Accounting and Finance Assignment Help

Accounting and Finance Assignment Help

Accounting and Finance Assignment Help

Introduction

In this report, different matters related to accounts have been discussed with practical example has been discussed. This report is bifurcated into three activities and each activity has different practical questions that are answered. In activity one, different accounts are to be identified for different items that business has like equipment, capital, drawings, etc. VAT is the most important concern for the business organisation and shall be managed by the accountant. VAT is charged with different rate but standard rate of VAT is 14%. There are four main types of supplies or sales that are divided by the VAT authorities and according to these types of supply or sales VAT are charged. These supplied are standard rated supply, zero rated supply, exempt supply and non-allowable items. In activity one, gross margin or gross profit is calculated for Barron’s Hardware Store. Another accounting practice that is undertaken in this report is of accounting equation. Accounting equation is the accounting practice in which impact of business transactions that is undertaken by the business organisation is reflected. It is prepared in seven columns i.e. date of transaction, impact on assets column, impact on owner’s equity column and impact on liabilities column will be there.

Accounting and Finance Assignment HelpSecond activity includes matters related to creditors and their accounting in the books of accounts of business organisation has been discussed. Creditor journal is the statement which is used to record information or transactions related to credit sales or transaction with creditors. Different information like creditor control, VAT amount, treading stock and name of creditor are its columns. Creditor allowance journal is the stamen which is prepared to record transactions related to purchase return. Cashbook payment and receipt is the books of accounts that is used to record transaction in which cash is involved. General ledger is another type of account which is used to record journal vouchers i.e. transaction cannot be recorded in any other books of accounts or other account.

In last activity i.e. activity 3 advance accounting practices has been discussed i.e. transactions involving VAT. Accounting equation has undertaken with transactions having VAT involved. Subsidiaries and general ledgers have been prepared in the next section of this report. Different types of ledgers like debtor’s journal, debtor allowance journal, cashbook receipts, petty cash journal and general journal have been prepared. Another accounting practice of bookkeeping i.e. individual accounts has been issued and practically applied in this report. Creditor individual account, sales account and sales return account has been prepared in this report.

ACTIVITY 1

Question 1

Part A: Complete the following table as it appears in your Portfolio of Evidence (PoE), by completing the account names and making the appropriate column with an X 

Name of account

Non-current assets

Current assets

Non-current Liability

Current Liability

Income

Expenses

Propriety account

Rates and amenities

-

-

-

-

-

X

-

Commission received

-

-

-

-

X

-

-

Fixed deposit (maturity in excess of 12 months)

-

X

-

-

-

-

-

Capital

-

-

-

-

-

-

X

Mortgage loan

-

-

-

X

-

-

-

Discount allowed

-

-

-

-

-

X

-

Drawings

-

-

-

-

-

-

X

Debtors control

-

X

-

-

-

-

-

Bank overdraft

-

-

-

X

-

-

-

Discount received

-

-

-

-

X

-

-

(Bhatia 2012)

Part B: Complete the following table as it appears in your Portfolio of Evidence (PoE), by making the correct block at each supply listed.

Assume that a business acquires the consideration listed and the business itself was invoiced in all instances. Where applicable, assume that all parties dealt with are registered VAT vendor and that the VAT Act has been adhered to in all instances.

Consideration

Standard rated Supply

Zero rated supply

Exempt supply

Non-allowable item

Staff microwave oven

-

-

X

-

Furniture and Equipment

X

-

-

-

Life assurance

-

X

-

-

Entertainment expenditure

X

-

-

-

Interest received on fixed deposit

-

-

X

-

The purchase of another business as a going concern

-

-

X

-

Golf club fees

-

-

-

X

Brown bread and milk

-

-

X

-

Computer Software

X

-

-

-

Passenger vehicle  

-

-

-

X

(Drake and Fabozzi 2012)

Question 2

Gross profit can be define as the profit margin which is earned by the business organisation from its primary activities or core business operations during the year. Gross profit indicates profit earning capacity of business organisation from its primary business activities. Following is the formula for calculating gross margin:

Gross margin attained (as a percentage) = Gross profit (VAT exclusive) / Sales (VAT exclusive) * 100

Gross margin attained (as a percentage) = 1262.40 / 3366.40 * 100 = 37.5 %

Question 3: Show how the above transactions will affect accounting equation and enter how the accounts in the general ledger will be affected

Accounting equation can be defined as the equation which reflects impact of business transactions on assets, liabilities and equity or owner's capital. Transactions are recorded in the initial form of journal entries and the ledger and financial statements. Accounting equations are used only to analyse impact of transaction or change in the value of assets, liabilities and equity funds or owner's capital. Narration is not required in accounting equation recording. Changes taken place in the assets, liabilities and owners capita is reflected in the accounting equation. It provides statement for making analysis of impact of business transaction on the assets, liabilities and owner’s capital or funds.

Date

 

Assets

 

Owner’s equity

 

Liabilities

3-Oct-2016

Dr.

-

Inventories

620

Cr.

+

Drawings

620

 

-

5-Oct-2016

Dr

-

Bank

1450

 

-

Cr.

-

Expenses

1450

11-Oct-2016

Dr.

+

Inventories

32,500

 

-

Cr.

+

Creditors

32,500

12-Oct-2016

Dr.

+

Dr.

-

Cash

925

Inventories

740

Cr.

+

Profit on sale of goods

185

 

-

26-Oct-2016

Dr.

-

Dr.

+

Inventories

1800

Debtors

2250

Cr

+

Profit on sale of credit sales

450

 

-

29-Oct-2016

Dr.

+

Dr.

-

Inventories

800

Debtors

800

Cr.

-

Profit on sale of credit sales

160

 

-

(ICAEW 2012)

Activity 2

(A): Creditors journal (CJ 2). Mark clearly how the different amounts or totals will be posted to the general ledger at month-end.

Creditor journal is a type of statement or account which is prepared for analysis of creditors balance and movement in value of creditors in the business organisation is recorded. Creditor journal is prepared with seven column i.e. date, creditors, folio or invoice no, creditor control, VAT input, trading inventories, purchases and sundry account for other creditors. Purchase column includes amount of purchased inventories on credit and amount under this column is amount that is charged to creditors i.e. including profits and excluding trade discount. Date of transaction is mentioned under date column and under folio column folio no or invoice no. is mentioned. Under creditor control column amount charged to creditors less VAT amount is shown or reflected (Accounting 2012). Effective amount of creditors reduced by VAT input is reflected in creditor control column. Under VAT input column, amount charged as VAT input from creditors is reflected. VAT input is the amount which is available as input or debit VAT input i.e. asset for business organisation. On the other hand trading inventories is the column which includes the units of inventories purchased from creditors in the normal course of business. In last column of creditor journal, items and amount yet to pay is reflected. It includes postage expenses, stationary expenses and other expenses which is outstanding.

Creditor journal

Date

Account credited

Folio no

Purchase

Creditor control

VAT Input

Trading Stock

1-Feb-16

Pollard Traders

IV241

        29,750.00

        26,096.50

       3,653.50

  16,310.31

11-Feb-16

Smack down Traders

CC539

        42,735.00

        37,486.84

       5,248.16

  23,429.28

11-Feb-16

Tinderbox Pty ltd

IV242

        32,200.00

        28,245.61

       3,954.39

  17,653.51

13-Feb-16

V. Macmahon

CC540

        38,850.00

        34,078.95

       4,771.05

  21,299.34

20-Feb-16

Tinderbox Pty ltd

CC542

       (32,200.00)

      (28,245.61)

     (3,954.39)

 (17,653.51)

21-Feb-16

Round track industries

IV246

          4,690.00

          4,114.04

          575.96

    2,571.27

26-Feb-16

Linkin Park Industries

CC546

        47,775.00

        41,907.89

       5,867.11

  26,192.24

 

 

 

163,800.00

143,684.22

20,115.78

  89,802.44

(Bhatia 2012)             

Analysis: From the above table it can be analyzed that purchases made during the period is of R 163,800.00 which includes cost of sales and profit margin. VAT input for the period is R 20,115.78 that reflects amount of VAT charged by the creditors of the Schwarz Industries and available with Schwarz Industries for set-off from the VAT payable. While difference between purchases made and VAT amount is the creditor control or charged to creditor’s account which is R 143,684.22.In last column,trading stock is the column which shows the amount of cost of trading inventories.

B: Creditor Allowance journal

Creditor allowance account is the account which reflects the transaction of purchase return made during the year. When business organisation purchases inventory on credit then it will be recorded in creditor journal account and when organisation return some goods to creditors the it will be recorded in creditors allowance journal. Creditors allowance journal is prepared in 7 column i.e. date; folio no, creditor, creditor control, VAT output, purchase, sundry account and details column. Creditor allowance journal is prepared or affected when purchase return transaction takes place. In creditor control account, amount of creditor or amount of inventory that is returned is reflected or shown. VAT in this transaction is the amount that is charged on purchase return amount and VAT entry is reversed i.e. previously charged VAT input is now reversed as VAT output because inventory purchased is now returned to creditor (Atril and McLaney 2013). Under purchase column amount of purchase or purchase return is reflected without including VAT amount because VAT will be shown in separate VAT output account. Under sundries column, amount of different transaction not related to purchase or other than purchase transaction will be reflected.

Creditor Allowance journal

Date

Account credited

Invoice

Purchase

Creditor control

VAT Input

Trading Stock

1-Feb-16

Pollard Traders

OCT197

2,677.50

2,348.68

328.82

1,467.93

16-Feb-16

Tinderbox Pty ltd

OCT198

3,220.00

2,824.56

395.44

1,765.35

20-Feb-16

Tinderbox Pty ltd

 

(3,220.00)

(2,824.56)

(395.44)

(1,765.35)

28-Feb-16

Round track industries

OCT201

539.35

473.11

66.24

295.69

 

 

 

3,216.85

2,821.79

395.06

1,763.62

From the above statement it can be observed, purchases have been returned to creditors during the period. Purchase column reflects overall value of purchase return except trade discount, creditor control column reflects the amount of creditors that is reduced by the VAT amount and during the period it is R 2821.79. VAT on purchase amount is R 395.06 that is included in the purchase only.  

Common note for task A and B:

Creditor Control: Creditor control in the above tables is the value or reflects the amount which includes cost of sales and profit margin but does not includes VAT amount that is charged in the value of purchased goods during the period. (Credit control = Purchases – VAT)

Purchase: It includes complete value or amount of goods purchased during the reporting period. Purchase amount includes profit margin and VAT amount but it does not include trade discount. (Purchase = Purchase – trade discount)

VAT input:VAT payable on purchase of goods i.e. VATS input available for set-off from VAT payable. VAT is charged on the purchase amount less trade discount. (Purchase excluding trade discount * VAT rate)

C: Cash payment journal

Cashbook payment summary is the cashbook that records each and every transaction related to cash payments made during the period. Cashbook payment is a type of account which is prepared with 8 columns. Date, name of payee, folio, bank, VAT, creditor control, purchase, sundries and detail of transaction are name of columns that appears in the cashbook payment journal of the business organisation. Cashbook payment records all cash and bank payment transaction with details in above specified columns. Payment to creditors including VAT amount is reflected in cashbook payment journal. This payment will be bifurcated into amount paid to creditors and VAT charged in this amount. Under bank column payment made directly to payee on account of services received or for other expenses will be reflected.

Date

Name of Payee

Fol.

Bank

Creditor

Sundry Account

Amount

Details

4-Feb-16

Tall fountain mall

CC536

(612.50)

 

612.50

motor vehicle expenses

8-Feb-16

Petty cash

CC537

       (10,500.00)

 

   10,500.00

Petty cash

9-Feb-16

Pollard Traders

CC538

       (25,228.00)

 

 

 -

13-Feb-16

CRD Computers

IV243

         (1,190.00)

 

 

Office consumables

14-Feb-16

Artline Stationers

CC541

         (5,250.00)

 

 

Postage and stationery

16-Feb-16

RomRam Computers

IV244

         (6,545.00)

 

 

Staff Welfare

16-Feb-16

RomRam Computers

IV245

       (10,339.00)

 

 

Office Equipment

20-Feb-16

Tinderbox Pty ltd

CC543

       (29,656.20)

 

 

 

21-Feb-16

Drawings

CC544

         (4,200.00)

 

 

Drawings

24-Feb-16

PRINT CC

IV247

         (7,549.15)

 

 

Printing cost

25-Feb-16

Starfish

CC545

       (21,000.00)

 

 

Furniture and fittings

28-Feb-16

Sammy Jones

IV248

(1,435.00)

 

 

Repair and maintenance

29-Feb-16

Silent Bob's Garage

CC547

(3,850.00)

 

 

Vehicle

29-Feb-16

Wages

CC548

(8,960.00)

 

 

Wages

   

(136,314.85)

   

(Jun 2013)

D: General journal

Date

Particulars

Code

Dr/Cr

Debit

Credit

12-Feb-16

Asset (Delivery van)

JR253

Dr

25,228.00

-

 

Capital

 

Cr

-

25,228.00

20-Feb-16

Tinderbox Pty Ltd

JR254

Dr

31,217.05

-

 

Cash

 

Cr

-

29,656.20

 

Discount on payment

 

Cr

 -

1,560.85

21-Feb-16

Drawings

JR255

Dr

12,500.00

-

 

VAT

 

Dr

1,750.00

 -

 

Purchases

 

Cr

 -

14,250.00

29-Feb-16

Interest charges

JR256

Dr

350.00

-

 

Round track Industries

 

Cr

-

350.00

29-Feb-16

Office equipment

JR257

Dr

7,854.00

 -

 

Office consumables

 

Cr

-

7,854.00

(KPMG 2014)

Activity 3

Question 1

Show how the above transactions will affect the accounting equitation and enter how the accounts in the general ledger will be affected.

Date

 

Assets

 

Owner’s equity

 

Liabilities

8/March/2016

+

Dr.

11,303.88

Inventory

 

-

+

Cr.

11,303.88

Creditor (B. Ashwell)

9/March/2016

-

Cr.

51,505.16

Bank

 

-

-

Dr.

51,505.16

Creditor (G. Moira)

11/March/2016

+

Dr.

-

Cr.

52,482.25

Cash

52,482.25

Inventory

 

-

 

-

14/March/2016

+

Dr.

2,813.74

Cash

 

-

 

-

16/March/2016

+

Dr.

-

Cr.

9,043.10

Debtor (D. Portman)

9,043.10

Inventory

 

-

 

-

25/March/2016

-

Cr.

480.76

Petty cash

 

-

 

-

(Gartenstein 2016)

Question 2

(A): Debtors Journal (DJ1) with analysis columns for debtor’s control, VAT, sales and cost of sales. Mark clearly how the different amounts or totals will be posted to the general ledger at month-end.

Debtor journal is prepared for the analysis of sales made on credit during the year. Different debtors are lined up in this journal with their credit sales amount. Debtor journal is prepared 6 columns i.e. date of transaction, name of debtor, VAT amount, sales and cost of sales. VAT amount column reflects the amount of VAT output that business organisation has received from the debtors in the transaction. Sales column reflects the amount of complete sales vale i.e. it is composed of cost sales, profit margin and VAT amount (Luis 2014). But it does not include trade discount allowed to debtors in the transaction. Cost of sales column reflects the amount of cost of sales of sales made i.e. goods sold.

Debtors Journal                 

Date

Particulars

Debtor control

VAT

Sales

Cost of sales

2-Jan-16

O. Clark

63,675.44

8,914.56

72,590.00

41,080.93

8-Jan-16

W. Els

59,260.96

8,296.54

67,557.50

17,204.79

12-Jan-16

J. Hansel

17,390.35

2,434.65

19,825.00

11,219.58

19-Jan-16

V. Nelson

52,572.37

7,360.13

59,932.50

33,917.66

21-Jan-16

M. Lang

14,008.60

1,961.20

15,969.80

9,037.81

25-Jan-16

F. Oppel

50,164.47

7,023.03

57,187.50

32,364.17

27-Jan-16

S. Gomes

65,949.56

9,232.94

75,182.50

42,548.10

28-Jan-16

V. Nelson

(52,572.37)

(7,360.13)

(59,932.50)

(33,917.66)

 

 

270,449.38

37,862.92

308,312.30

153,455.38

(Jun 2013)

During the period, sale of R 308,312.30 made by the Red Traders which includes Vat amount of R 37,862.92 and value of debtors is R 270,449.38. VAT at output i.e. sales of Red Traders is required to be paid to the account of government after set-off of VAT paid on inputs i.e. VAT paid to creditors. Cost of sales of Red Traders during the period is of R 153,455.38 that represents sell of inventory at cost.

Common notes:

VAT:Sales Amount x 14 / 114 (as VAT is included in the sales amount therefore sales amount will be 114 %)

Sales Amount: It is the amount of sales made to debtors including VAT and profit margin but trade discount is reduced from it.

Debtor control:Following is the amount that is charged to debtor control column:

Sales amount- VAT

Cost of sales:This includes only cost of goods sales i.e. without profit margin. Following is the amount of cost of sales:

(Sales – VAT amount) x 100 / (100 + profit margin)

(B): Debtors Allowance Journal (DAJ1) with analysis column for debtor control, VAT, sales returns and cost of sales.

Debtors allowance journal is the statement that is used to reflect sales return made by debtors of the business organisation. In this statement, sales returned by debtors with VAT amount are reflected and will be treated as reversal of sales made and VAT output as compared to the account at the time of sales made.

Debtors Allowance Journal

Date

Particulars

Debtors control

VAT

Sales Return

Cost of sales

13-Jan-16

J. Hansel

869.52

121.73

991.25

560.98

26-Jan-16

F. Oppel

3,260.69

456.50

3,717.19

2,103.67

28-Jan-16

V. Nelson

2,102.89

294.41

2,397.30

1,356.70

 

 

6,233.10

872.64

7,105.74

4,021.35

During the year, there is sales return of R 7,105.74 including VAT amount and on the other hand debtor control value is R 6,233.10 which includes profit margin of the Red Traders. VAT output is reversed in sales return transactions and will be available as credit of VAT with Red Traders from payment. When sales made is returned then VAT charged by seller as output VAT is reversed or reversed at the time of sales return therefore included in the debtors allowance journal.

(C): Cashbook receipt (CBR 1) with analysis columns for bank, debtor’s control, VAT output, sales, sundries and cost of sales. Mark clearly how the different amounts or totals will be posted to the general ledger at the month-end.  

Cashbook receipts

Date

Particulars

Bank

Debtors control

VAT

Sales

Cost of sales

1-Jan-16

To Capital

73,200.00

-

-  

 -

 -

15-Jan-16

To Dividend

7,930.00

-

-

-

-

20-Jan-16

By Bowen Industries

     (27,350.08)

23,991.30

3,358.78

27,350.08

15,478.26

24-Jan-16

To Tomado transporter

747.25

 -

-

-

-

26-Jan-16

To J. Hansel

6,203.63

-

-

-

-

28-Jan-16

To V. Nelson

58563.04

55480.77

7,767.31

63,248.08

35,794.05

 

 

     119,293.84

 

 

 

 

(D): Petty cash journal (PCJ 1) with analysis columns for petty cash, postage and stationary, staff refreshments VAT and sundries.  

Petty cash

Date

Particulars

Amount

Postage & Stationery

Staff refreshments

18-Jan-16

By Office consumables

2,610.80

-

2,610.80

22-Jan-16

By Coffee

378.20

-

378.20

25-Jan-16

By P & P Stationers

137.25

137.25

-

27-Jan-16

By drawings

6100

-

-

 

 

9,226.25

  
(E): General Journal:

Sr. no

Particulars or Account

Debit

Credit

1

Delivery Van (Asset)

68,089.91

-

 

VAT Input

95,32.59

-

 

Bank

[Delivery van purchased for business therefore treated as asset]

-

77,622.50

2

Bowen Industries (creditor)

30,304.80

-

 

To Bank

-

28,789.56

 

To Discount received

[Being Payment made to Bowen Industries and received discount on payment]

-

1515.24

3

Drawings

16,138.25

-

 

Purchases (Inventories)

-

14,156.36

 

VAT

[Being drawing of trading inventories made by owner and VAT charged on such inventories]

-

1,981.89

4

Interest on overdue account

305

-

 

Candid Hardware

[Being interest charged by Candid Hardware on the overdue balance]

-

305

5

F. Oppel

671

-

 

Interest on overdue account

[Being interest income earned on the overdue balance of F. Oppel]

-

671

6

Bad debts

73,675.44

-

 

Profit and loss account

[Being account of creditor is declared as unrecoverable therefore treated as bad debts]

-

73,675.44

7

Equipment (Asset)

6844.20

-

 

Consumables

[Being rectification of error entry passed]

-

6844.20

(F): Open, post to and balance the following accounts in general journal:

General Ledger

Sales Account

Particulars

Amount

Particulars

Amount

 By Balance c/d

 866,462.30

By balance b/d

 503,250.00

 

 

By O. Clark

   67,557.50

 

 

By W. Els

   67,557.50

 

 

By J. Hansel

   19,825.00

 

 

V. Netson

   59,932.50

 

 

M. Lang

   15,969.80

 

 

F. Oppel

   57,187.50

 

 

S. Gomes

   75,182.50

 

 

 

866,462.30

(Marginean, Mihaltan and Todea 2015)

Sales Return Account

Particulars

Amount

Particulars

Amount

To balance b/d

60,390.00

To balance c/d

67,495.74

To J. Hansel

991.25

 

 

To F. Oppel

3,717.19

 

 

V. Nelson

2,397.30

 

 

 

67,495.74

 

 

Question 3

Debtor and creditor individual account is prepared to calculate and analyse balance of debtor or creditor at the year-end or at the end of reporting period. It is prepared for individual debtor or creditor and transactions with debtors and creditors or journal entries are posted this account. Separate account for each debtor and creditor is prepared by the business organisation. Debtor and creditor individual account is prepared using 6 columns i.e. date, particulars and amount on both debit and credit side of account. Transaction with debtors and creditors are reflected in particulars i.e. credit sale, credit purchase, payment made to creditors, cash received from debtors, credit purchase, credit sale, discount received, discount allowed, sales return, purchase return, etc. are some transaction that is reflected in debtor and creditor individual account (Accounting 2012). Opening balance brought forward and closing balance carried forward also reflected in debtor and creditors individual account.

(A): Open, post to and balance the creditors control account (B7) in the general ledger of Goffer Industries for June 2016. The balance brought down on 1 September 2015 is R 53,931.08

Creditor’s ledger

Glass glow Industries

Date

Particulars

Amount

Date

Particulars

Amount

5-Jun-16

To Creditor allowance

5346.46

1-Jun-16

By balance b/d

11,531.58

10-Jun-16

To Cash

33,871.38

1-Jun-16

By Purchases

31,449.75

30-Jun-16

To balance c/d

3,762.99

 

 

 
 

 

42,980.83

 

 

42,981.33

Branch Traders

Date

Particulars

Amount

Date

Particulars

Amount

9-Jun-16

To Creditor allowance

5,189.21

1-Jun-16

By balance b/d

11,007.41

25-Jun-16

To Cash

1,729.74

6-Jun-16

By Purchases

28,828.94

30-Jun-16

To balance c/d

32,917.40

 

 

 

 

 

39,836.35

 

 

39,836.35

Redo Traders

Date

Particulars

Amount

Date

Particulars

Amount

17-Jun-16

To Creditor allowance

2830.48

1-Jun-16

By balance b/d

19,336.35

30-Jun-16

To balance c/d

40,093.18

13-Jun-16

By Purchases

23,587.31

  

42,923.66

  

42,923.66

(Bhatia 2012)

(B): Draft the creditors ledger of Goffer Industries

Creditors Ledger

Glass glow Industries

Date

Particulars

Debit

Credit

Balance

1-Jun-16

By balance b/d

-

-

11,531.58

1-Jun-16

By Purchases

-

31,449.75

42,981.33

5-Jun-16

To Creditor allowance

5346.46

-

37,634.87

10-Jun-16

To Cash

33,871.38

-

3,763.49

 

 

 

 

 

(Bragg, What is net profit margin 2011)

Branch Traders

Date

Particulars

Debit

Credit

Balance

1-Jun-16

By balance b/d

-

-

11,007.41

6-Jun-16

By Purchases

-

28,828.94

39,836.35

9-Jun-16

To Creditor allowance

5,189.21

-

34,647.14

25-Jun-16

To Cash

1,729.74

-

32,917.40

Redo Traders

Date

Particulars

Debit

Credit

Balance

1-Jun-16

By balance b/d

-

-

19,336.35

13-Jun-16

By Purchases

-

23,587.31

42,923.66

17-Jun-16

To Creditor allowance

2830.48

-

40,093.18

 

 

   
C: Draft the creditors list of Goffer Industries as at 30 June 2016

Creditors List

Sr. no.

Particulars

Amount

1

Glass glow Industries

3,762.99

2

Branch Traders

32,917.40

3

Redo Traders

40,093.18

 

TOTAL

76,773.57

(Financial 2012)

Question 4

(A): Record any difference identified in the bank reconciliation process in a supplementary cashbook receipt and payment with columns for details and amount. Begin with the totals before any amendment.

Supplementary Cashbook

Particulars

Amount

Particulars

Amount

Cash receipts

130,531.53

Balance b/d

102,769.69

Deposit

3,429.61

Cash payments

30,053.20

D.Haywood (Direct deposit)

3,930.53

Bank statement fees

455.65

Double debit (CC816)

601.06

CC814 difference amount

100.00

Difference amount DS736

250.00

Transaction fees

187.35

E. Redford (Direct deposit)

       7,839.11

Government levy

306.31

 

 

CRD120

2,871.36

 

 

Interest on overdraft

894.64

 

 

More time insurance (direct)

8,943.64

 

146,581.84

 

146,581.84

(B): Open, post to and balance the bank account (B10) in the general ledger

Bank Account B10

Date

Particulars

Amount

Date

Particulars

Amount

 

To Cash

130,531.53

1/Sept./16

By Balance b/d

102,769.69

 

To Balance c/d

2,291.36

 

By Cheque counterfoils

30,053.20

 

 

  

 

 

 

 

132,822.89

 

 

132,822.89

 

 

 

30/Sept./16

By Balance b/d

2,291.36

 

 

 

 

 

 

(Bragg, Types of Financial Statements 2015)

C: Compile the bank reconciliation statement as at 30 September 2016

Bank reconciliation statement is the statement that is used to reconcile balance as per cash book and balance as per pass book. It can be seen that, difference between bank balance as per cash book and balance as per pass book is experienced by business organisation. Therefore to reconcile or match both balances some adjustments or unrecorded transaction or recorded with wrong amount, etc. of business organisation are recorded (Fareed 2015). Bank reconciliation statement is prepared in two columns i.e. particulars where transactions required adjustments are reflected and second column is of amount where amount of transactions are specified. Bank reconciliation is the statement which is prepared by the organisation for reconciling the balance as per cash book and pass book of the period.

Bank Reconciliation Statement

Particulars

Amount

Balance as per bank statement (unfavourable)

(47,717.75)

Bank statement fees

(455.65)

Transaction fees

(187.35)

Government levy

(306.31)

Interest on overdraft

(894.64)

More time insurance (direct)

(8,943.64)

D.Haywood (Direct deposit)

3,930.53

E. Redford (Direct deposit)

7,839.11

Rectification of DS 363

250.00

Deposit not credited

11,747.84

Deposit not credited

26,716.94

Payment not debited

4,042.16

Payment not debited

2,569.55

Double debit (CC816)

601.06

CC814 difference amount

100.00

CRD120

2,871.36

Difference in balance

128.15

Balance as per bank account (unfavourable)

2,291.36

Question 5

Footwear Industries’ individual account in the creditor’s ledger starting with the balance before reconciliation

In this question, balance of creditor and debtors is matched and transactions between two are reconciled. Reconciliation of balance of debtor i.e. Rumari Suppliers and creditor i.e. Footwear Industries were taken into account. Creditor’s reconciliation statement will be prepared in this question and difference in balances will be identified and corrected.

Footwear Industries Account

    

Date

Particulars

Amount

Date

Particulars

Amount

11-Jan-16

To Bank

61,365.99

1-Jan-16

By balance b/d

61,365.99

15-Jan-16

Purchase return CRN80

15,307.02

11-Jan-16

By Purchase INV214

127,558.52

25-Jan-16

Purchase return CRN96

22,814.36

21-Jan-16

By Purchase INV268

220,641.76

26-Jan-16

To Bank CHQ529

277,760.40

30-Jan-16

By Purchase INV295

127,558.52

30-Jan-16

Credit note for INV268

34,596.63

 

 

 

31-Jan-16

By balance c/d

125,280.39

 

 

 

 

 

537,124.79

 

 

537,124.79

The creditors reconciliation statement (remittance advice) dated 7 February 2016

Creditors Reconciliation Statement

 

 

Particulars

Amount

 Balance as per creditors ledger 

61,365.99

 Difference in Credit note INV268

34,596.63

Cheque herewith

61,365.99

 Difference in CRN96

1,456.23

Invoice INV 214

137,763.20

Invoice INV295

123,731.76

CRN80

15,307.02

Payment

435,586.82

Balance as per Rumari Suppliers

181,561.96

   

(Bhatia 2012)

Question 6

Prepare a basic general ledger reconciliation statement for budding as at 31 January 2016.

Rectification of errors in the financial statements is common and most important matter that business organisation has to undertake. In this case of Budding, there are some errors that have to be rectified so that true picture of financial statements shall be reflected. In this case, balance that appears in the financial statements will be adjusted with the errors and omission that has taken place during the period.   

Following are basic general ledger reconciliation statements as at 31st January, 2016:

Sr. no

Particulars or Account

Balance

Debit

Credit

Closing Balance

1

Drawings

11,586.84

2569.74

-

14,156.58

 

Cost of sales

289,673.45

-

2569.74

287,103.71

 

Inventories

10,450

-

2569.74

7,880.26

2

Petty cash

5,130

-

229.77

4900.23

 

VAT

86,189.32

32.17

-

86,157.15

 

Cash

2508.00

229.77

-

2737.77

3

Cash

2737.77

418

-

2319.77

 

Fuel expenses

9800.20

418

-

10,218.20

4

Stationary

4024.42

725.58

-

4750

 

Cash Book

2319.77

725.58

-

1594.14

5

Machinery

165,300

5,700

-

171,000

 

Office equipment

184,300

-

5,700

178,600

­6

VAT

86,157.15

96.50

-

86253.65

Question 7

Trading and profit and loss account is the statement that reflects financial performance of the business organisation during the year. It is merger to two accounts i.e. trading account and profit and loss account. Trading account shows transactions related to business operations or related to primary activities of organisation. Profit and loss account shows income and expenses in terms of administration of business operations. Profit and loss account reflects income of business and expenses incurred in administration of business or organisation. Gross profit and net profit are two main elements of trading and profit and loss account prepared by business organisation.

Statement of financial position that reflects financial position in terms of assets, liabilities and owner's capital or equity shareholders fund. Statement of financial position is also known as balance sheet of the business organisation. Items of balance sheet are classified according to its nature or according to its timing i.e. current and non-current items. Current assets, non-current asset, current liabilities, non-current liabilities and owner’s capital are important heads of balance sheet or statement of financial position.

(a): Prepare the trading and profit and loss account, clearly showing the gross profit and net profit respectively.

Trading and Profit and Loss Account

As at 28th February, 2016

Particulars

Amount

Sales revenue

593,199.65

Less: Sales return

(26,137.95)

Net sale revenue

567,061.70

Cost of sales

(279,299.91)

Wages and salaries

(84,618.80)

Gross Profit

203,142.99

Rental income

36,168.75

Dividend income

8,841.25

Packing income

53,304.70

Interest on debtors account

5,304.75

Credit loss recovered

2,732.75

Rates and services

(11,509.70)

Credit loss

(3,922.30)

Delivery expense

(11,381.10)

Shop consumables

(4,018.75)

Postage and stationery

(1,736.10)

Insurance

(6,847.95)

Repairs and maintenance

(4,340.25)

Interest on creditors account

(2,797.05)

telephone and fax

(9,580.70)

Staff refreshments

(3,954.45)

Rent expense

(40,669.75)

Net Profit

208,737.09

(b): Draft a statement of financial position as at 28 February 2016. No notes are required.

Statement of Financial Position

Liabilities

Amount

Assets

Amount

Capital as at 1 March 2015

321,500.00

Non-Current Assets

 

Less: Drawings:

(1,607.50)

Land and building

392,152.84

Add: Net Profit

208,737.09

Plant and Machinery

144,675.00

Capital as at 28 February 2016

528,629.59

Motor vehicles

151,105.00

Current Liabilities

 

Ordinary Shares in Witts Ltd

38,580.00

Credit control (Creditor)

17,039.50

Current Assets

 

Credit card account

46,135.25

Bank

8,359.00

Non-Current Liabilities

 

Debtors control (Debtors)

14,467.50

Mortgage Loan

160,750.00

Petty cash

1,768.25

SARS

11,734.75

Inventories (Stock)

8,841.25

 

 

Cash float (Cash in hand and at bank)

4,340.25

 

764,289.09

 

764,289.09

(Drake and Fabozzi 2012)

Conclusion

From the above report it can be analysed that there are various types of accounting obligations that business organisation are required to fulfil. One of the major implications is of recording business transaction in the books of accounts that makes business organisation able to analyses its performance. Accounting equation enables business organisation to analyse the impact of transactions. VAT transactions required special attention in terms of amount bifurcation of VAT and purchase or sale or other expenses made. Different types of journals are prepared by business organisation for the appropriate recording of business transactions. These journals includes creditors journal, creditors allowance journal, debtors journal, debtors allowance journal, etc. so that transaction can be easily recorded with bifurcated amount. Bank reconciliation statement is prepared for reconciling cash book of business organisation and pass book of bank account. For this purpose, certain adjustments in cash are required to be done. There are some bank charges, direct deposit in bank account by customers and other difference is reconciled in this statement. Financial statement are comprised mainly of two major statements i.e. statement of financial positional and statement of profit and loss.

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