GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
GRADE 12
SENIOR SECONDARY INTERVENTION PROGRAMME
SESSION 16
(LEARNER NOTES)
TOPIC: COMPANIES FINANCIAL STATEMENTS – DEBTORS CONTROL AND ANALYSIS
AND DEBTORS RECONCILIATION
SECTION A: TYPICAL EXAM QUESTIONS
Learner Notes:
 Always answer in point form
 Make sure you learn your theory on companies
 Open ended questions do not have one correct answer
QUESTION 1:
35 marks
20 minutes
DEBTORS CONTROL & AGE ANALYSIS
You are provided with information relating to Howie Furnishers, a business owned by
Howie Harris. The financial year-end is 28 February 2010. Daisy Duncan was appointed as
the new credit controller on 1 March 2009.
REQUIRED:
1.1
1.2
1.3
1.4
1.5
How can the preparation of a Debtors Collection Schedule and Debtors Age
Analysis assist Howie and Daisy in controlling debtors?
Refer to Information 2 below.
Calculate the expected monthly collection of credit sales for March 2010 for
inclusion in the Debtors Collection Schedule. Total sales for the year ended
28 February 2011 is expected to increase to R960 000.
The balance on the Debtors Control Account was R42 500 on 1 March
2009, the beginning of the financial year, and R83 500 on 28 February
2010, the end of the financial year.
 Calculate the Debtors Average Collection Period (in days) for the
past financial year ended 28 February 2010.
 Explain whether Howie should be satisfied with this.
 Provide a reason for your opinion.
Howie feels that the control of debtors has not been satisfactory since Daisy
was employed. Howie wants you to report to him on what appears to have
gone wrong. Refer to the Debtors Age Analysis (Information 3) and the
Debtors Control Account (Information 4) provided below.
Explain FOUR points that you would include in your report. You must quote
specific information from the Age Analysis of Debtors (TWO points) and
from the Debtors Control Account (TWO points) to support your answer.
Refer to the media article (Information 5).
How would these regulations influence your granting of credit to clients?
List TWO points.
(4)
(7)
(8)
(12)
(4)
Page 1 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
SENIOR SECONDARY INTERVENTION PROGRAMME
GRADE 12
SESSION 16
(LEARNER NOTES)
INFORMATION
1. Credit limits and credit terms:
It is Howie’s business policy to grant debtors credit limits of R15 000 each. They are
expected to settle their accounts in 30 days.
2.
3.
Sales and collections for the year ended 28 February 2010:
 Total sales for the year, R 840 000.
 Sales occurred evenly throughout the year
 25% of sales are for cash, the rest are on credit
 30% of debtors settle their accounts in the same month as the sales transaction
month subject to 2% discount
 50% settle in the month following the sales transaction month
 15% settle in the 2nd month
 5% are written off as bad in the 3rd month.
DEBTORS AGE ANALYSIS ON 28 FEBRUARY 2010
Note:
 Business policy is to set credit limits at R15 000 per account
 The credit terms are 30 days.
Name
Total
Current
30 days
60 days 60 days+
K Khoza
15 000
15 000
M Miller
31 000
12 000
B Bester
9 100
P Paulse
11 600
9 200
2 400
N Ncube
16 800
7 800
5 500
3 500
83 500
44 000
11 900
14 600
4.
2010
Feb 1
Balance
Feb
28
Sales
Bank
Sundry accounts
(Discountreversed)
4 000
Balance
13 000
9 100
13 000
DEBTORS CONTROL ACCOUNT
2010
b/d
86 500 Feb
Bank & discount
28
Debtors’
DJ
52 500
allowances
CPJ
9 700
Bad debts
GJ
800
149 500
2010
March
1
2 000
b/d
Balance
CRJ
61 000
DAJ
3 000
GJ
2 000
c/d
83 500
149 500
83 500
Page 2 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
5.
GRADE 12
SENIOR SECONDARY INTERVENTION PROGRAMME
SESSION 16
(LEARNER NOTES)
Newspaper article
Furniture retailers fear that National Credit Act will restrict business
Daily Views, February 20, 2010
In June 2007, the government introduced a new law, the National Credit Act
(NCA), which stipulates strict requirements before granting credit to any customer.
Legal expert Neil Nene said: “The NCA was designed to save consumers from
themselves. Before the implementation of the NCA, many businesses had a field
day. They were actively encouraging customers to buy on credit in order to
increase the sales volumes of their businesses. Now, they will have to apply
responsible measures before allowing customers to open new accounts.”
In a survey of 20 local furniture retailers, the Daily Views found that 15 retailers
were extremely worried about the effect of the NCA on their businesses. One of
these retailers, Steve Smits, said that customers should be trusted to make their
own decisions about whether they can afford to settle their debts, and that the new
measures might force some retailers to close down their businesses.
[35]
QUESTION 2:
30 marks
20 minutes
DEBTORS RECONCILIATION AND INTERNAL CONTROL
You are provided with information relating to SA Traders. The bookkeeper has made
a few errors when reconciling the Debtors Control Account to the Debtors List.
REQUIRED
2.1 SA Traders requires their new customers to provide personal details, including
proof of residence, before opening accounts. Briefly explain why this is
necessary. Name TWO points.
(4)
2.2 Prepare the correct Debtors List on 31 August 2010, and show how you would
adjust the Debtors Control Account using the format provided.
(26)
INFORMATION
1.
The bookkeeper discovered that he had made a number of errors when preparing
the Debtors Ledger Accounts.
2.
The Debtors Control Account and the Debtors List did not reconcile. The difference
is R6 470.
Page 3 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
SENIOR SECONDARY INTERVENTION PROGRAMME
GRADE 12
Balance of the Debtors Control Account
Total of the Debtors List
Sunnyside Traders
Thembisa Traders
Tildai Suppliers
Mondo Stores
Difference
3.
4.
5.
SESSION 16
(LEARNER NOTES)
R70 663
77 133
17 600
55 473
3 400
660
R6 470
Errors on the account of Sunnyside Traders

Interest on the account was calculated incorrectly. Adjust for an
additional R165 interest.

VAT at 14% was omitted on Invoice 868 dated 31 July 2010. Total sales,
excluding VAT, amounted to R16 500.
Errors on the account of Thembisa Traders

A credit note of R3 080 was incorrectly reflected in the Debtors Ledger
Account as a debit entry. The General Ledger is correct.

Thembisa Traders claim that they paid R13 200 last month, but that this
is not reflected on their statement. Investigations revealed that Thembisa
Traders' payment was incorrectly posted to the account of another
debtor, Sunnyside Traders.

Thembisa Traders had issued a dishonoured cheque for R2 750 in
settlement of an amount of R3 100. The CRJ and CPJ entries were
correctly recorded. The cancellation of the discount was not reflected in
the Debtors Ledger Account. The control account is correct.
Additional errors reflected on the Debtors Reconciliation Statement

The debt of R660 of Mondo Stores, a debtor, has been written off as
irrecoverable. The amount was posted to the Debtors Control Account
but not to the debtor's personal account.

Tildai Suppliers are reflected in the Debtors Ledger and the Creditors
Ledger. Their credit balance of R2 124 in the Creditors Ledger is to be
offset against their account in the Debtors Ledger.
[30]
Page 4 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
SENIOR SECONDARY INTERVENTION PROGRAMME
GRADE 12
SESSION 16
(LEARNER NOTES)
SECTION B: ADDITIONAL CONTENT NOTES
Debtors represent amounts owing to the business. The collection of amounts due must be
evaluated. The recoverability weakens as debtors age.
The credit policy must be strictly adhered to, and the management must keep an eye on
aging debtors’ accounts and thus avoid possible losses (bad debts). Analysis of every debtor
must be done by way of ageing debtors and must be done regularly.
AGE ANALYSIS OF DEBTORS
An age analysis of debtors can be drawn up in order to monitor how long debtors have been
owing.
The following table illustrates a Debtors Age Analysis schedule:
PINKY TRADERS
DEBTORS AGE ANALYSIS AT 31 DECEMBER 2007
DEBTORS
A.Aim
P.Pine
C.Calm
D.Drone
E.Edward
% Total
Amount
Due
Curren
t
R2 000
R3 600
R3 000
R2 500
R1 000
R12 100
R1 000
R1 800
R1 500
R1 250
1
month
R500
R500
R500
R500
R5 550
R2 000
100%
46%
17%
Terms : 30 days
Period in arrear
2
3
+90
month
month
days
R500
R500
R800
R500
R500
R500
R250
R1 000
R2 000 R1 550
R1 000
17%
13%
7%
The credit control department can make use of the above information to:
 Send out statements
 Determine bad debts
 Determine provision for bad debts
 Charge interest on outstanding accounts
 Encourage debtors to pay accounts promptly
 Offer discounts
 Etc.
Page 5 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
GRADE 12
SENIOR SECONDARY INTERVENTION PROGRAMME
SESSION 16
(LEARNER NOTES)
SECTION C: HOMEWORK
QUESTION 1:
31 marks
20 minutes
DEBTORS RECONCILIATION
Age Traders sells 80% of their fashion wear on credit. Their credit terms are strictly 30 days.
Study the information given below and answer the following questions.
REQUIRED
1.1 Explain what action the bookkeeper should have taken when he discovered a
difference of R6 800 in the reconciliation statement. Discuss at least 2 actions.
1.2
(4)
Calculate the correct balance owing by the following debtors:
B.Bengu
D. Singh
E. Amos
(11)
1.3
Calculate the opening balance in the Debtors Control Account on 1 February 2008.
(4)
1.4
The age analysis of the debtors, extracted at the end of January, showed the
following:
More than 90 days
60 – 90 days
30 – 60 days
Current
R20 000
R24 000
R8 000
R10 800
1.5
(7)
Is this business controlling their debtors effectively? Why? Discuss 2 measures
that they need to consider in order to improve the above situation.
Age Traders pay all their creditors cash or in 30 days in order to receive a cash
discount of 5%. Do you agree with their philosophy? Why? Discuss at least 2
factors that should be considered before making a decision to pay creditors in cash (5)
or within 30 days.
Page 6 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
GRADE 12
SENIOR SECONDARY INTERVENTION PROGRAMME
SESSION 16
(LEARNER NOTES)
INFORMATION
AGE TRADERS - RECONCILIATION OF DEBTORS CONTROL ACCOUNT TO
THE DEBTORS LIST ON 31 JANUARY 2008
Balance per Debtors Control Account
Balances per Debtors Ledger:
A. Zulu
B. Bengu
C. Cawood
D. Singh
E. Amos
Difference
R62 800
56 000
12 000
9 000
17 000
11 000
?
6 800
ADDITIONAL INFORMATION
The following errors were discovered and must be corrected:
A
B
C
D
Goods sold on credit to D. Singh for R2 600 were correctly recorded in the Debtors
Journal but incorrectly posted as R6 200 to D. Singh’s account in the Debtors Ledger.
No entry has been made for a cheque of R6 000 which was returned by the bank
due to insufficient funds. The cheque was originally received from B Bengu in settlement of a
debt of R6 400.
The Debtors Allowances Journal has been undercast by R5 600.
An invoice issued to E Amos for R2 400 has been posted to the wrong side of her
account.
Page 7 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
SENIOR SECONDARY INTERVENTION PROGRAMME
GRADE 12
SESSION 16
(LEARNER NOTES)
SECTION D: SOLUTIONS AND HINTS TO SECTION A
QUESTION 1
1.1 Any valid explanation 
Good explanation = 2 marks; Satisfactory = 1 mark;
Incorrect or no answer = 0 marks
 Project anticipated receipts from debtors.
 Ensure that debtors keep to terms of their accounts, i.e. 30 days.
 Act if the debtors do not comply with credit terms.
 Compare anticipated budget with actual budgets.
How can the preparation of a Debtors Age Analysis assist in
controlling debtors?
Any valid explanation 
Good explanation = 2 marks; Satisfactory = 1 mark;
Incorrect or no answer = 0 marks
 Effective method of credit control.
 Action can be taken against debtors who do not comply by charging
interest/legal action.
 Bad debts can be minimised.
 Make decisions based on age analysis of the debtor/s.
(4)
1.2
DEBTORS COLLECTION SCHEDULE:
Month
March 2010
Credit sales
March 2010
April 2010
May 2010
R
R
R
R
960 000 / 12 x
75%  =
60 000 
17 640 
30 000

9 000
(7)
Page 8 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
1.3
1.4
1.5
GRADE 12
SENIOR SECONDARY INTERVENTION PROGRAMME
SESSION 16
(LEARNER NOTES)
Average debtors
x 365
Credit Sales

63 000 X 365
=
36,5 days 
630 000
1

Provide a reason for your opinion.
Yes / No 
Valid reason depending on calculation 
Posible reasons:
 Debtors are not complying with the 30 day credit term.
 He expected that some debtors would pay within the 60 days. The
collection period is therefore not good.
Any four valid points 
 
Good explanation = 3 marks; Satisfactory = 2 marks; Poor = 1 mark;
Incorrect or no answer = 0 marks
Age Analysis of Debtors (TWO points)
 M Miller’s debt exceeds 60 days – R13 000 outstanding for 60+ days.
 M Miller and N Ncube’s balances are higher than the credit limits of
R15 000.
Debtors Control Account (TWO points)
 Dishonoured cheques amounts to 17,2% of payments received from
debtors. Received R61 000 – dishonoured cheques R10 500 (R9 700 +
R800). This is not acceptable.
 R2 000 bad debts written off. They sold too much on credit to unreliable
debtors – customers are not screened properly.
 Debtors’ allowances is 5,7% of sales. Too much stock is returned by
debtors, (R 3 000).
Two points   
Possible answers:
 Potential customers should be thoroughly screened in order to decrease
bad debts.
 Customers are gullible and the National Credit Act is needed to save
customers from themselves.
 Selling on credit will increase sales – if potential customers are screened,
bad debts will not increase with an increase in sales.
 Become aware of different policies and acts.
 Use debt risk management technology when acquiring new clients.
(8)
(12)
(4)
[35]
Page 9 of 10
GAUTENG DEPARTMENT OF EDUCATION
ACCOUNTING
GRADE 12
SENIOR SECONDARY INTERVENTION PROGRAMME
SESSION 16
(LEARNER NOTES)
QUESTION 2
2.1
Any TWO valid points  
Possible explanation:
 It is essential for a business to know the addresses so that they can
send statements promptly to debtors to ensure that they pay on
time.
 If any debtors do not settle their accounts, it will be necessary for the
business to take legal action against them in which case the
addresses will be essential in order to serve the legal documents on
them.
 The National Credit Act requires a business to check whether a
potential debtor can afford to purchase on credit. Addresses are part
of the personal history of the customer.
(4)
2.2
Debtors List on 31 August 2010
Sunnyside Traders
(17 600  + 165 + 2 310 + 13 200 )
Thembisa Traders
(55 473  – [3 080  + 3 080 ] – 13 200 
+ 350 
Tildai Suppliers (3 400  – 2 124 )
Mondo Stores (660-660)
R
33 275
36 463
 1 276
 Nil
71 014
List of adjustments to Debtors Control Account
Amount
R165 
R2 310 
R2 124 
Account debited
Debtors' control 
Debtors' control 
Creditors' control 
Account credited
Interest income 
VAT output/control 
Debtors' control 
(26)
Learner Note: From the above you can see the importance of understanding your
concepts of debtors’ reconciliation. As you attempt the homework, you need to ensure that
you are able to answer the questions in the allocated time frames. If you get stuck, you
should refer either to the additional notes or your class teacher.
[30]
The SSIP is supported by
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