QUESTION 1 [58]
During May 2020 the following transactions took place in Brickstone Traders:
Date:

1. Issue receipt number 401 to B Wilson for R3 700 in full settlement of his account of R4 042.
2. Cash purchases of inventory: Cheque number 701, R4 845.
3. Cash sales of inventory: R3 534, Issue receipt number 402.
4. Credit purchases of inventory from P Konig per invoice number ZZ12,
   R5 472.
5. The owner draws R912 cash from the bank account for private use, cheque number 702.
6. Issue the following invoices for inventory sold on credit:
   • P Botha number X301, R4 731.
   • C Briers number X302, R4 389.
7. Receive a loan from ABC Bank for R11 400 and deposit the amount in the bank account. Issue receipt number 403.
8. Pay for petrol per cheque number 703, R228.
9. Pay the insurance premium for the month per cheque number 704, R399.
10. Buy office furniture on account from Tables ( invoice number MM85), R3 876.
11. Pay salaries and wages per cheque number 705, R3 306.
12. Issue receipt number 404 to C Nel for rent of premises, R4 275.
13. Received a cheque of R513 from P Schultz, who’s account was written off as irrecoverable during 1994 and issue receipt number 405.
14. Returned damaged inventory to P Konig, R505. Receive credit note ZZ13.
15. P Botha is claiming a trade discount of 10% that we did not give to him. Issue a credit note XX402.

You are required to:

1. Record the above transactions in the appropriate Subsidiary journals.
   Calculate the column totals of each journal. 55/2 = MAX (27)
2. Open the general ledger accounts and post from the Subsidiary journal totals to the following General ledger accounts: (31)
   2.1) Bank account
   2.2) Trading account
   2.3) VAT control account
3. The following instructions must be taken into account:
   a) All appropriate transactions include VAT at 15%.
   b) The perpetual inventory system is being used.
   c) Sales are made at a constant mark-up of 25% on selling price
   d) Folio numbers are required in the General ledger.
   e) Totals are required on 31 May 2019.
   f) Round off to the nearest Rand.
   g) Properly balance off the General ledger accounts.
   h) Make use of the answer sheet provided.

QUESTION 2 [20]
Big Boy Traders uses the perpetual inventory system and maintains a constant mark-up of 25% on selling price. Amounts are inclusive of VAT of 15% where applicable.
The following transactions took place during March 2020:

1. Received R20 000, being a loan granted by ASTRA BANK at an interest rate of 12% p.a.
2. Sold the following on credit to S Maree:
   2 chairs @ R500 each, and
   1 table @ R1 500.
3. Received R3 000 from S Baloyi, a debtor, after allowing a discount of 5% for prompt payment.
4. Received an invoice from All-in-one-Store for :
   10 boxes of paper @ R100 each and
   10 boxes of milk @ R60 each for the staff canteen.
5. S Maree returned one the chairs, as the colour is not according to the sample.

You are required to:

1. Record the above transactions in the General journal of Big Boy Traders for March 2020. Narrations are required.

ROUND OFF ALL AMOUNTS TO THE NEAREST RAND.
QUESTION 3 [22]
The following information was obtained from the financial records of Corvid Traders on 30 June 2019:
GENERAL LEDGER OF CORVID TRADERS

DEBTORS CONTROL ACCOUNT
(Prepared by inexperienced bookkeeper)
June 1 Balance b/d 110 761 June30 Bank (refund to debtors) CPJ 138
30 Creditors allowance CAJ 2 405 Bank (R/D cheques) CPJ 275
Bank
(debtors column) CRJ 161 300 Credit sales DJ 105 000
Cash sales CRJ 68 640
Sales returns DAJ 3 080
Credit loss GJ 689 Balance c/d 241 462
346 875 346 875
July 1 Balance b/d

CREDITORS CONTROL ACCOUNT
(Prepared by inexperienced bookkeeper)
June30 Purchases CJ 156 612 June1 Balance b/d 37 156
Journal debits GJ 637 30 Cash purchases CPJ 24 336
Discount column CPJ 800
Balance c/d 59 665 Bank (creditors column) CPJ 154 622

        216 914             216 914             July 1  Balance b/d 59 665

Additional information:

1. On 30 June 2019 the total of the list of debtors was R51 830 and the total of the list of creditors, R37 415. Accept that the opening balances of the control accounts were correct.
2. In addition to the obvious errors made by the bookkeeper in the control accounts above, an investigation revealed the following:
   a) The creditors journal was under-cast by R1 000.
   b) An amount of R1 109 in the creditors journal was posted to the account of the creditor Alto Suppliers as R1 190 by mistake.
   c) A credit note, for R280 was issued to L Cronje in respect of merchandise returned by him. No entry has been made.
   d) A credit note for R200 received from a creditor, Good WorkX was recorded in the Creditors allowances journal, but posted as an invoice to his account in the creditors ledger.
   e) A sales invoice issued to M Boza for 3 280, was entered in the debtors journal as R2 380.
   f) Interest of R40 must be charged on the overdue account of a debtor, T Cloete.
   g) The receipts from debtors, R161 300, included an amount of R85, recovered from a debtor, L Matshaba, whose account had been written off as irrecoverable during the previous financial year. The error did not affect the debtors ledger.
   h) An entry in respect of sales returns of R320 was recorded correctly in the debtors allowance journal, but posted to the wrong side of the account of the debtor, L Colbe by mistake.
   i) A credit note received from Mandla Suppliers was entered twice in his account in the creditors ledger, R170.

You are required to:

1. Prepare the correct debtors and creditors control accounts and reconcile the accounts with the debtors and creditors lists.

Sample Solution