REMOTE LEARNING EXERCISES/WORKSHEETS

LEARNER’S GUIDE
SUBJECT: Accounting
GRADE 10
TOPIC (S) Term Two topics
Week (s) Week 11-19

TERM WEEK TOPICS

11-12 Debtors and Creditors Reconciliation
Two

13-14 Salaries and Wages Journals

15-19 Year-end Adjustments
6. RECONCILIATION OF DEBTORS AND CREDITORS

DEBTORS LIST, CREDITORS LIST AND CONTROL ACCOUNTS

Control accounts are a summary of the individual debtor/creditors accounts. Reconciliation between
control accounts and lists is drawn up monthly to ensure that the entries in the debtors/creditors list agree
with the entries in the control account.

 Both balances of control accounts and lists must Debtors/

Control
agree to each other. Creditors
 Control accounts act as an independent check on Accounts
List
the accuracy of the totals of the balances in the
Debtors and Creditors ledgers.
 Control accounts assist the business in detecting
errors/omissions in their books.
 Information needed to prepare the Creditors Ledger
comes from Creditors Control Account.

WHAT ERROR CAN BE DETECTED BY CONTROL ACCOUNTS

Control accounts can detect the following errors amongst many:-
 Casting errors (errors of addition)
 An error can arise if a transaction is recorded in the control account and not in the individual
account, or vice versa.
 Error of omission – a transaction is not recorded at all.
 Error of commission – an item is entered right and in the correct account but the value is wrong (it’s
added instead of being subtracted or vice versa).

Illustration of Creditors Control account and Creditors List

ABC XYZ VEE BOOZER

Wholesale Wholesale Wholesale Stores
R500 R1 200 R300 R2 000

Suppliers/Creditors List Creditors Control

2
EXAMPLE

Creditors Ledger of Ivory for the month ending 31 March 2020

ABC Wholesale

Debit Credit Balance

Mar 1 Balance brought forward 500

XYZ Wholesale

Debit Credit Balance

Mar 1 Balance brought forward 1 200

VEE Wholesale

Debit Credit Balance

Mar 1 Balance brought forward 1 200

General Ledger of Boozer Stores for the month ending March 2020
CREDITOR’S CONTROL ACCOUNT
Mar
2020 1 Balance b/d 2 000

3
EXAMPLE 1: DEBTORS RECONCILIATON AND INTERNAL CONTROL

SCHUMANN WHOLESALERS
The information below was taken from the books of Schumann Wholesalers.
REQUIRED
1.1 Prepare a correct Debtors Control account for 31 March 2019 after adjusting for all errors
and omissions and balance the account. (14)
1.2 Prepare a correct list of debtors as at 31 March 2019. (16)

1.3 Provide ONE reason why should the Debtors Control account and the Debtors List (2)
always agree?
1.4 The owner Paul Schumann is worried that debtors are not paying on time. List THREE (6)
measures that he can put in place to ensure debtors pay on time.
1.5 Refer to the Debtors Control account and answer the following:
4.5.1 If the discount allowed was R35 720, how much was received from debtors for (2)
the month of March?
4.5.2 Apart from interest charged, what else could appear as a journal debit? Provide (2)
ONE item or answer.
4.5.3 Provide TWO possible reasons for the debit of R300 in the Debtors control (4)
account.

4
INFORMATION
GENERAL LEDGER OF SCHUMANN WHOLESALER
BALANCE SHEET ACCOUNTS SECTION

Dr DEBTORS CONTROL Cr
Mar 1 Balance b/d 89 560 00 Mar 31 Bank and CRJ 266 040 00
discount
allowed
31 Sales DJ 270 000 00 Debtors DAJ 1 200 00
allowances
Bank CPJ 300 00 Journal credits GJ 1 950 00
Journal GJ 720 00 Balance c/d 91 390 00
debits
360 580 00 360 580 00

Apr 1 Balance b/d 91 390 00

List of debtors as at 31 March 2019

NAME Debit
Cooper 17 900 00
Baloyi 16 380 00
Hope 14 400 00
Smith 21 900 00
Williams 18 200 00
88 780 00

Errors and omissions discovered during the month:

A The Debtors Control opening balance was overcast by R6 000.

B The total column of the Debtors Allowances Journal was undercast by R210.

C A credit sales invoice for R2 900 issued to Baloyi was correctly entered in the Debtors
Journal, but was incorrectly posted to the account of Smith.
D A credit note of R520 for Cooper was not recorded at all.

E A cheque of R5 600 received from Hope in full settlement of his account of R6 000 was
recorded correctly in the subsidiary journal. However the bookkeeper forgot
to record the discount in the account of Hope.
F A credit note of R1 600 was correctly entered to the Debtors Allowances Journal, but was
incorrectly recorded as an invoice in the account of Williams.
G Charged Baloyi R300 interest on his overdue account of R8 000. No entry has been made.

Total Marks
46

5
EXPECTED SOLUTION : DEBTORS RECONCILIATION AND INTERNAL CONTROL

1.1 DEBTORS CONTROL ACCOUNT

GENERAL LEDGER OF SCHUMANN WHOLESALERS

BALANCE SHEET ACCOUNTS SECTION

Dr DEBTORS CONTROL Cr
Mar 1 Balance b/d 83 560 00 Mar 31 Bank and CRJ 266 040 00
[89 560 - discount
6 000] allowed
30 Sales DJ 270 000 00 Debtors DAJ 1 930 00
allowances
[1 200 +
210+ 520]
Bank (R/D) CP 300 00 Journal credits GJ 1 950 00
J
Journal GJ 1 020 00 Balance c/d 84 960 00
debits
[720 +
300]
354 880 00 354 880 00

Apr 1 Balance b/d 84 960 00

1 mark if all folios inserted

14
1.2 LIST OF DEBTORS AS AT 31 MARCH 2019
NAME Debit
Cooper (17 900 – 520) 17 380

Baloyi (16 380 + 2 900 + 300) One part correct 19 580

Hope (14 400 – 400) 14 000

Smith (21 900 – 2 900) One part correct 19 000

Williams (18 200– 1 600 – 1 600) One part correct 15 000

One part correct 84 960

16

6
1.3 Provide ONE reason why should the Debtors Control account and the
Debtors List always agree?
Any relevant answer 

 The debtors control is a summary of the debtors list and the debtors list is
summary of the debtors ledger.
 Both are prepared from the same source documents (transactions).
2

1.4 The owner Paul Schumann is worried that debtors are not paying on time.
List THREE measures that he can put in place to ensure debtors pay on time.

Any Three valid answers    (3x2)

 Offer early settlement discounts.

 Charge debtors interest on overdue accounts.
 Sent letters of demand.
 Send SMS’s.
 Hand accounts over to debt collectors.
6
1.5.1 If the discount allowed was R35 720, how much was received from debtors
for the month of March?

R266 040 – R35 720 = R230 320

2
1.5.2 Apart from interest charged, what else could appear as a journal debit?
Provide ONE item or answer.

Any valid answer 

 Transfer of a credit balance in the debtor’s ledger to the creditors ledger

 Correction of errors
2

1.5.3 Provide TWO possible reasons for the debit of R300 in the Debtors Control
account.
Any two valid answers  

 Refund to a debtor who over paid

 A dishonoured cheque 4

Total Marks

46

7
ACTIVITY 1

The information below relates to Buhle Traders for October 2020.

REQUIRED:
1.1 Explain why the Creditors Control account balance and the Creditors list total should
be equal.

1.2 Refer to the Creditors Control Account (Information A) and Information C:

Show the corrections to the Creditors Control account by completing the table
provided. Use only positive figures in either the debit or credit column.
Calculate the correct Creditors Control balance on 31 October 2020.
1.3 Refer to Information B and C:
Prepare the correct Creditors List on 31 October 2020.
Show all workings next to the appropriate Creditor.

1.4 Buhle wants to improve the management of his creditors. Provide TWO internal
control measures that he can use to achieve his goal.

INFORMATION:

A. The Creditors’ Control account before taking into account Information C:

GENERAL LEDGER OF BUHLE TRADERS

Dr CREDITORS CONTROL Cr
2020 Bank and discount 2020
Oct 31 CPJ 62 910 Oct
1 Balance b/d 48 735
received
Total returns and Credit
CAJ 3 510 31 CJ 72 480
allowances purchases
Journal debits GJ 2 250 Journal credits GJ 1 450

B. The incorrect Creditors' list on 31 October 2020:

CREDITORS DEBIT CREDIT

Green Stores 14 255
Becker Ltd 13 505
Suns Warehouse 5 685
Lamb Suppliers 8 940
Brown Stores 1 315
ZZ Distributors 2 120
Best Bakery 9 615

8
C. ADDITIONAL INFORMATION

(i) The total in the Creditors Journal was under-stated by R2 000.

(ii) Due to a calculation error, the balance of Becker Ltd’s creditor’s ledger account
was reflected as R13 505 instead of R23 505.

(iii) An invoice for goods bought from Suns Warehouse, R895, was recorded in the
Creditors' Journal as R985, and posted as such.

(iv) A debit note of R960 was issued to Suns Warehouse for goods returned to them.
They did accept the returns but no entry was made in the books of Buhle Traders
for this transaction.

(v) An invoice for R1 460 received from Brown Stores and correctly recorded in the
journals, was incorrectly posted to the creditors ledger account of Lamb
Suppliers.

(vi) The Creditors’ Control column in the Cash Payments Journal included an amount
of R2 120 paid to ZZ Distributors for cash purchases.

(vii) Merchandise of R1 285 was returned to Best Bakery and correctly entered in the
Creditors’ Allowances Journal. However, it was posted to Best Bakery's account
in the Creditors’ Ledger as a purchase.

9
 ACTIVITY 2

The following information applies to Uzalo Traders on 30 June 2020. The debtors and creditors
control accounts were prepared by an inexperienced bookkeeper.

GENERAL LEDGER OF UZALO TRADERS

Dr. DEBTORS CONTROL ACCOUNT Cr.
2020 2020
Jun 01 Balance b/d 22 880 Jun 30 Bank (R/D) CPJ 176
30 Creditors Bank (Repayment to
Allowances CAJ 1 540 debtors) CPJ 88

Cash Sales CRJ 44 000 Sales DJ 115 000

Bad debts GJ 440 Balance c/d 58 476

Bank (debtors
column) CRJ 103 400

Sales Returns DAJ 1 980

174 240 174 240

2020
Jul 01 Balance b/d 58 476

Dr. CREDITORS CONTROL Cr.

2020 2020
Jun 30 Purchases CJ 101 280 Jun 01 Balance c/d 24 000
30
Journal debits GJ 408 Discount column CRJ 960
Bank (Creditors
Balance c/d 37 992 column) CPJ 99 120

Purchases CPJ 15 600

139 680 139 680

2020
Jul 01 Balance b/d 37 992

ADDITIONAL INFORMATION:

On 30 June 2020 the total of the list of debtors was R33 132 and the total of the list of creditors
R24 026. Accept that the opening balances of the control accounts were correct. In addition to
the obvious errors made by the bookkeeper in the control accounts above, an investigation
brought the following to light:

1. The creditors journal was overcast by R240.

2. An amount of R206 in the creditors journal was posted to the account of Bongani Suppliers
as R260 by mistake.

3. Transfer a credit balance of R40 on the account of G Gugu in the debtors ledger to her
account in the creditors ledger. (The bookkeeper had not done this yet).

10
4. A credit note for R110 was issued to F Fazlin in respect of merchandise returned by him,
but no entry has been made as yet.

5. Interest of R55 must still be charged on the overdue account of a debtor, S Shaun.

6. The receipts from debtors, R103 400 in the CRJ, included an amount of R44, recovered
from a debtor, R Rai, whose account had been written off as a bad debt during the previous
financial year. The error did not affect the debtors ledger however.

7. An entry in respect of sales returns of R132 was made correctly in the

debtors allowance journal, but posted to the debit side of the account of debtor L Lucas by
mistake.

11
7. SALARIES AND WAGES

DIFFERENCE BETWEEN SALARIES AND WAGES

SALARIES WAGES
 Paid monthly, funds are transferred to the  Paid weekly, funds are transferred to :
employer’s bank account. o The employee’s bank account
o The employee can be paid in cash or
online using e wallet.
 The fixed salary is negotiated before the  The rate is negotiated before the employee
employee starts his job. starts his job and the following rates are
applicable :
o Hourly rate – paid for each worked
o Piece work rate – worker is paid according
to number of units produced.
 Usually there in no pay for overtime, but  Overtime is calculated added to the gross
employees can receive incentive bonuses, wage.
housing subsidies or medical or car
allowance.

Definition of Concepts for salaries and wages

Concept Definition
Employer A person or an institution that provides employment to others and pays
them for services rendered.
Employee A person employed by the employer and paid for services rendered

Clock card  A clock-card system is used to calculate the number of hours

worked.
 Each employee is given a card which is inserted into a clock card
machine at the start and end of each working day.

Payslip/salary advice A “payslip” is given to each employee, it reflects gross wage

(salary), deductions and net wage (net salary).
Rate of remuneration Calculate an amount per hour/week at which an employee will be
remunerated, e.g. at a rate of R20 per hour.

Gross wage It is the basic wage plus other payments such as overtime.

Net wage Gross wage less deductions

Gross salary It is the basic salary plus other payments such as bonuses.

Net salary Gross salary less deductions.

Bonus /  An employee can also receive a thirteenth cheque or bonus.

13th cheque  The employer determines the bonus and it is usually calculated at a
percentage.

12
Contract of employment

It is a contract between the employer and employee it include:

o Personal information of employee o Annual leave and sick leave

(name, ID number, home address)
o Commencement date o Salary scale
o Job title o Contributions (pension fund, medical aid , etc)
o Job description o Other allowances
o Working hours o Signature of employer and employee

Records to be kept by employer

Detailed records of each employee must be kept by the employer and they include :
o Records of work done (attendance registers, clock cards)
o Records of the calculation of gross and net pay
o Amount of tax deducted
o Employment contract

Employer has to register with the following institutions:

South African Revenue

Services (SARS)  To pay SITE, PAYE, UIF and Skills Development Levy (SDL)

 Regulate the South African labour market.

Department of Labour  Ensure that working environment is not harmful to the health and
well-being of those in the workplace.

DEDUCTIONS

PAYE  This tax is paid by the employee to the South African Revenue
Pay As You Earn Services (SARS) and is calculated according to tax tables that
are issued by SARS.
 The more he earns, the higher the tax rate.
Trade unions  A monthly contribution by employees to their respective unions
(Employers do not contribute towards this fund)
Staff association  Association of employees that is formed to function as trade
unions it represents their members in discussions with the
management.
 The associations aims at improving social engagement amongst
employees and at their professional growth or advancement.
(Employers do not usually contribute towards this fund)
Pension Fund  A pension plan is a retirement plan in which an employer, and
often the employees, make contributions into a pool of funds set
aside for the workers' future benefit.
Unemployment Insurance Fund  Compulsory deduction of 1% from the employees’
(UIF) remuneration.
Medical Aid Fund  Members belonging to a Medical Aid Fund make contributions
to the Fund and in return receive medical cover according to
the rules of the Fund

13
Contributions made by the employers :

Unemployment
Insurance Fund (UIF)
 The employer’s compulsory UIF, percentage contribution is currently
1% of gross salary.
 It is payable to SARS by the employer
(1% deducted from employee and 1% contributed by employer)
Medical Aid Fund
Contribution  The employer’s contribution to the Medical Aid fund according to the
employer’s policy.
 It is a compulsory scheme to develop the skills of the work force.. It
encourages employers to train their staff.
Skills Development Levy
(SDL)  SDL is payable to SARS and is kept in a special fund.
(Only the employer contributes towards this fund – not
employees)

SALARY SCALES
 It shows the starting salary (notch) of the employee, annual increment and the future notch.
 The employee can see what his future increment and notches will be.

EXAMPLE 1 - SALARY SCALES.

Salary scale of H Kok

Notch: R80 000 X R3 000 – R92 000 X R4 500 – R105 500

EXPLANATION
Year 1 start with R80 000
Year 2 + R3 000 = R83 000
Year 3 + R3 000 = R86 000 R3 000 increase p.a. until R92 000 p.a. is reached
Year 4 + R3 000 = R89 000
Year 5 + R3 000 = R 92 000
Year 6 + R4 500 = R96 500
Year 7 + R4 500 = R101 000 R4 500 increase p.a. until R105 500 p.a. is reached
Year 8 + R4 500 = R105 500

ACTIVITY 1

Mogashoa Traders employed P Oka on 1 January 2016.

The following annual scale was agreed upon:
180 000 x 12 000 – 204 000 x 18 000 – 240 000

REQUIRED
Complete the following table:

Year Annual increase Annual salary Monthly salary

2016
2017
2018
2019
2020

14
EXAMPLE 2
REQUIRED
Use the information to draw up the Wages Journal of Kgatle Traders for the week ended 9 April
2021.

INFORMATION

 Kgatle Traders has a working week of 40 hours. Workers who work for more than 40 hours per
week are paid overtime at a rate of 1, 5 times the ordinary rate for the excess hours worked.

 The basic rate for all workers is R20 per hour.

 The employees worked as follows for the week ended 9 April 2021.
J Bronkhorst 46 hours
B Mpanza 35 hours
M.Qaka 43 hours

Deductions for the week ended 9 April 2021:

A. PAYE
20% of gross wage

B. Pension Fund
8% of the amount for normal time. Kgatle Traders contributes R1, 50 for each R1
contributed by the employees to Sizwe Pension Fund.

C. Medical Aid
Members pay R50 per week towards DOS Medical Aid Fund. Kgatle Traders contributes to
the medical aid on a Rand for Rand basis.

D. UIF
A deduction of 1% of normal wage is made by each employee and the business contributes
the same amount.

E. Trade union
All the employees are members of CTU trade union and R15 is deducted each week from all
employees.

15
 WAGES JOURNAL OF KGATLE TRADERS FOR THE WEEK ENDING 9 APRIL 2021
Normal time Overtime Deductions Employer’s contribution
Employee Gross Pen- Medi- Net Pen- Medi-
Hrs Amount Hrs Amount wage sion PAYE cal aid UIF Union Total wage sion cal aid UIF
J Bronkhorst 40 800 6 180 980 64 196 50 8 15 333 647 96 50 8
B Mpanza 35 700 0 0 700 56 140 50 7 15 268 432 84 50 7
M.Qaka 40 800 3 90 890 64 178 50 8 15 315 575 96 50 8
2300 270 2570 184 514 150 23 45 916 1654 276 150 23
Overtime hours are multiplied by R30 (R20 X1.5)

This amount is Pension deduction x1.5

payable to = Pension contribution
employees 64 x 1.5 =96
The maximum norm time 40 hours
GENERAL LEDGER OF KGATLE TRADERS- 30 APRIL 2021

BALANCE SHEET SECTION

Pension Fund
Apr 30 Bank CPJ Total pension Apr 9 Wages WJ 184
of all the weeks Pension fund WJ 276
contribution

Medical Aid Fund

Apr 30 Bank CPJ Total medical Apr 9 Wages WJ 5 790
of all the weeks Medical aid fund WJ 2 700
contribution
8 490

SARS (UIF)
Apr 30 Bank CPJ Total UIF of all Apr 9 Wages WJ 23
the weeks

SARS (SDL)
Apr 30 Bank CPJ Total SDL of Apr 9 SDL contribution WJ1 No SDL in
all the weeks this activity

SARS (PAYE)
Apr 30 Bank CPJ Total PAYE of Apr 9 Wages WJ1 514
all the weeks

Creditors for wages

Apr 30 Bank CPJ Total PAYE of Apr 9 Wages WJ1 1 654
all the weeks
NOMINAL ACCOUNTS SECTION

Wages
Apr 9 Sundry WJ1 2 570
Accounts

Pension Fund Contribution

Apr 9 Pension Fund WJ1 276

Medical Aid Contribution

Apr 9 Medical Aid WJ1 150
Fund

Unemployment Insurance Fund contribution

Apr 9 UIF WJ1 23

Skill Development Levy Contribution

Apr 9 SDL WJ1 xxx

18
EXAMPLE 3
VAN NIEKERK TRADERS
REQUIRED
Use the information in the Salary Journal provided.

 Transfer funds electronically on 28 February 2021 to settle the outstanding amounts.

 Record the amounts in the Cash Payment Journal.

INFORMATION

SALARY JOURNAL OF VAN NIEKERK TRADERS FOR FEBRUARY 2021 SJ11

Gross Deductions
Employee salary Pension PAYE Medical UIF Total Net salary
Fund aid
L Lindon 11 400 570 3 898,80 1 930 114 6512,80 4887,20
V Valley 17 100 855 5 848,20 1 930 171 8804,20 8295,80
K Kruger 12 800 640 4 377,60 1 930 128 7075,60 5724,40
41 300 2 065 14124,60 5 790 413 22392,60 18907,40

Employer’s contributions
Medical aid
Fund Pension fund UIF SDL Total
900 570 114 114 1698
900 855 171 171 2097
900 640 128 128 1796
2700 2065 413 413 5591

ANSWER

CASH PAYMENT JOURNAL OF VAN NIEKERK TRADERS FOR FEBRUARY 2021

Doc day Name of payee f Bank Sundry accounts
Amount f Details
EFT 28 AA Pension Fund 4 130 4 130 AA Pension Fund
EFT MM Medical Aid 8 490 8 490 MM Medical Aid Fund
Fund
EFT SARS 15 363,60 826 SARS (UIF)
EFT UIF+SDL+PAYE 413 SARS (SDL)
EFT 14 124, 60 SARS (PAYE)
EFT Sundry employees 18 907,40 18 907,40 Creditors for salaries

CALCULATIONS

AA Pension Fund = R2 065 + R 2 065 = R4 130 Payable to SARS

PAYE
MM Medical Aid Fund = R5 790 + R2 700 = R8 490
UIF
UIF = R413 + R413 = R826
SDL
19
ACTIVITY 2

KOK TRADERS

Use the following information to prepare the salaries journal of Kok Traders for February 2021.

INFORMATION

Gross salaries per year: The following deductions were made:

B.Mpanza R136 800 Pension fund 5% of gross salary

Mahomed R205 200 PAYE 36% of gross salary after pension

fund has been deducted
N.Naidoo R153 600 Medical Aid R1 930 per month
fund
UIF 1% of gross salary

The following contributions were made by KokTraders

Pension fund Rand-for-rand basis
Medical aid fund contributes R900 for each employee
UIF 1% of gross salary
SDL 1% of gross salary

20
QUESTION 3: CONCEPTS, SALARIES AND WAGES AND ETHICS
(21 marks; 13 minutes)
3.1 CONCEPTS
Indicate whether the following statements are TRUE or FALSE.
3.1.1 The acronym SDL stands for Skills Development Levy.
3.1.2 SDL is paid by employers whose payroll exceeds R300 000.
3.1.3 UIF is normally 1% of the net salaries.
3.1.4 Net salaries are also known as creditors for salaries.
3.1.5 PAYE must be paid over to the Treasury.

3.2 SALARIES AND WAGES

You are provided with information extracted (taken) from the Wages Journal and
Salaries Journal of Ndebele Dealers for May 2021.They have employees that are
paid weekly and monthly.
REQUIRED

3.2 (10)
Calculate the missing amounts in the Wages and Salaries Journal for May 2021.

3.3 Answer the following questions:

Provide the double entry for the Pension Contributions in the Wages
3.3.1 (2)
Journal.
The net salary calculated in 3.2.5 of the Salaries Journal would be posted to
3.3.2 (1)
Salaries Account in the ledger and which other account?
The owner Mr Thomas Ndebele decided that he would not pay the money over for (3)
3.4
PAYE this month as he needed the cash, he will make a double payment the next
month. Why are you against the decision he took? Provide consequences (result)
for this action in ONE point.

INFORMATION A

WAGES JOURNALS OF NDEBELE DEALERS FOR MAY 2021

Week Gross DEDUCTIONS Net EMPLOYERS CONTRIBUTIONS

ended Wage Wage
Pension Medical UIF PAYE Total Pension Medical UIF SDL
Fund Aid Fund Aid
Fund Fund

21 May R2 874 R160 R240 R28.74 R809 3.2.1 3.2.2 R320 R240 3.2.3 R28.74
2021

28 May R3 078 R164 R240 R30.78 R882 R320 R240 R30.78

2021

21
INFORMATION B

SALARIES JOURNAL OF NDEBELE DEALERS FOR THE MONTH ENDED 31 MAY 2021
Gross DEDUCTIONS Net CONTRIBUTIONS
Salary Salary
Pension Medical PAYE UIF Total Pension Medical UIF SDL
Fund Aid Fund Aid

Fund Fund

R21 110 R1 480 R1 450 3.2.4 R2 111 R13 261 3.2.5 R2 960 R2 175 R2 111 3.2.6

INFORMATION C
 The employer contributes on a rand for rand basis towards UIF.
 The employer contributes 1% of gross salaries towards the SDL.

Total marks
21

22
8. CONCEPTS AND CASH TRANSACTIONS

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 Post to
for the 12 months. 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 Post to
expense accounts and are applicable for a specific financial year. the ledger
They are all closed off at the end of the financial year.

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 It is drawn up to calculate the
gross profit net profit
Subtract the cost of sales from the sales. 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)

23
EXAMPLE 1:BAD DEBTS

REQUIRED
1 Show the following transaction in the General Ledger and General Journal
2 Show the effect on the accounting

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2021

Debtors control 100 000
Bad debts 500

Adjustment
 The debt of S Smit, R200 must still be written off as irrecoverable.

ANSWER

GENERAL LEDGER OF ZIZI TRADERS

Debtors Control
Feb 28 Balance b/d 100 000 Feb 28 Journal credits / 200
Bad debts

Bad Debts

Feb 28 Total b/d 500

S Smit / Debtors 200

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Bad debts 200
S Smit (Debtors control) 200
Write off the account of S Smit as irrecoverable

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Bad debts Debtors control -200 -200

24
EXAMPLE 2 :BAD DEBTS RECOVERED
REQUIRED
1 Show the following transaction in the General Ledger
2 Show the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2021

Debtors control 100 000
Bank 7 000
Bad debts 500

ADJUSTMENT

An amount of R250 was received on 27 February from B Baloyi, a debtor whose debt had previously been
written off. The transaction has not yet been recorded.

ANSWER
GENERAL LEDGER OF ZIZI TRADERS

Bank
Feb 28 Balance b/d 7 000
Bad debt 250
recovered

Debtors Control
Feb 28 Balance b/d 100 000

Bad Debts
Feb 28 Balance b/d 500

Bad Debts Recovered

Bank 250

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Bank Bad debt recovered +250 +250

The Bad debt account and Debtors Control account are not affected by the transaction – the
debt of the debtor has already been written of.

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TRADING STOCK DEFICIT AND TRADING STOCK SURPLUS

 The business making use of the perpetual (or continuous) inventory system, keeps an ongoing (continuous)
record of all stock items purchased and sold.
 Therefore, the balance of the Trading stock account at the end of the financial year represents the cost
price of the trading stock on hand.

An example of a Trading Stock account

Opening balance
TRADING STOCK
Mar 1 Balance b/d 300 000 Mar 31 Drawings GJ 10 000
31 Bank CPJ 10 000 Cost of sales DJ 50 000
Creditors control CJ 20 000 Creditors control CAJ 3 000
Cost of sales DAJ 2 000 Cost of sales CRJ 30 000
Balance c/d 239 000
332 000 332 000
Apr 1 Balance c/d 239 000 Closing balance

 Our stock on hand on 31 March according to records is R239 000

 The business should conduct physical stock count to verify if the actual stock agrees with the balance
reflected in the trading stock account.

Stock Deficit
When the physical count is less than the physical count, the shortage is called a deficit and it is a loss to the
business.

Possible reasons for a deficit :

 errors made during the year (like incorrect mark-ups)
 theft of stock
 damage / broken stock
 stock destroyed
 errors in stock-taking

Stock surplus
When the physical count is more than the physical count, the surplus in stock will be regarded as income
Possible reasons for a surplus :

 errors made during the year ( incorrect mark-ups)

 errors in stock-taking
 omissions of stock purchases in the Trading stock account

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EXAMPLE 3 :TRADING STOCK DEFICIT

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 2021

Trading stock 63 800

Adjustment
No entry has been made for an invoice received from Ntini Stores for goods purchased on credit, R1 080.
Physical count showed stock for R63 000.

SOLUTION

Trading Stock
Feb 28 Balance b/d 63 800 Feb 28 Trading stock deficit ?? 1 880
Creditors control 1 080 Balance c/c 63 000
64 880 64 880
Mar 1 Balance c/c 63 000

Trading Stock Deficit

Feb 28 Trading stock 1 880

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Trading stock
Ntini Stores / Creditors control
Goods purchased on credit

Trading stock deficit

Trading stock
Trading stock deficit as per stock count

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Trading stock Creditors control +1080 +1080
Trading stock deficit Trading stock - 1880 - 1880

27
EXAMPLE 4:TRADING STOCK SURPLUS

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 2021

Trading stock 63 800

ADJUSTMENT
A credit note received from creditor B Baloyi Stores for goods returned, R700 has not yet been entered.
Physical count showed stock for R64 000.

ANSWER

Trading Stock
Feb 28 Balance b/d 63 800 Feb 28 Creditors control 700
Trading stock surplus Balance c/d 64 000
(unknown amount ) ?? 900 (given)
64 700 64 700
Mar 1 Balance b/d 64 000

Trading Stock Surplus

Feb 28 Trading stock 900

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
B Baloyi Stores / Creditors control 700
Trading stock 700
Credit note for goods returned to creditor

Trading stock 900

Trading stock surplus 900
Trading stock surplus as per stock count

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Creditors control Trading stock - 700 - 700
Trading stock Trading stock surplus + 900 + 900

28
CONSUMABLE STORES ON HAND

 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 the trial balance will indicate total expenditure for the financial year for
stationery, packing material and consumables.

 At the end of financial period when the stock count is conducted, the consumables that 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.

EXAMPLE 5

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 2021

Packing material 1 960

ADJUSTMENT
Physical stock count showed packing material of R180 on hand.

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ANSWER

1 Show the transaction in the General Ledger and General Journal

GENERAL LEDGER OF ZIZI TRADERS

Expense account
Packing Material
Feb 28 Balance b/d 1 960 Feb 28 Consumable stores 180
on hand
Profit and loss acc ***1 780
1 960 1 960

Balance sheet account (Asset )

Consumable Stores on Hand
Feb 28 Packing material 180

Profit and Loss

Packing material ***1 780
amount packing material
USED

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Consumable stores on hand 180
Packing material 180
Packing material on hand as per stock count

2 Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Consumable stores on hand Packing material +180 +180 0

3 Show how these accounts will appear in the Financial statements

NOTE 4 - INVENTORIES
Trading stock xxx
Consumables stores on hand 180

30
CAPITALISED INTEREST ON LOAN
LOAN FROM BANK
 When the bank grants a loan to the business, the interest rate and monthly repayments are
agreed upon.

When the loan amount is received:

Debit - Bank account (Cash Receipt Journal) Assets increase

Credit - Loan account Liabilities increase

Interest
 The bank calculates monthly interest, which is added directly to the loan account - that is called
the “capitalization of interest”
 Interest on a loan is a finance cost – therefore an expense for the business.
Monthly instalments
 The monthly instalments include the capital repayments and the interest.
When monthly loan repayments are made:

Debit - Loan account Liabilities decrease

Credit - Bank account (Cash Payment Journal) Asset decrease

Financial year-end
 At the end of the financial year, the loan statement is received from the bank. This statement
shows the capital amount of the loan, the repayments made during the year and the monthly
interest charged by the bank.
 Some of the banks can arrange to send the statement every three months or a period less than a
year which is regarded as suitable for the client or loan account holder.

Procedure for determining and recording the amount of interest

 Reconcile the Loan account in the General ledger with the Loan statement received from the
bank.
 Recording of interest in the General Journal as follows:
Debit - Interest on loan Expense increases – Equity decrease
Credit - Loan account Liabilities increase

31
EXAMPLE 6
Zizi Traders received a loan on 1 March 2020 from ABC Bank for R200 000 at an interest rate of
10% p.a.
The loan repayments amount to R5 000 per month payable on the 30th of each month, starting 31
March 2020.

Loan statement received from ABC Bank on 28 February 2021.

ABC BANK
Loan statement of ZIZI TRADERS for the period 1 March 2011 to 28 February 2021
DATE DEBIT CREDIT BALANCE
01/03/2020 Balance 240 000
31/03/2020 Interest 2 000 238 000
Deposit 5 000 233 000
30/04/2020 Interest 1 942 234 942
Deposit 5 000 229 942
30/05/2020 Interest 1 916 231 858
Deposit 5 000 226 858
30/06/2020 Interest 1 890 228 748
Deposit 5 000 223 748
30/07/2020 Interest 1 865 225 613
Deposit 5 000 220 613
30/08/2020 Interest 1 838 222 451
Deposit 5 000 217 451
30/09/2020 Interest 1 812 219 263
Deposit 5 000 214 263
30/10/2020 Interest 1 786 216 049
Deposit 5 000 211 049
30/11/2020 Interest 1 759 212 808
Deposit 5 000 207 808
30/12/2020 Interest 1 732 209 540
Deposit 5 000 204 540
31/01./2021 Interest 1 705 206 245
Deposit 5 000 201 245
28/02/2021 Interest 1 677 202 922
Deposit 5 000 197 922

INFORMATION
Information from the Trial balance of Zizi Traders
Trial balance on 28 February 2021
Debit Credit
Loan: ABC Bank 180 000

ADJUSTMENT
Determine the amount of interest paid on the loan from ABC Bank. The loan statement from the
bank showed a closing balance of R197 922 on 28 February 2021. Zizi Traders made monthly
repayments of R5 000 each.

32
 CALCULATIONS

LOAN: ABC BANK

Bank
Feb 28 (12 x R5 000) 60 000 Mar 1 Balance b/d 240 000
Balance c/d 197 922 Interest on loan 17 922
257 922 257 922
Balance c/d 197 922

INTEREST ON LOAN
Feb 28 Loan: ABC 17 922 Feb 28 Profit & loss 17 922
Bank

OR

240 000 -60 000 0R (5 000x12) =180 000

LOAN: ABC BANK

Balance c/d 197 922 Mar 1 Balance b/d 180 000
Interest on loan 17 922
197 922 197 922
Balance c/d 197 922

INTEREST ON LOAN
Feb 28 Loan: ABC Bank 17 922 Feb 28 Profit & loss 17 922
Closing transfer

PROFIT AND LOSS

Interest on loan 17 922

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Interest on loan 17 922
Loan: ABC Bank 17 922
Interest on loan brought into account

33