GRADE 10
WEEK 23 - Lesson 1 of 4
79
FINAL ACCOUNTS
WORKSHEET 1
REVISION OF FINANCIAL YEAR-END PROCEDURES
At the end of the accounting period the owner wants top know the following:
- how much profit the business has made
- whether any changes have to be made
To calculate the profit
- there must be no errors in the books
- the books must give accurate information for the accounting period
- errors have to be adjusted
- books have to be closed off
- gross profit and net profit must be calculated
Pre-adjustment trial balance
It is drawn up before any changes have been made
Adjustments
Certain accounts have to be changed (adjusted) at the end of the year to reflect the correct
position for the 12 months.
Post-adjustment trial balance
It is drawn up after changes (adjustments) have been made
Closing transfers
The accounts in the nominal accounts section are income and expense accounts and are
applicable for a specific financial year. They are all closed off at the end of the financial year
Post-closing trial balance
It is drawn up after all expenses and incomes have been closed off.
It consists of only assets and liabilities.
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ACTIVITY 1
REQUIRED
Explain in your own word the following concepts:
1.1 Accounting period / financial period
1.2 The purpose of drawing up final accounts
1.3 Gross profit
1.4 Net profit
1.5 Year-end Adjustments
1.6 GAAP principles
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YEAR-END PROCEDURE
Pre-adjustment trial balance
On the last day of the financial year a trial balance is drawn up
from the balances of the General ledger accounts. It is a
summary of all transactions during the financial year. It is
drawn up before any changes have been made
Adjustments
(General journal entries)
Changes are made to certain amounts to reflect the correct
position for the 12 months.
Post to
the ledger
Post-adjustment trial balance
It is a list of balances from the general ledger accounts after
changes (adjustments) have been made
Closing transfers
(General journal entries)
The accounts in the nominal accounts section are income and
expense accounts and are applicable for a specific financial
year. They are all closed off at the end of the financial year.
Post to
the ledger
Final accounts
All nominal accounts are closed off to the Final accounts.
Final accounts consist of:
Trading account
Profit and Loss account
It is drawn up to calculate the
gross profit
Subtract the cost of sales from the sales.
It is drawn up to calculate the
net profit
Add incomes to the gross profit and
subtract the expenses from this amount.
Net profit is transferred
to the Capital account
Post-closing trial balance
It is drawn up after all expenses and incomes
have been closed off.
It consists of only assets and liabilities.
(balance sheet accounts)
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WORKSHEET 2
INTERNAL CONTROL OVER ASSETS
CONTROL OVER STOCK
It is important that a business ensures that there is not a large amount of stock loss, as this
decreases the profit. There should be proper control over all stock.
CONTROL MEASURES
Division of duties
Regular stock counts agreed to ledger accounts to identify deficits or surpluses
Storing space must be safe from natural disasters (rain, wind, hail, etc)
Storerooms must have proper locking facilities
Minimize the risk of burglary
Insure all stock
Stock cards to be kept up-to-date
Keep sufficient stock – not too much or too little
Complete documents for stock purchases
Complete documents for stock issued to sales department
Regular stocktaking must be done
Goods to be displayed in a manner to reduce theft by staff and clients
Employ security guards and install cameras to prevent theft
Delivery trucks should be allowed to use only one exit where there is gate control –
check valid sales
documents when goods leave the premises
Damaged goods to be returned to supplier by means of a debit note
Proper authorization to be acquired for purchasing stock
Compare goods received with invoices
Stock to be safeguarded against theft and loss
Lost items to be reported immediately
Stock records to be kept separately from physical stock
Orders placed by clients should contain the correct stock and must be correctly packaged.
If stock is kept for a very long time, a clearance sale will prevent possible losses.
Access to stock in storerooms to be restricted
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CONTROL OVER FIXED ASSETS
Internal control over assets is important to ensure that fixed assets are bought and disposed
of (sold) only with the proper authorisation. Assets must be safeguarded and proper
records must be kept.
CONTROL MEASURES
Division of duties – responsibilities for authorizing transactions, recording transactions and
handling the assets are divided.
There must be system of authorization – adequate control over acquisition and disposal of
assets – owners / managers must authorize.
Person who place the order must be authorized to place the order – orders placed be
checked when assets are received
Person who disposes must see that all decisions taken are executed
Keep records of all assets – detailed records must be kept as well as invoices
Records must be periodically checked by means of physical stock-take.
Regular counts of assets
Lost or stolen items to be reported immediately
Assets to be protected against loss and damage
Any movements of assets to be recorded immediately
Depreciation policies must be recorded.
79 Accounting Grade 10
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ACTIVITY 2
INFORMATION
June Jones feels that she has a problem in her business.

Many customers buy books on credit. However, the sales assistant does not always
document the transactions.

Stock is going missing from the shop. She suspects that either the customers or her
employees are stealing stock from her shop.
REQUIRED
List the main points that June should apply in her business to solve the stock problem
(5 main points)
ANSWER
ACTIVITY 3
INFORMATION
The owner of Jay-Jays has realised that the stock deficit figures were unacceptable and
increasing compared to last year’s figures.
REQUIRED
Briefly name three control procedures management can implement to avoid loss of stock.
ANSWER
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ANSWERS
WEEK 23 (Lesson 1 of 4)
79
ACTIVITY 1
1.1 Accounting period /financial period
It is a period of 12 months in which the financial position of the business is determined, for
example 1 March 2010 to 28 February 2011
1.2 Purpose of drawing up final accounts
To determine the Gross profit and Net profit
1.3 Gross profit
Sales minus Cost of sales
1.4 Net profit
Add incomes to the gross profit and subtract the expenses from this amount
(Gross profit plus income less expenses
1.5 Year-end Adjustments
Certain accounts have to be changed (adjusted) at the end of the year to reflect the correct
position for the 12 months.
All amounts outstanding for the year (accrued) and amounts already paid for the following
year (prepaid) must be brought into account.
The purpose of year-end adjustments is to make the financial results more realistic
1.6 GAAP principles
These are practices that accountants make use of to ensure that the financial statements are
reliable. It is important that accountants use the same set of principles
Accountants apply theses principles to ensure that financial statements are:
 Fair
 Timely
 Understandable
 Reliable
 Comparable
 Relevant
 Useful
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ACTIVITY 2
Check books delivered to the shop – check items delivered to the invoice and delivery note
Regular stock counts – check to Trading stock account
Layout of books carefully designed e.g. magazines near desk, valuable books secured
Security tags on books
Store inspectors / security guards at doors – check to sales slip
Background checks on employees
ANY OTHER APPROPRIATE ANSWER
ACTIVITY 3
Avoid shoplifting – security tags/sensors on stock items
Security surveillance cameras on the premises
Physical check of employees’ belongings when they leave the premises
Employ staff to watch out for shoplifting
Gate control for delivery trucks and staff vehicles
Stock received from suppliers to be checked against order forms and invoices
The same person should not be in charge of the stock, stock cards and trading stock account
Rotation of duties in the store – ordering, receipt and issue of stock
ANY OTHER APPROPRIATE ANSWER
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