June Test 2022
120 marks (180 minutes)
Question 1
20 marks (30 minutes)
“All you can do is make the best decision based on the facts in front of you. My (Kiran’s)
mantra going in was ‘a good decision is based on the facts in front of you, not the outcome’.
According to him (Kiran), this sentiment was reinforced time and again during the
competition. ‘It is something that I definitely try to underpin in my career and especially with
my clients.’ (Accountancy SA:10).
Readings – Appendix 1 and 2
Read the following two readings as attached:
‘A survivor’s food for thought’ – Accountancy SA February 2022; and
‘About Survivor South Africa’
(extracted from the internet, https://siwesbeginner.com/survivor-south-africa/.
You are required to:
Marks
(a) The title of the article, ‘A survivor’s food for thought’ could be seen in this
(2)
article figuratively and literally. Write one sentence explaining figuratively
and one sentence literally explaining the meaning of each in the context of
the article.
(b) In about 2 sentences, briefly describe in your own words the following: ‘In a
South African context, Kiran feels this experience was quite poignant.’ (see
quote in Appendix 2, 3rd page, left column towards the middle, in the
paragraph starting with ‘In a South African context….”)
(2)
(c) Prepare an email to the competition organisers of a reality game show, for
example ‘Survivor,’ to apply to be a contestant on the television show.
Indicate and describe three skills that make you unique to walk away with
the R1 million price money. (See Appendix 1 for an example of a reality
game show or you can create your own reality game show).
(5)
(d) Based on the article (Appendix 2) and the knowledge you gained from the
‘Critical Thinking Accounting I Module’, write a short essay of 200 to 250
words on whether decision-making is important to be competitive in an
uncontrollable or controllable environment. Marks will be allocated for
formatting, clear writing, well-structured sentences and paragraphs.
(9)
(e) Lastly, briefly list and discuss two ways of surviving and/or adapting to the
‘game of life’ as a first-year student at Wits.
(2)
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ACCN1005A/ACCN1006A June 2022
Question 2
45 marks (67,5 minutes)
This question consists of 2 parts. These parts are not related to each other. Please note the
following regarding all parts:
•
Show all your workings clearly
•
Round all amounts to the nearest Rand where applicable
•
All entities apply IFRS for SMEs in the preparation of financial statements
Part A
15 marks (22,5 minutes)
The following is relevant to the information in Part A:
•
A Value Added Tax (‘VAT’) rate of 15% is applicable.
•
All amounts include VAT where relevant unless indicated otherwise.
•
The perpetual inventory system is applicable.
PenA is a sole proprietorship that was started by Thomas Ncgobo. Pen A is a one stop
stationary shop that sells stationery and art supplies. The year-end of PenA is 31 May. PenA
became a registered VAT vendor on 1 June 2020.
The VAT control account had a debit balance of R24 900 on 30 April 2022. The following
transactions were entered into by PenA during May 2022:
1) Thomas decided to invite one of PenA’s largest customers for dinner at J’s Boutique
Diner (a registered VAT vendor) on 4 May 2022 as a token of appreciation for their
loyalty and support. The dinner amounted to R5 500 and was settled in cash.
2) PenA purchased stationary on credit from APN Supplies (registered VAT vendor) on
11 May 2022. The stationary and delivery thereof amounted to R522 500 in total.
Hestany Transport (not a registered VAT vendor) assisted with the delivery thereof
which amounted to R2 500. The delivery costs can be capitalized to the cost of
inventory.
3) To boost sales PenA had a special offer during the last two weeks of May where a
6% discount was offered to customers if a certain quantity of printer cartridges is
purchased for cash. The printer cartridges are usually sold for R1 700 per cartridge.
A total of 400 cartridges were sold under this special offer and had a total cost price
of R240 000 (exclusive of VAT).
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ACCN1005A/ACCN1006A June 2022
4) On 14 May 2022 PenA sold goods on credit to Waldorfs Office (not a registered VAT
vendor) as per the tax invoice below. Waldorfs Office settled their outstanding
balance of R135 000 by the end of May. The cost of the goods sold amounted to
R100 000 (inclusive of VAT).
PenA (Vat registration number: 4005989655)
Date
Description
Tax Invoice: 867
Units
Price/Unit
Total
(R)
(R)
14/05/2022
A4 white copier paper (500 sheets)
300
400
120 000
14/05/2022
Ballpoint pen (black) (10 per box)
100
150
15 000
Total
135 000
VAT (15%)
Total (Incl. VAT)
0
135 000
You are required to:
Marks
(a) Record the entry/ies in the general journal of PenA for Transaction 2) for the
(5)
month of May 2022. You are not required to provide closing entries or journal
narrations.
(b) Discuss whether PenA correctly accounted for Output VAT on the sales
(2)
transaction with Waldorfs Office (Transaction 4).
You are required to prepare the correcting journal entry/ies as part of your
discussion.
(2)
(c) Prepare the VAT Receivable/Payable General Ledger account of PenA for
the month of May 2022.
(6)
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ACCN1005A/ACCN1006A June 2022
Part B
30 marks (45 minutes)
Ignore VAT.
Eksom Plumbing Services (‘EPS’) is a sole proprietorship that was started by Mr James
Ndlovu on 1 June 2019. EPS focuses primarily on servicing electrical systems in homes and
businesses. EPS has a 31 May financial year end.
The previous accountant resigned before completing the financial statements for the year
ended 31 May 2022. The accountant was able to prepare the pre-adjustment trial balance
and recorded all external transactions. However, no internal transactions or adjustments
have been recorded for the 2022 financial year. Below is an extract of the pre-adjustment
trial balance of EPS for the year ended 31 May 2022 (you may assume all opening balances
provided are correct):
Debits
Vehicle (as at 1 June 2021)
Fixed deposit
Prepaid expenses
Trade receivables
Bank
Supplies on hand
Cost of services provided
Rent expense
Salaries and wages
Water and electricity expense
Credits
Capital
Income received in advance
Revenue from providing electrical services
Notes
Amount
(R)
1
2
3
4
7
8
300 625
150 000
232 500
320 000
733 875
520 000
490 000
130 000
420 000
60 000
5
4
500 000
?
?
6
Notes
1) The vehicle was purchased on 1 December 2019 at a cost of R370 000. The vehicle is
expected to be used for a total of 8 years and has a residual value of Rnil.
2) Mr James transferred R150 000 from the bank account to a fixed deposit account on
1 September 2021 earning interest at 6% per annum.
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ACCN1005A/ACCN1006A June 2022
3) Prepaid expenses consist of the annual insurance premium payable on 1 December of
each year. An amount of R157 500 was paid on 1 December 2021 and posted to prepaid
expenses. This amount includes an annual premium increase of 5%.
4) The trade receivables opening balance at 1 June 2021 was R270 000. According to the
cash receipts journal a total of R240 000 was received from debtors during the year
regarding the settlement of outstanding debt. Services provided on credit amounted to
40% of the total services provided for the year.
5) EPS were contracted to assist with the installation and wiring of electrical systems in a
townhouse development that will be constructed in two phases. They received a cash
payment of R1 400 000 upfront on 1 April 2021 from the contractor regarding the
development of phase 1. Phase 1 consist of 25 townhouse units. In terms of the project,
23 units of phase 1 have been completed in total by 31 May 2022 (31 May 2021: three
units). The construction of phase 2 started on 1 May 2022 and EPS received an upfront
cash payment of R900 000 which has not yet been accounted for in the accounting
records of EPS; no phase 2 units have been completed by year end.
6) The supplies on hand balance was R120 000 on 1 June 2021. EPS purchased supplies
of R400 000 during the 2022 financial year. On 31 May 2022 the supplies on hand
amounted to R155 000.
7) Included in Salaries and Wages is an amount of R60 000 paid to Mr James regarding
cash he withdrew from EPS for personal use.
8) EPS received the water and electricity invoice from the municipality amounting to R7 000
related to the usage for May 2022. This was only settled in June 2022.
Training of junior electricians
Mr James would like to expand the business and service more clients and increase future
revenue. To achieve this EPS, require electricians with more experience. EPS would like to
enroll two of its junior electricians in courses that will provide them with the necessary
experience. The cost of these courses will be R60 000 per electrician and will be paid by
EPS on behalf of the employees with no obligation to repay EPS. The electricians will start
with the course on 1 August 2022.
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ACCN1005A/ACCN1006A June 2022
You are required to:
(a) Prepare all the required journals in the general journal of EPS for the
year ended 31 May 2022 that should have been processed by EPS
to correctly account for the information in note 5 and note 8. Journal
narrations are required.
Marks
(8)
(b) Prepare the “Profit or Loss” general ledger account of EPS for the
year ended 31 May 2022, after all required adjustments have been
taken into account. The account should be correctly closed off and
you are required to indicate whether a profit or loss was generated by
EPS for the year.
(17)
(c) Discuss if EPS can recognize the training of junior electricians as an
asset in terms of the Conceptual Framework. You are not required to
discuss the recognition criteria.
(5)
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ACCN1005A/ACCN1006A June 2022
Question 3
10 marks (15 minutes)
•
Show all your workings clearly
•
Round all amounts to the nearest Rand where applicable
•
Ignore VAT
Bilaal Adam is the owner of a small, homemade pie distribution shop, Adam’s Pies, which
supplies pies to cricket clubs in the Gauteng Area. He rents a small warehouse in Richmond,
located near most of the cricket clubs. Cricket is predominately a summer sport and
operates mainly in the summer seasons to its’ full capacity. Adam entered into negotiations
with the rugby clubs in the same area to provide pies to the rugby clubs mainly in the winter
seasons, as rugby is mainly a winter sport. This new addition will definitely boost Adam’s
Pies’ income.
Adam is not familiar with bookkeeping and has performed most of the bookkeeping himself.
He appointed you as his bookkeeper due to the potential new addition to this business and
to escalate all bookkeeping responsibilities to you. After your appointment Adam urgently
had to go on an overseas trip. Before Adam left he processed all the adjustments contained
in the April 2022 bank statement but did not manage to prepare the bank reconciliation.
Additional information:
1. Adam’s Pies uses the business’s debit card (DC) to make payments, but in some
instances there were delays due to the bank that processed these transactions late.
This had an impact on the preparation of bank reconciliations.
2. Each transaction has a unique document number and are arranged in a chronologic
order.
3. Bilaal indicated that all the reconciling items on the March bank reconciliation were
resolved in the April bank statement.
4. The bank made an error in credited a banking business deposit of R2 468 to
Adam’s private bank account in April 2022 but corrected this in May 2022.
5. Adam provided you with the Green Bank’s bank statement, Cash Payments Journal
(CPJ) and the Cash Receipts Journal (CRJ) for April 2022 as well as the additional
information to assist you to prepare a bank reconciliation.
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ACCN1005A/ACCN1006A June 2022
Adam's Pies
Cash Payments Journal: April 2022
Doc nr
Date
Description
DC1490
DC1491
DC1492
EFT107
EFT108
EFT109
EFT110
DC1493
4
4
6
18
28
25
29
29
Pie Supplies
Rent
Electricity and Water
S Naidoo
P Smith
F Masinga
T Li
Printing and Stationery
Sundry
Rand
Purchases
Rand
Acc Payable
Rand
Bank
Rand
1 954
1 954
3 500
2 879
700
6 220
1 970
1 710
678
3 500
2 879
700
6 220
1 970
1 710
678
7 057
1 954
10 600
19 611
Adam's Pies
Cash Receipts Journal: April 2022
Doc nr
Date
Credit Card
Credit Card
Credit Card
Cash Sale
Cash Sale
Cash Sale
Credit Card
Cash Sale
Cash Sale
4
7
13
14
20
21
28
29
29
29
Credit Card
Date
30-Apr
Description
CRJ
Interest Received
Cash Sales
Rand
Description
Sales
Sales
Sales
Cash Sales
Cash Sales
Cash Sales
Sales
Cash Sales
Cash Sales
Sale
Bank
Rand
Date
41 175 31-Mar
20 30-Apr
Description
Balance
CPJ
Bank Charges
Bank Charges
Balance c/d
41 195
30-Apr
Balance b/d
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18 017
ACCN1005A/ACCN1006A June 2022
Bank
Rand
6 500
4 890
2 278
11 098
2 468
285
4 390
3 876
1 010
4 380
6 500
4 890
2 278
11 098
2 468
285
4 390
3 876
1 010
4 380
41 175
41 175
Rand
3 500
19 611
12
55
18 017
41 195
See below the Green Bank, bank statement for April 2022.
Green Bank
PO Box 234
Green City
2202
Tel: 072 4560987
Bank Statement
Statement from 1 April to 30 April 2022
Page 1 of 1
Adam's Pies
Bank Statement
Date
Description
1
1
4
4
4
4
4
7
14
13
18
21
28
28
29
29
29
29
30
30
30
Balance b/f
Deposit
DC1483
DC1486
DC1491
Sales
DC1490
Sales
Deposit
Sales
EFT: Naidoo
Deposit
EFT: P Smith
Sales
Sales
EFT: T Li
DC1493
Deposit
Bank Charges
Interest received
Bank Charges
Amount
Rand
Cumulative total
Rand
CR
700
-2 450
-1 867
-3 500
6 500
-1 954
4 890
11 098
2 278
-700
285
-6 220
4 390
3 876
-1 710
-678
1 010
-12
20
-55
117
817
-1 633
-3 500
-7 000
-500
-2 454
2 436
13 534
15 812
15 112
15 397
9 177
13 567
17 443
15 733
15 055
16 065
16 053
16 073
16 018
Page 1 of 1
You are required to:
(a) Prepare the bank reconciliations of Adam’s Pies for March and April
2022. Prepare a separate reconciliation for each month.
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Marks
(10)
Question 4
45 marks (67.5 minutes)
This question consists of 2 parts. These parts are not related to each other.
•
Show all your workings clearly
•
Round all amounts to the nearest Rand where applicable
•
Ignore VAT
Part A
(35 marks; 52.5 minutes)
Teb Mokoena owns a small business, apart from his other businesses in Johannesburg,
‘Party Bus’ which arranges transport for groups and/or individuals in an open-top bus to and
from functions and/or sport stadiums. Teb is well-known under the sport celebrities, mainly
the soccer community. Teb bought a bus from a travel agency, that was doing sightseeing
trips, which stopped all activities due to Covid-19. Teb also saw an opportunity when
functions increased, due the relax Covid-19 requirements, that partygoers would like to
enjoy the outdoors and what is a better way than using an open-top party bus with fresh air.
Teb employed Sam to manage his business. Party Bus has a 30 April financial year end.
Party Bus is paid as follows:
•
Party groups can book with Sam in advance on credit, with payment due within one
week of the function. A cancelation policy is in place if groups cancel their booking.
•
Due to popularity partygoers can pay cash at the time when taking the bus, this
depends on availability. In most cases there are spaces available on the bus.
•
Partygoers can also book via travel agents which pay Party Bus in advance. These
partygoers present a voucher when taking the bus.
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Asset and Liabilities of Party Bus at 30 April 2022 are presented below:
Asset/Liability
Party Bus (Balance at 30 April 2022)
Bank
Accounts receivable
Supplies on Hand
Expenses paid in advance
Capital 30/04/2022
Accounts payable
Income received in advance
Loan
Notes and
Transaction number
1
15
4
5 and 11
13
12
14
Rand
145 000
12 000
5 600
1 500
3 600
103 680
1 350
2 670
60 000
Transactions not yet accounted for May 2022 and additional notes were as follow:
1. Teb bought the bus on the 1st of May 2021 for R175 000. Depreciation is recognized
on a straight-line basis over its estimate useful life of five years, with an estimate
residual value of R25 000. Party Bus started to operate on the 1st of May 2021.
2. Depreciation for May 2022 has not yet been accounted for.
3. Employees were paid wages of R2 600.
4. Sam invoiced R8 990 to party groups for bus rides provided by the party bus and still
outstanding at the end for May.
5. Sam bought supplies on credit for the amount of R850.
6. Sam received R6 700 in cash from partygoers for bus rides provided by the party
bus.
7. Sam received R3 675 owing from party groups in respect of bus rides undertaken
during April 2022.
8. Sam paid R700 to creditors that was still outstanding.
9. An amount of R1 800 was distributed to Teb.
10. An advertisement was placed in the local newspaper of May 2022 of R440. The
amount will be paid in June 2022.
11. Supplies that cost R1 010 were on hand and unused at the end of May 2022.
12. Partygoers presented vouchers for the amount of R1 400 for the month of May 2022.
13. The expenses paid in advance of R3 600 at 30 April 2022 relating to a one-year
insurance policy effective from 30 April 2022
14. A loan was raised of R60 000 on 1 May 2021 with an interest of 4% per annum in
payable quarterly in arrears. The loan is payable in four equal instalments
commencing on 30 April 2023.
15. The bank has a favourable balance on 30 April 2022.
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You are required to:
(a) Prepare a statement of profit and loss of Party Bus for the month
ended 31 May 2022
(b) Prepare a statement of changes in equity of Party Bus for the month
ended 31 May 2022.
Marks
(12)
(c) Prepare a statement of financial position of Party Bus at 31 May 2022
(18)
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ACCN1005A/ACCN1006A June 2022
(5)
Part B
(10 marks; 15 minutes)
Watson Siyanga is the owner of Clean-Shop which purchases cleaning material to sell in
his shop and provides a service for customers cleaning carpets and households. Cleanshop has a variety of suppliers, Broom’s Galore is one of Clean-Shop’s suppliers. Watson
was advised by his accountant to record each supplier in a separate account in his general
ledger. The balance of the ledger account for Brooms’ Galore at 31 March 2022 was
R20 400. Watson keeps a set of books that he created on this computer and each account
is linked up to the trial balance and thereafter producing financial statements.
When Watson compared Broom’s ledger account with the statement sent to him on the 31st
of March 2022 he discovered the following discrepancies:
1. An invoice no. 234 of R950 was not entered in the accounting records.
2. Invoice no. 239 for R4 300 was entered on the statement as R3 300.
3. An invoice no. 235 for R320 had been entered on the incorrect side of the general
ledger of Broom’s Galore account in the ledger.
4. Broom’s Galore’s statement had been under-cast by R150.
5. A credit note no. 45 for R165 appeared on Brooms Galore’s statement twice.
6. Invoice no. 240 for R280 was duplicated on the statement.
7. The statement indicted an outstanding amount of R12 000 brought forward from
February. The invoice was paid on 4th of April 2022.
8. Brooms Galore’s statement indicated a net amount after a deduction on an Easter
Special discount of 15%, the discount amounts to R530. Invoice no. 238 has been
entered in Clean-Shop’s records at a gross value.
You are required to:
Marks
(a) Prepare the remittance advice for Clean-Shop at 31 March 2022.
(10)
END
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