefits
are considered to outweigh the costs of providing the information.

ANSWER :TRUE

Which of the following users is not a user of financial information?

Public

Government

Labour brokers

Suppliers and other trade payables

Employees

ANSWER : LABOUR BROKERS

Ko

Accounting is a process consisting of the following activities:

(a) The orderly and systematic identification and recording of monetary values of
economic transactions of a business enterprise.
(b) The identification and recording of economic events.

(c) the reporting on the results of transactions, which is then used by the users of financial
information.

Which of the above activities regarding accounting is correct?

ANSWER : A, B, C
Please match the correct concept with the correct description.

A. Aim of accounting
B. Management accounting
C. International Financial Reporting Standards (IFRSs)
D. Financial statements
E. Recognition

The field of accounting that employs historical and estimated data about specific aspects
of an entity’s activities which management uses in conducting and evaluating current
operations, and in planning future operations. = B

A particular form of financial reports that provide information about the reporting entity’s
assets, liabilities, equity, income and expenses. = D

The process of incorporating in the statement of financial position or statement of profit or

loss and other comprehensive income an item that meets the definition of an element and
satisfies the criteria for recognition. = E

To provide quantitative information which is primarily financial in nature. = A

The international financial reporting standards as set by the Financial Reporting Standards
Council (FRSC) to ensure to a great extent that the same type of transactions is recorded by
different entities in more or less the same way. = C

Please state if the following statement is true or false.

Assets always has debit balances in a T-account in the general ledger

ANSWER : TRUE

Please state if the following statement is true or false:

Assets will decrease on the debit side of a T-account in the general ledger.

ANSWER : FALSE

Please state if the following statement is true or false:

Trade receivables/debtors are an example of a current liability.

ANSWER : FALSE

Please state if the following statement is true or false:

An account consists of a left-hand side, the credit side, and a right-hand side, the debit
side and is presented in a “T” format.

ANSWER : FALSE

Please state if the following statement is true or false:

ASSETS – LIABILITIES = NET ASSET VALUE

ANSWER : TRUE

Please state if the following statement is true or false:

The statement of financial position is described in terms of assets, liabilities and equity for
the year ended 31 December 20.9.

ANSWER : FALSE

Which one of the following options represents the net worth of an entity at any
specific point in time?

Statement of cash flow.

Statement of changes in equity.

Income and expenditure statement.

Statement of profit or loss and other comprehensive income.

Statement of financial position.

ANSWER : STATEMENT OF FINANCIAL POSITION

An asset is …
A resource controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity. An economic resource is a right that
has the potential to produce economic benefits.

A liability is ...

A present obligation of the entity arising from past events, the settlement of which is
expected to result in an outflow from the entity of resources embodying economic benefits.
An obligation is a duty or responsibility that the entity has no practical ability to avoid.

STUDY UNIT 3

The financial results of an entity are measured in terms of the profit or loss which the
entity has made …

On a particular date.

At a specific point in time.

On a particular date.

At the end of a particular week.

In a specified period of time.

ANSWER : IN A SPECIFIED PERIOD OF TIME

Income are ..

Increases in assets or decreases in liabilities, that result in increases in equity, other than
those relating to contributions from holders of equity claims.

Expenses are …

Decreases in assets, or increases in liabilities, that result in decreases in equity, other than
those relating to contributions to holders of equity claims.

STUDY UNIT 4
Assets will be disclosed in the statement of profit or loss and other comprehensive income

ANSWER : FALSE

Expenditure accounts will decrease Equity.

ANSWER : TRUE

To decrease a liability account the account needs to be debited.

ANSWER : TRUE

The statement of changes in equity is prepared on a specific date.

ANSWER : FALSE

All income accounts and expenditure accounts will be disclosed in the statement of
financial position.

ANSWER : FALSE

The following transactions were entered as indicated:

TRANSACTIONS ACCOUNT TO BE DEBITED ACCOUNT TO BE

CREDITED
A) Vehicle purchased for Vehicles Bank
cash
b) A debtor paid his Bank Trade Receivables Control
outstanding account with
an EFT payment directly
into the bank account of the
business
c) The owner increased his Bank Capital
capital contribution with a
deposit directly into the
bank account of the
business
D) Did an EFT payment to Trade payables control Bank
pay a creditor

THE WHOLE TABLE IS CORRECT.

STUDY UNIT 5
Indicate by choosing the correct option whether the following statement is true or
false:

Output VAT is the tax (charged) by the entity on goods delivered to the entity.

ANSWER : FALSE

Indicate by choosing the correct option whether the following statement is true or
false:

Settlement discount granted is offered to debtors in order to encourage quick settlement of

their debts within the stated credit term shown on the credit invoice.

ANSWER : TRUE

Indicate by choosing the correct option whether the following statement is true or
false:

Entries in the sundry accounts column in the cash payments journal are posted individually
to the general ledger.

ANSWER : TRUE

What will the journal entry be if an entity buys inventory on credit when the periodic
inventory system is in use (Ignore any VAT implications?

Debit purchases account and credit trade payables control account.

Nomzi Traders sold furniture to a customer for R1 610 cash, the mark up on cost is 20%.
Assuming Nomzi Traders uses a perpetual inventory system, is a registered VAT vendor and
the VAT rate is 15%. (Round your answer off to the nearest Rand.)

What will the cost of sales be for this transaction?

ANSWER : R 1 167

A debtor, Mr A Naidoo, owed Peter Stores R4 000 on 1 May 20.20. On 15 May Mr A Naidoo
decides to settle his account at Peter Stores, by paying his account in full. Peter Stores
gives him 10% discount.

Which of the following correctly represents the above transaction (Ignore any VAT
implications)?

ANSWER : the trade receivables control account with R4 000 and debit the settlement
discount granted account with R400 and debit the bank account with R3 600
VALUE ADDED TAX

-If the amount is VAT inclusive(VAT OUTPUT) , it means the vat of 15% is already included in
the amount.

VAT amount= Amount including VAT X 15/115

-If the amount is exclusive of VAT(VAT INPUT) , it means that vat of 15% is NOT included in
the amount.

VAT amount= Amount excluding VAT X 15/100

CPJ(SALES) = Sales – Vat output

SUNDRY ACCOUNTS:

TTRADE RECEIVABLES CONTROL = Amount + Vat input + Settlement Discount Granted

PURCHASES = Amount – Vat input

TRADE PAYABLES CONTROL = Amount + Vat output + Settlement Discount Received

SETTLEMENT DISCOUNT GRANTED = Trade Receivable Control – Amount Given – Vat

input

SETTLEMENT DISCOUNT RECEIVED = Trade Payables control – Amount Given – Vat

output

GENERAL LEDGER ACCOUNTS :

Bank(CRJ) : Sales + Trade Receivable Control + Vat output – Settlement Discount Granted –
Vat input

CPJ= Purchases + Trade payables control + Vat input + sundry amounts – Vat output –
Settlement Discount Received

PURCHASES JOURNAL :

Trade payables – Vat Input = Purchases

STUDY UNIT 6

Is the following statement true of false?

A trial balance is a statement of all balances in a single-entry account book.

ANSWER : FALSE

Is the following statement true of false?

Accumulated depreciation is known as a contra asset account

Is the following statement true of false?

At the beginning of The next financial year a totally new set of journals, as well as ledger
Accounts, will be created. Only the nominal accounts will have balances.

ANSWER :FALSE

At the end of the financial year of Diamond Dealers, R367 worth of stationery for office use
was still on hand. What is the journal entry to record this transaction?

ANSWER : Debit the consumable inventory on hand account with R367 and credit the
stationery account with R367.

On 28 February 20.1, the end of its financial year, BD Dealers’ water and electricity account
shows expenses of R3 500. On closer examination BD Dealers accountant establishes that
the February water and electricity account of R500 has not been taken into account.

ANSWER : Debit the water and electricity account with R500 and credit the accrued
expenses account with R500

Quantico Electrical paid R27 000 to Lea Insurers on 1 August 2017. This payment was for
18 months insurance cover. The financial year-end for Quantico Electrical is 28 February
2018. Which of the following represents the correct entry for this transaction in the general
ledger of Quantico Electrical on 28 February 2018?

ANSWER : The insurance account will be credited with R16 500 and the prepaid expenses
account will be debited with R16 500.

Calculations: R27 000÷18 R1 500 per month. R1 500 x 7 R10 500 for the current financial
period (profit or loss account) R1 500 x 11= R16 500 is the amount that is considered as
prepaid expenses.

Property, plant and equipment:

Beginning of the period= Cost – Accumulated depreciation

End of the Period = Cost – Accumulated depreciation

STUDY UNIT 7

Indicate whether the following statement is true or false:

The cost price of merchandise sold is recorded

At the same time as the sale of the merchandise when the periodic inventory system is in
use.

ANSWER : FALSE

Purchases and purchases returns accounts are Kept when the periodic inventory system is
in use.

ANSWER : TRUE

Carriage on purchases is debited Directly to the inventory account when the periodic
inventory system is in use.

ANSWER : FALSE

Cost price (100%) + (Profit mark-up%) = Selling Price

If the selling price is R120, the cost price is R100

If the selling price is R150 000 the cost price is 100÷120 x R150 000

= R125 000

Selling price (100%) – (profit mark-up %) = Cost Price

If the selling price is R100, the cost price is R80

If the selling price is R150 000, the cost price is 80÷100 x R150 000

= R120 000
STATEMENT OF CHANGES IN EQUITY FOR THE Year :.

Balance + Total comprehensive income for the year – Drawings

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE Income :

REVENUE = cash sales + Credit sales – sales return – Settlement discount granted

Cost of sales = Inventory + Net purchases(purchases-purchases return – Settlement

discount received) + Carriage on purchases + import duty – Closing inventory

GROSS PROFIT

Closing journal entries :

Cost of sales = cost of sales – settlement discount received

Gross profit= Total sales-Sales return – settlement discount granted = Sales

Sales – Cost of sales = Gross profit

STUDY UNIT 8

Is the following statement true of false?

A bank, as a registered VAT vendor, can claim VAT (VAT input) from SARS if they charge
transaction fees on services rendered, For example, ledger fees and commission on debit
and credit card transactions.

ANSWER : FALSE

A bank reconciliation is necessary to update the entity’s records to account for actual
transactions reflected in the bank statement.

ANSWER : TRUE

Transactions

Or corrections that the bank must (or will) attend to, for example, deposits not Yet credited
and errors made by the bank to be corrected must Be recorded in the cash receipts journal.

ANSWER : FALSE

PR P2867 for R181 requested to pay Pros Limited, a creditor, during the month was
recorded as R118 in the cash payments journal. This mistake was discovered when the CPJ
was compared with the bank statement.

The error will be corrected by making an entry …

ANSWER : in the cash payments journal for R63.

A deposit meant for another client of the bank for R180 appeared on the bank statement
but not in the cash journals.
This transactions will be entered …

ANSWER : As a debit entry in the bank reconciliation statement.

STUDY UNIT 9

Settlement discount granted will be written off to the profit or loss account at the end of the
financial period (closing transfer).

ANSWER : FALSE

An entity with a settlement discount granted policy applicable to debtors who pay their
accounts fully in the settlement period must, at the end of the financial year, create an
allowance for settlement discount granted for those sales that took place in the current
financial year but in respect of which the settlement period falls in the next financial year.

ANSWER : TRUE

When money that was previously written off as irrecoverable (a credit loss) is recovered, it
must be recorded as follows, bank is debited and trade receivables control/individual
debtor will be credited.

ANSWER : FALSE

Calculating error amount :

Error Amount – amount = Correct Amount

Balance on General ledger(c/d) :

Total receipts(CRJ) – Total payments(CPJ) – Balance(b/d) on cr.

PETTY CASH JOURNAL:

Total(receipts) = Half of CPJ & Half of CPJ

TOTAL MUST BALANCE.

GENERAL LEDGER

Balance(b/D) – Total payments + Total Receipts = Balance(c/d) on CR and Balance b/d

Credit losses + Allowance for credit losses = amount that will be shown as credit
losses in the statement of profit or Loss and other comprehensive income

CREDIT LOSSES

Profit or loss account – Trade Receivable Control = Allowance for credit Losses*
(creation of new Allowance)

Bank and settlement Discount granted = Trade Receivable Column + Overcast amount

STUDY UNIT 10

Under a perpetual inventory system, the purchase of inventory is recorded into the
purchases account at cost price.

ANSWER : FALSE

Only goods that are kept to be sold in the normal Course of business (merchandise) can be
classified as inventory.

ANSWER : FALSE

When determining the historical cost of inventory, more costs, like costs of transporting the
goods from the point of purchase to the premises of the business, are involved.

ANSWER : TRUE

Bennie took inventory worth R1 200 (cost price) for his wife’s computer business. The entity
uses the perpetual inventory system.

The accounts to be debited and credited in the general ledger are as follows:

ANSWER : The drawings account will be debited, and the inventory account will be
credited.
STUDY UNIT 11

Because equipment BECOME Obsolete after several years, they must be written off over
their EXPECTED Economic life. This is usually done by means of a provision referred to as
Depreciation.

ANSWER : TRUE

The historical cost price refer to the cost price of an asset that will remain constant
throughout the life of the asset.

ANSWER : TRUE

Financing costs on loans raised to acquire the Asset are included in the cost price of the
asset.

ANSWER : FALSE

The following balances were extracted From the accounting records of Peot Deliveries at 31
July 20.5:

Vehicles at cost (31 R500 000

July 20.5)
Accumulated R120 000
depreciation:
Vehicles (31 July
20.5)

Additional information

A) The Fleet of vehicles consists of four delivery vehicles of equal value, purchased On 1
August 20.4. On 30 April 20.6 one of the vehicles was traded in at R80 000

For a new delivery vehicle with a cost price of R180 000. The outstanding Amount payable
on the new vehicle was financed by obtaining a loan from Capt. Bank at an interest rate of
9% per annum.

(a) Depreciation On the vehicles, are provided for at 20% per annum according to the
Straight-line method.
The depreciation for the current financial year (30 April 20.6) on the vehicle that was
traded in is …

Calculation of vehicle traded in

Cost price of vehicle traded in = R600 000/ 4 = R150 000

Hence depreciation on vehicle traded in = R150 000 x 20% x 9/12 = R22 500

The depreciation on the remaining three vehicles as well as the new vehicle for the
year ended 31 July 20.6 will be …

Depreciation on remaining three vehicles

Cost price = R600 000/4 x 3 = R450 000

Therefore depreciation for the year for the three vehicles

= R450 000 x 20%

= R90 000

Depreciation on the new vehicle

R180 000 x 20% x 3/12 = R9 000

Therefore total depreciation to be disclosed in the statement of profit and loss and other
comprehensive income:

= R90 000 + R9 000

= R99 000

If it assumed that the depreciation for the current year and the accumulated
depreciation of the vehicle traded in on 31 July 20.6 amounted to R20 000 and R60 000
respectively, then the profit or loss on the sale of the vehicle is …

Carrying amount of vehicle traded in

= Cost of vehicle - Accumulated depreciation

= R150 000 – R60 000

= R90 000

Vehicle was sold for R80 000.

Vehicle selling price – Carrying amount of vehicle

= R80 000 - R90 000

= R10 000 (loss on sale of vehicle)

The interest payable on the new vehicle acquired for the year ended 31 July 20.6 is ..

Calculation of interest payable :

(R180 000 – R80 000) x 9% x 3/12 = R2 250

STUDY UNIT 12

Intangible assets are defined as identifiable monetary assets with physical substance that
are held for use in the production or supply of goods or services, for rental to others or for
administrative purposes and that are controlled by an entity as a result of past events and
from which future economic benefits are expected to flow to the entity.

ANSWER : FALSE

When an entity first recognises a financial asset, it classifies it based on the entity’s
business model for managing the asset and the asset’s contractual cash flow
characteristics.

ANSWER : TRUE

If entities have cash temporarily available that they want to invest for a relatively short
period they will invest it in shares

ANSWER : FALSE
“Intangible assets are identifiable, non-monetary assets that lack physical substance”.
Which of the following example’s does not meet the definition of an intangible asset:

ANSWER : LAPTOP

“An intangible asset with a finite useful life should … on a systematic basis over the best
estimate of its useful life”

ANSWER : be amortised.

On 1 January 20.9 (beginning of financial period), Save for the Future Traders invested
R120 000 in a fixed deposit with Fly-by-Night Bank at 12% interest per annum. On 30
September 20.10 25% of the fixed deposit amount matures and 75% matures on 31
December 20.11.

How much of the fixed deposit should be disclosed as non-current assets and as current
assets in the statement of financial position of Save for the Future Traders as at 31
December 20.9.

75% of fixed deposit = R120 000 x 75%= R90 000. 75% of fixed deposit matures in 20.11,
which is more than 12 months after year end of 31 December 20.9, therefore R90 000 is a
non current asset. 25% of fixed deposit = R120 000 x 25%= R30 000. 25% of fixed deposit
matures within 12 months after year end of 31 December 20.9 (it is actually 9 months after
year end). Therefore R30 000 is a current asset.

Value-Added Tax receivable from the SA Revenue Service are usually classified as a current
liability.

ANSWER :FALSE

Trade and other payables include the trade payables control balance and the accrued
expenses as at the date of the statement of financial position.

ANSWER : TRUE
Individual entries in the cash payments journal are posted to the personal accounts of
creditors (credit side) in the trade payables ledger on the last day of the month.

ANSWER : FALSE

Petro Deliveries owe Enren R80 000 for packing material and has been offered a settlement
discount of 2,5% if the account is paid within 30 days.

If Petro Deliveries pays within 30 days, the journal entry for the settlement discount in the
accounting records of Petro Deliveries will be …

ANSWER : Debit the trade payables control account and credit the settlement
discount received account.

Petro Deliveries owe Enren R80 000 for packing material and has been offered a settlement
discount of 2,5% if the account is paid within 30 days.

The settlement discount Petro Deliveries will receive if they pay within 30 days is …

ANSWER : 80 000 x 2,5/100 = R2 000

An investigation into the accounting records of an entity indicated that, credit purchases
from M Kunene to the value of R2 280 was incorrectly entered in the purchases returns
journal and posted to the purchases returns account in the general ledger.

The business uses the periodic inventory system.

What will the journal entry be to reverse the incorrect posting to the purchase returns
account?

ANSWER : Debit the purchases returns account and credit M Kunene’s account (trade
payables control account).

STUDY UNIT 14

A liability which is payable within 12 months is a non-current liability.

ANSWER : FALSE
The difference between debentures and a long-term loan is that with debentures there are
a number of creditors, whereas with a long-term loan there is usually only one creditor
which is usually a financial institution.

ANSWER : TRUE

Secured by a first bond over land and buildings” means if a borrower is not able to repay the
loan, the claimant can seize the land and buildings, sell them and retain as much of the
amount as the mortgagor owes the claimant.

ANSWER : TRUE

Non-current liability are liabilities that?

ANSWER : becomes repayable within 24 months.

Which one of the following is a non-current liability?

ANSWER : Long-term borrowings.

The “capital” of the owner in a sole proprietorship consists of the initial capital invested in
the business entity plus all additional investments, plus the total comprehensive income
for the year (or less the total comprehensive loss for the year) and less the drawings.

ANSWER : FALSE

The statement of changes in equity is the statement version of the capital account of the
entity.

ANSWER : TRUE

Drawings by the owner are debited to a drawings account during the financial year. At the
end of the financial year the drawings account is closed off to the profit or loss account.
ANSWER : FALSE

The elements of the statement of financial position are…

ANSWER : assets, liabilities and equity.

Where will the total comprehensive income for the year or the total comprehensive loss for
the year of the entity be disclosed in the statement of financial position?

ANSWER : It will be used in the calculation of total equity.

The balance in the capital account on 1 June 20.4, the beginning of the financial year, is
R326 880. Drawings is R15 700 for the current financial year and the total comprehensive
income for the current financial year is R65 210.

On 1 March 20.5, the owner deposited an additional amount of R100 000 into the bank
account of the business. This transaction was correctly recorded in the accounting records
of the entity.

What will the amount of the total equity in the statement of financial position of Mabel
Wholesalers as at 31 May 20.5 be?

ANSWER : R 476 390 (326 880+65 210+100 000−15 700)

For nonprofit organisations, an income and expenditure statement is the same as a

receipts and payments statement .

ANSWER : FALSE

If the allocation of entrance fees are not indicated in the policy of a nonprofit organisation
the entrance fees must be capitalised.

ANSWER : TRUE
The layout of the statement of income and expenditure statement may differ from that of a
statement of profit or loss and other comprehensive income because all the relevant
expenses, including finance costs, can be shown under the heading “Expenses”.

ANSWER : TRUE
ASSIGNMENT 1

The following information was obtained from the records of Lesedi Hairdressing Salon for
the month of February 20.1:

Lerato saved R500 000 so that she can start her own hairdressing salon in Midrand. On 1
February 20.1, Lerato opened a business bank account, Lesedi Hairdressing Salon, at ABC
Bank and she deposited R400 000. On 2 February 20.1 she bought equipment for R150 000
via the business banking app. On 3 February she purchased furniture on credit from Unique
Salon Furnishers for R70 000. On 14 February 20.1, Lerato used the business banking app
to R7 000 for the installation of an air conditioner at her home. On 16 February she used the
business debit card to pay R9 000 for the rental of the business property. On 25 February
Lerato obtained a loan of R150 000 from XYZ Bank with a payback period of more than a
year. This amount was paid into the bank account of Lesedi Hairdressing Salon. During he
first month of trading she made cash sales of R5 000 and she rendered services to clients
on credit for R3 000.

Required: After taking into account all the information provided in the scenario above,
please fill in the total assets section of the statement of financial position as at 28 February
20.1 of Lesedi’s Hairdressing Salon.

Instructions:

1. Follow the format of the statement of financial position as provided in the study
units 1 to 5.

2. Use a full stop to indicate any decimals (eg: 1000.01)

3. Round off to the second decimal after the full stop (eg: 50.56)

STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.1

ASSETS

NON CURRENT ASSETS:R220 000

PROPERTY, PLANT AND EQUIPMENT: R220 000

0 CURRENT ASSETS: R39 2000

TRADE AND OTHER RECEIVABLES: R3000

CASH AND CASH EQUIVALENTS: R38 9000

TOTAL ASSETS : R61 2000

Which statement is correct?

a.Sales and credit losses which are classified as income must be disclosed to measure the
financial performance of an entity.

b. Credit losses recovered which is classified as income is one of the elements that must
be disclosed to measure the financial position of an entity.

c.Sales, credit losses recovered and credit losses are the only elements that must be
disclosed to measure profitability of an entity.

ANSWER : C

The following information was obtained from the records of MG Electricians for the month
of February 20.1:

Michael is a qualified electrician and he decided to open his electrician business in

Durban. He had saved R780 000 in his personal bank account. On 1 February 20.1, Michael
opened up a business bank account in the name MG Electricians at ABC Bank and
deposited R395 000.
 On 5 February 20.1, he bought equipment on credit for R655 000, which is repayable within
a year, and a second -hand van for R56 000 via the business banking app. During his first
month of trading, he rendered cash services for R30 000 and he rendered services to
clients on credit for R20 000. On 23 February 20.1, Michael bought a business premises for
R450 000 after he obtained a mortgage from ABC Bank. On 28 February 20.1, Michael used
the business banking app to pay for the water and electricity of R10 000.

Required:

After taking into account all the information provided in the scenario above, please fill in
the total equity and liabilities section of the statement of financial position as at 28
February 20.1 of MG Electricians.

Instructions:

1. Follow the format of the statement of financial position as provided in the study units 1
to 5.

2. Use a full stop to indicate any decimals (eg: 1000.01)

3. Round off to the second decimal after the full stop (eg: 50.56)

STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20.2

EQUITY AND LIABILITIES

TOTAL EQUITY. R43 5000

CAPITAL. R43 5000

NON CURRENT LIABILITIES R450 000

LONG TERM BORROWINGS. R450 000

CURRENT LIABILITIES. R65 5000

TRADE AND OTHER PAYABLES R65 5000

TOTAL EQUITY AND LIABILITIES. R15400 000

Indicate by choosing the correct option whether the following statement is true or false:
Impairment of a non-current asset is just another word for the depreciation of the non-
current asset.

Select one:

True

False

ANSWER : FALSE

You are given the following information for Sibas Nail Bar:

Equipment…30 000

Manicure tables and chairs…4 000

Inventory…10 000

Clients owing Sibas Nail Bar…5 000

Sibas Nail Bar owes Salon Suppliers…15 000

Bank overdraft…3 000

The total assets of Sibas Nail Bar will be …

R49 000 (30 000+10 000+4 000+5 000)

Equipment in an entity maybe exchanged for other assets and liabilities.

ANSWER : FALSE

Which statement is incorrect regarding entries in a T-account?

a.An increase in the services rendered account will be recorded on the credit side.

b.An increase in the drawings account will be recorded on the debit side.

c.An increase in the services rendered account will be recorded on the debit side.

ANSWER : C
On 1 May 20.2 Ms T Naidoo opened a supermarket under the tradename Better Traders.
Better Traders is a registered VAT vendor and the VAT rate applicable is 15%. Better Traders
will use the periodic inventory system and entered into the following transactions during
May 20.2:

20.2 Day
May 1 The owner, Ms T
Naidoo, deposited
R250 000 of her own
funds directly into
the bank account of
the business.
Cash purchase of WWR STORES,
merchandise from
WWR Stores for BANK : R64 400
R64 400.
VAT INPUT : R 8 400

PURCHASES : R 56
000

2 Bought shop
equipment from
EQUIP on credit,
R10 005, and paid
R1 005 by credit card
as a deposit.
3 Purchased
merchandise on
credit from Big
Wholesalers,
R28 750.
Made an EFT of PHARM TRADERS
R36 225 to creditor, BANK : R36 225
Pharm Traders and TRADE PAYABLES :
received a R40 250
 settlement discount SETTLEMENT
of R4 025. DISCOUNT
RECEIVED : - R3 500
VAT OUTPUT : - R525
10 Credit card sales of
R3 105.
Cash sales of R4
600.
Credit sales to B
Sullivan of R6 900
15 B Sullivan deposited
R5 750 directly into
the bank account of
Better Traders in full
settlement of his
account.
18 Borrowed an amount
of R50 000 from
Better Bank. The
amount must be
paid back on 1 May
20.4.
25 The owner withdrew CASH
cash for R4 300 from BANK : R 4 300
the ATM to restore SUNDRY ACCOUNT :
petty cash float. PETTY CASH

Which statement is correct?

a.Cash taken for personal use by the owner will decrease equity and decrease assets.

b.Inventory taken for personal use by the owner will increase equity and decrease assets.

c.Cash taken for personal use by the owner will increase equity and decrease assets.

ANSWER : A

Trading inventories is an example of a current asset element of the statement of financial

position.

Select one:

True
False

ANSWER : TRUE