GRADE 10
LESSON
68
YEAR-END ADJUSTMENTS
CONSUMABLE STORES ON HAND
WORKSHEET 1
When a business buys packing material, stationery and consumables, they are treated as
expenses.
According to the accrual principle, only the value of the stationery, packing materials and
consumables USED during the year, may be shown as expenses when calculating the net
profit for the financial year.
At the end of the financial year, stationery, packing material and consumables show the total
expenditure for the financial year.
During the stock taking, consumables, stationery and packing material not used, are
counted. That means these consumables have not been used and cannot be shown as
expenditure in this financial year. It will only be used in the next financial year.
The consumables, stationery and packing material not used is called consumable stores
on hand. It means that these consumable stores on hand which was part of expenses, are
now converted to assets.
A journal entry must be made to convert consumable stores to assets.
Treatment in the financial statements
Consumable stores on hand is shown under Inventory in the notes to the
financial statements. On the first day in the new financial year, this amount
is reversed to the Consumable, Stationery and Packing material accounts.
This will be treated later when financial statements are treated.
67 - Accounting Grade 10
will be
treated
later
1
WORKSHEET 2
EXAMPLE
REQUIRED
1 Show the following transaction in the General Ledger and General Journal
2 Show the effect on the accounting equation
3 Show how these accounts will appear in the Financial statements
INFORMATION
EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2011
Packing material
1 960
ADJUSTMENT
Physical stock count showed packing material of R180 on hand.
ANSWER
Expense account
1 Show the transaction in the General Ledger and General Journal
GENERAL LEDGER OF ZIZI TRADERS
PACKING MATERIAL
Feb
28
Balance
b/d
1 960
Feb
28
Consumable stores
on hand
Profit and loss acc
1 960
180
1 780***
1 960
Balance sheet account
(Asset)
CONSUMABLE STORES ON HAND
Feb
28
Packing material
Packing material
180
PROFIT AND LOSS
1 780
*** R 1 780 - This is the balancing figure of the account – it represents the
amount packing material USED during this financial year and therefore
represents the expense amount for the financial year.
67 - Accounting Grade 10
2
GENERAL JOURNAL OF ZIZI TRADERS
DEBIT
Consumable stores on hand
180
Packing material
Packing material on hand as per stock count
2
CREDIT
180
Show the effect on the accounting equation
Account debit
Consumable stores on hand
Account credit
Packing material
Accounting equation
A
OE
L
+180
+180
0
3 Show how these accounts will appear in the Financial statements
NOTE 4 - INVENTORIES
Trading stock
Consumables stores on hand
67 - Accounting Grade 10
180
3
WORKSHEET 3
ACTIVITY 1
ACTIVITY 1.1
REQUIRED
1 Show the following transaction in the General Ledger and General Journal
2 Show the effect on the accounting equation
INFORMATION
EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2011
Stationery
560
ADJUSTMENT
Stationery used for the year is R480.
ANSWER
GENERAL LEDGER OF ZIZI TRADERS
STATIONERY
CONSUMABLE STORES ON HAND
PROFIT AND LOSS
GENERAL JOURNAL OF ZIZI TRADERS
DEBIT
CREDIT
Show the effect on the accounting equation
Accounting equation
Account debit
Account credit
A
OE
L
67 - Accounting Grade 10
4
ACTIVITY 1.2
REQUIRED
Show the following transaction in the General Ledger and General Journal
INFORMATION
EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2011
Stationery
Packing material
1 500
2 400
ADJUSTMENT
A donation of stationery of R300 has not yet been entered.
Physical stock count showed the following balances:
 Stationery of R280.
 Packing material of R800
ANSWER
GENERAL LEDGER OF ZIZI TRADERS
STATIONERY
PACKING MATERIAL
CONSUMABLE STORES ON HAND
GENERAL JOURNAL OF ZINZI TRADERS
DEBIT
67 - Accounting Grade 10
CREDIT
5
ACTIVITY 1.3
REQUIRED
1 Show the following transaction in the General Ledger and General Journal
2 Show the effect on the accounting equation
INFORMATION
EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2011
Trading stock
Stationery
Packing material
63 800
2 500
1 400
ADJUSTMENTS
1 No entry has been made for an invoice received from Pollock Transporters for the
transport of goods purchased, R180.
2 No entries were made for stock sold on credit for R6 000. The mark-up on cost is 50%
3 After taking the above into account, a trading stock surplus of R1 800 was detected as
per stock count on 28 February 2011
4 The physical stock count showed Packing material of R400.
5 Stationery of R1 900 was used during the year.
ANSWER
GENERAL LEDGER OF ZIZI TRADERS
TRADING STOCK
PACKING MATERIAL
STATIONERY
CONSUMABLE STORES ON HAND
TRADING STOCK SURPLUS
67 - Accounting Grade 10
6
GENERAL JOURNAL OF ZINZI TRADERS
DEBIT
CREDIT
Show the effect on the accounting equation
Accounting equation
Account debit
Account credit
A
OE
L
67 - Accounting Grade 10
7
ANSWERS
67
ACTIVITY 1.1
GENERAL LEDGER OF ZIZI TRADERS
Feb
28
STATIONERY
Feb
28 Consumable stores
560
on hand
Profit and loss
Total
GJ
80
GJ
480
560
Feb
28
Stationery
560
CONSUMABLE STORES ON HAND
80
GENERAL JOURNAL
DEBIT
Consumable stores on hand
Stationery
Stationery on hand as per stock count
CREDIT
80
80
Show the effect on the accounting equation
Accounting equation
Account debit
Account credit
A
OE
L
Consumable stores on hand Stationery
+ 80
+ 80
ACTIVITY 1.2
GENERAL LEDGER OF ZIZI TRADERS
Feb
28
STATIONERY
Feb
28 Donations
1 500
Consumable stores
on hand
Profit and loss
Total
GJ
GJ
GJ
1 500
Feb
28
PACKING MATERIAL
Feb
28 Consumable stores
2 400
on hand
Profit and loss
Total
2 400
Feb
28
Stationery
Packing material
67 - Accounting Grade 10
300
280
920
1 500
GJ
800
GJ
1 600
2 400
CONSUMABLE STORES ON HAND
280
800
GJ
GJ
8
GENERAL JOURNAL OF ZINZI TRADERS
DEBIT
Donations
Stationery
Donations of stationery made
CREDIT
300
300
Consumable stores on hand
Stationery
Packing material
Consumable stores on hand as per stock count
280
800
ACTIVITY 1.3
GENERAL LEDGER OF ZIZI TRADERS
Feb
28
Balance
Creditors control
Trading stock
surplus
b/d
GJ
GJ
TRADING STOCK
Feb
28 Cost of sales
63 800
180
Balance
1 800
b/d
65 780
61 780
Mar
1
Balance
Feb
28
Total
Feb
28
Total
c/d
28
Consumable stores
on hand
Profit and loss
GJ
400
GJ
1 000
1 400
GJ
600
GJ
1 900
2 500
c/d
1 000
2 500
Feb
Mar
28
1
Packing material
Stationery
Balance
CONSUMABLE STORES ON HAND
Feb
28 Balance
400
600
1 000
c/d
1 000
GJ
GJ
TRADING STOCK SURPLUS
Feb
28 Trading stock
67 - Accounting Grade 10
4 000
61 780
65 780
PACKING MATERIAL
Feb
28 Consumable stores
1 400
on hand
Profit and loss
1 400
STATIONERY
Feb
2 500
GJ
1 000
GJ
1 800
9
GENERAL JOURNAL OF ZINZI TRADERS
DEBIT
Trading stock
Pollock Transporters / Creditors control
transport of goods purchased
CREDIT
180
180
Cost of sales
Trading stock
Sold goods for R6 000 cost price R4 000
4 000
Trading stock
Trading stock surplus
Trading stock surplus as per stock take
1 800
Consumable stores on hand
Packing material
Stationery
Consumable stores on hand as per stock count
1 000
4 000
1 800
400
600
Show the effect on the accounting equation
Accounting equation
Account debit
Account credit
A
OE
L
Trading stock
Creditors control
+ 180
+ 180
Cost of sales
Trading stock
- 4 000
- 4 000
Trading stock
Trading stock surplus
+ 1 800
+ 1 800
Consumable stores on hand Packing material
+ 400
+ 400
Consumable stores on hand Stationery
+ 600
+ 600
67 - Accounting Grade 10
10
CHALK BOARD SUMMARY / TRANPARANCY
CONSUMABLE STORES ON HAND
Feb
28
Balance
b/d
PACKING MATERIAL
Feb
28 Consumable
1 960
stores on hand
Profit and loss
account
1 960
180
1 780***
1 960
Balance sheet
account
(Asset)
Feb
28
Packing
material
CONSUMABLE STORES ON HAND
180
The amount as per stock take
R180
*** R 1 780
The packing material USED for the year
(Balancing figure)
GENERAL JOURNAL
DEBIT
Consumable stores on hand
Packing material
Packing material on hand as per stock count
67 - Accounting Grade 10
CREDIT
180
180
11