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this are accounting framework questions that needs to be done
Typology: Exercises
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Model example 1 The following is the post-adjustment trail balance of Circle Bar Limited: Dr/(Cr) Trial Balance as at 31 December 201 9 R Sales ………………………………………………………………….. (4 842 870) Cost of Sales …………………………………………………………… 3 147 866 Interest paid …………………………………………………………… 11 500 Rent Income …………………………………………………………… (66 000) Land and Buildings at cost…………………………………………… 1 800 000 Furniture and Fittings at cost………………………………………… 85 000 Plant and Equipment at cost…………………………………………… 675 000 Accumulated depreciation: Furniture and Fittings…………………… (34 000) Accumulated depreciation: Plant and Equipment…………………. (283 500) Motor Vehicles at cost………………………………………………….. 360 000 Accumulated depreciation: Motor Vehicles…………………………… (100 800) Salaries and Wages paid………………………………………………. 465 000 Electricity and Water expense………………………………………… 8 000 Rates paid…… …………………………………………………………. 15 300 Debtors…………………………………………………………………… 365 842 Creditors…………………………………………………………………. (286 400) Dividends Received ……………………………………………………. (65 000) Dividends Paid………………………………………………………….. 100 000 Shareholders for Dividends……………………………………………. (50 000) Share Capital……………………………………………………………… (2 0 65 000) Long term loan…………………………………………………………… (450 000) Inventories - merchandise ……………………………………………… 330 460 Consumable Stores (expense) …………………………………………. 18 721 Repairs and Maintenance……………………………………………… 23 490 Directors’ emoluments………………………………………………….. 400 000 Audit fees paid……………………………………………………………. 105 000 Operating Lease expenses ……………………………………………... 144 000 Telephone paid…………………………………………………………... 28 452 Prepaid expenses……………………………………………………… 58 000 Retained Earnings as at 31/12/20 18 ………………………………… .. (276 900) Credit losses ……………………………………………………………… 68 500 Allowances for credit losses (SOFP) …………………………………….. (36 585) Fines paid…… …………………………………………………………… 6 000 Depreciation ……………………………………………………………… 215 500 Bank……………………………………………………………………….. 125 424
shares of no par value, all of which were issued to Miss Jabula Sitholo for cash. Miss Sitholo is also the director of the company. Debit R Credit
Additional Information (1) Bank reconciliation of ABSA current account as at 28 February 201 9 R Balance as per cash book/bank ledger account 8 000 Direct bank transfer on 25/2/201 9 not yet captured (see note 2) 20 000 Balance as per ABSA current account bank statement 28 000 (2) Sale of the investment held in the ordinary shares of Puza Limited, a listed company The ordinary shares were purchased on 20 April 201 8 at R 3 per share. The shares were acquired as a long-term investment. All the shares in Puza Limited were sold for R 2 each on 23 February 201 9. The share broker directly deposited the proceeds from the sale into the company’s bank account on 25 February 201 9. Ignore any brokerage costs. However, the cashbook clerk has not yet processed the receipt in the company’s CRJ. A profit or loss arising from this disposal also needs to be recorded in the company’s books. (3) Dividends declared by Jabula (Pty) Ltd A dividend of R 10 per share was declared on 28 February 201 9. No entries have been made in respect of the accrual of this dividend at year- end. (4) Income taxation payable to the South African Revenue Services Taxation still needs to be provided at 30% of pre-tax profits. Assume that all items of income and expenses are subject to tax. During the year, provisional tax payments of R 12 000 were made to the South African Revenue Services. These amounts were debited to the “Receiver of Revenue – Income Taxation” account.
Question 1: (Lecture review) You have just been appointed as the accountant of Walala Wasala Limited, a Durban- based company involved in the wholesaling of furniture. The company was incorporated on 1 January 20 19. The company’s bookkeeper (who is not up to date with IFRS) has prepared and presented to you the following draft income statement for the 12 month period ended 31 December 20 19 : Walala Wasala Limited Draft Income statement for the year ended 31 December 20 19 R Sales 4 202 000 Less: Purchases (3 600 000) Gross profit 602 000 Add: Sundry income 15 000 Profit from sale of vehicles 15 000 Total income 617 000 Less: Expenses (492 000) Administrative expenses 100 000 Distribution costs 40 000 Other expenses: o Auditors’ remuneration 30 000 o Depreciation on vehicles 20 000 o Depreciation on equipment 45 000 o Directors’ remuneration 70 000 o Interest paid on long-term loans 25 000 o Repairs and maintenance 160 000 o Sales returns 2 000 Net profit before tax 125 000 Less: Provisional taxes paid during the year (80 000) NET PROFIT AFTER TAX 45 000
Additional Information On closer examination of the accounting records you determined that the following information had not been taken into account by the bookkeeper when preparing the draft statement of profit or loss and comprehensive income: (a) Year-end inventory valuation The company maintains a periodic inventory system. Inventory is valued at the lower of cost and net realizable value. Cost is determined on a first-in first-out basis. At 31 December 20 19 a physical inventory count was performed in order to establish the value of inventories on hand at that date. Reproduced hereunder are summaries from the inventory sheets of 31 December 20 19 , which were compiled by the bookkeeper, and a transcript from a meeting that took place between yourself and the company’s financial director. EXTRACT FROM INVENTORY WORKING PAPER FILE SECTION J2/ SUMMARY OF INVENTORY COUNT HELD ON 31/12/20 19 Prepared by : Bookkeeper Inventory item code Quantity Cost per item Net realizable value (the items which the company purchases) (as established during the inventory count) (determined using the FIFO- method) (market value per item) A001- Table sets 80 R 500 R 500 B001- Cupboards (BICs) 50 R 200 R 250 C001- Sofa sets 30 R 6 000 R 5 000
Makanda (Pty) Ltd was incorporated on 1 March 20 17 with an authorised share capital of R 100 000, 100 000 ordinary shares of which half have been issued. On 28 February 20 19 , the following balances appeared in the books of the company:
Additional Information (1) Depreciation still needs to be written off as follows:
During the financial year ended 31 December 201 9 the following
Question 5: Lecture review The following totals were extracted from the nominal accounts section of the post- adjustment trial balance of Galore (Pty) Ltd for the financial year ended 31 December 2019 : R Revenue 600 000 Cost of sales 200 000 Operating lease payments – rental paid for offices 20 000 Depreciation – machinery 10 000 Depreciation – vehicles 15 000 Depreciation – equipment 15 000 Auditors’ remuneration – for audit services 40 000 Salaries and wages – director 50 000 Salaries and wages – other employees 50 000 Profit on sale of vehicle 5 000 Profit on sale of machinery 40 000 Loss due to flood damage to inventories 9 000 Impairment of goodwill 5 000 Amortisation of patents and trademarks 20 000 Payment received from a supplier for breach of contract 4 000 Proceeds received from expropriation of land 55 000 Decrease in allowances for credit losses 8 000 Investment in liquidated subsidiary written off 12 000 Normal income taxation expense - current 55 200 Additional information
Question 6: Self-study ANSWER EACH OF THE FOLLOWING QUESTIONS BY STATING IN EACH CASE WHETHER THE STATEMENT IS TRUE or FALSE:
Question 7: Self-study Multiple choice questions Write down each question number below one another. Indicate next to each one your option with a CAPITAL letter. 1.1 The qualitative characteristics of useful information in financial reports are: A. Prudence, understandability, reliability and completeness. B. Reliability, consistency, relevance and materiality. C. Understandability, relevance, comparability and reliability D. Faithful representation, relevance.. 1.2 Information is faithfully represented if: A. Information is free from material error and bias. B. Its disclosure will affect the economic decision of users. C. It is capable of making a difference to a decision. D. None of the above. 1.3 Which of the following alternatives represent all the elements of financial statements? A. Assets, liabilities, income and expenses. B. Assets, owners’ equity and liabilities. C. Statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows and notes. D. None of the above. 1.4 Off-setting is permitted when: A. It is required or allowed by a statement of generally accepted accounting practice. B. The items being off-set are material. C. The amounts arise from dis-similar transactions or events. D. All of the above.
Question 8: Self-study The following summarised statements of financial position for Alfa Limited as at 31 December 20 19 and 31 December 20 18 are available: 2019 2018 R R Machinery and vehicles at carrying amount 115 000 130 000 Fixed property at valuation 760 000? Current assets 110 000 85 000 Total assets 985 000? Share capital – ordinary shares 90 000? Revaluation reserve 120 000 40 000 Retained earnings 716 000? Current liabilities 59 000 47 000 Total equity and liabilities 985 000? Additional information The following transactions took place during the year ended 31 December 201 9 :
(Adapted DUT exams)
