ACCOUNTING GRADE 10 2020 REVISED ATP SOLE TRADERS

ACCOUNTING GRADE 10 2020 REVISED ATP SOLE TRADERS ANALYSIS OF ADJUSTMENTS AND POST ADJUSTMENT TRIAL BALANCE (NOTES & WORKED EXAMPLES)

CHARACTERISTICS OF FINANCIAL STATEMENTS Timeliness information is available to decisionmakers in time to be capable of influencing their decisions Understandability presenting information clearly and concisely Faithful representation completeness, neutrality and freedom from error Relevance must have both a predictive value and confirmatory value Comparability can be compared with a similar information about other entities and with similar information about the same entity for another period or another date Verifiability observers looking at the data will reach have the same consensus

PRINCIPLES OF GAAP Business entity principle Business and owner separate entities Historical cost principle Assets valued at original cost Going-concern principle Business to continue foreseeable future

Matching principle Prudence Principle Materiality Principle Income and expenses allocated to correct time period Financial results Reflected on Conservative bases Irrelevant information not highlighted

INSTRUCTIONS YOU ARE PROVIDED WITH THE PRE-ADJUSTMENT TRIAL BALANCE AND LIST OF INDIVIDUALLY WORKED AND EXPLAINED ADJUSTMENTS YOU ARE REQUIRED TO FAMILIARIZE YOURSELF WITH THE ADJUSTMENTS AND WORKINGS NOTE: EACH ADJUSTMENT HAS IMPACT ON DIFFERENT ACCOUNTING BOOKS

THE FOLLOWING INFORMATION HAS BEEN TAKEN FROM NODADA TRADERS FOR THE YEAR ENDED 28 FEBRUARY 2019. PRE- ADJUSTED TRIAL BALANCE ON 28 FEBRUARY 2019 Balance Sheet account section Capital Drawings Land Building Vehicles (at cost) Accumulated depreciation on vehicles Equipment Accumulated depreciation on equipment Fixed Deposit: E. C. Bank Trading stock Debtors control Bank Loan: E. C. Bank Creditors control Nominal accounts section Sales Cost of sales Debtors Allowances Discount allowed Bad debts Discount received Telephone Interest on fixed deposit Insurance Rent Income Salaries Stationery Bank charges Debit Credit B 1 B 2 B 3 B 4 B 5 B B 7 19 600 1 006 000 240 000 60 000 963 000 80 000 36 000 B 8 B 9 B 10 B 11 B 12 B 13 N 1 N 2 N 3 N 4 N 5 N 6 N 7 N 8 N 9 N 10 N 11 N 12 N 13 50 000 29 900 18 000 235 000 440 000 2 000 600 1 200 2 800 3 400 72 000 1 400 2 500 2 184 400 ? 26 000 880 000 900 3 000 110 500 2 184 400

ADJUSTMENTS 1 Trading stock Deficit The physical stocktaking of trading stock on 28 February 2019 is R 28 500 R 29 900 – R 28 500 = R 1 400 Amount to be calculated: Amount from Trial Balance OR TB + Purchases – Returns to Creditors + Returns from Debtors (cost price) ACCOUNT DEBIT ACCOUNT CREDIT Trading Stock Deficit Trading Stock

GENERAL JOURNAL OF NODADA TRADERS FOR FEBRUARY 2019 Doc D 1 28 Details Trading stock deficit taken into account Fol N 14 B 9 GJ Debit 1 400 Credit 1 400 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION 2019 Feb 28 Balance 2019 Mar 1 Balance TRADING STOCK 2019 b/d 29 900 Feb 28 Trading stock deficit Balance 29 900 b/d 28 500 B 9 GJ c/d 1 400 28 500 29 900

NOMINAL ACCOUNTS SECTION 2019 Feb 28 TRADING ACCOUNT DEFICIT 2019 Trading stock GJ 1 400 Feb 28 Profit and loss N 14 GJ 1 400 GENERAL JOURNAL OF NODADA TRADERS FOR FEBRUARY 2019 2 Profit and loss account Trading stock deficit Closing transfer F 2 N 14 GJ 1 400 EFFECT ON ACCOUNTING EQUATION Journal Source Account debit Document GJ Journal Trading stock voucher deficit Account credit Trading stock A = E + L - - 0

ADJUSTMENTS 2 Consumable stores on hand The physical stocktaking of stationery on 28 February 2019 is R 500 ACCOUNT DEBIT ACCOUNT CREDIT Consumable Stores on hand Stationery

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 3 28 Details Consumable stores on hand Stationery on hand Fol B 14 N 12 Debit Credit 500 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION 2019 Feb 28 CONSUMABLE STORES ON HAND Stationery GJ 500 B 14 500

NOMINAL ACCOUNTS SECTION 2019 Feb 28 Total STATIONERY b/d 1 400 2019 Consumable Feb 28 stores on Hand Profit and loss 1 400 N 12 GJ 500 GJ 900 1400 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 4 Profit and loss Stationery Closing transfer F 2 N 12 900 EFFECT ON ACCOUNTING EQUATION Journal Source Document GJ Journal voucher Account debit Account credit Consumable stores on hand Stationery A = E + L + + 0

ADJUSTMENTS 3 ACCOUNT DEBIT ACCOUNT CREDIT Depreciation Accumulated Depreciation on vehicles

ADJUSTMENTS 3 CONTINUED ACCOUNT DEBIT Depreciation ACCOUNT CREDIT Accumulated depreciation on Equipment

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D Details Fol Debit 5 28 Depreciation N 15 28 000 Accumulated depreciation on B 5 vehicles Accumulated depreciation on B 7 equipment Depreciation on vehicles at 10% p. a. diminishing balance method Depreciation on equipment at 20% p. a. on cost GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION ACCUMULATED DEPRECIATION ON VEHICLE 2019 Feb 28 Balance Depreciation B 5 b/d GJ Credit 16 000 12 000 80 000 16 000 96 000

ACCUMULATED DEPRECIATION ON EQUIPMENT 2019 Feb 28 Balance Depreciation B 7 b/d GJ 36 000 12 000 48 000 NOMINAL ACCOUNTS SECTION 2019 Accumulated Feb 28 depreciation on vehicles Accumulated depreciation on equipment DEPRECIATION 2019 Feb 28 Profit and loss GJ 16 000 GJ 12 000 N 156 GJ 28 000 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 6 Profit and loss Depreciation Closing transfer F 2 N 15 28 000

EFFECT ON ACCOUNTING EQUATION Journal GJ GJ Source Account debit Document Journal Depreciation voucher Journal voucher Depreciation Account credit Accumulated depreciation on vehicles Accumulated depreciation on equipment A = E + L - - 0

ADJUSTMENTS 4 ACCOUNT DEBIT ACCOUNT CREDIT Bad Debts Debtors Control

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D Details Fol 7 28 Bad debts N 5 N. Mfondolo D 7 Write off debts as irrecoverable Debit Credit Debtors Control Debit Credit 200 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION DEBTORS CONTROL 2019 Feb 28 Balance b/d 18 000 Feb 28 Journal Credits Balance 18 000 2019 Mar 1 Balance b/d 17 800 B 10 GJ c/d 200 17 800 18 000

2019 Feb 28 Total NOMINAL ACCOUNTS SECTION BAD DEBTS N 5 2019 b/d 1 200 Feb 28 Profit and loss GJ 1 400 Debtors Control / N. Mfondolo GJ 200 1 400 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 8 Profit and loss Bad debts Closing transfer F 2 N 5 1 400 EFFECT ON ACCOUNTING EQUATION Journal Source Account debit Account credit Document GJ Journal Bad debts Debtors Control voucher 1 400 A = E + L - - 0

ADJUSTMENTS 5 Bad debts recovered Debtor, T. Integrity, deposited R 600 directly into bank account. It was discovered that his account was written off as bad debts. Receipt 650 was issued. R 600 ACCOUNT DEBIT ACCOUNT CREDIT Bank Bad Debts Recovered

CASH RECEIPTS JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 Doc 650 D Details Fol. 28 T. Integrity Bank Amount 600 CRJ Sundry accounts Fol. Details N 16 Bad debts recovered GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION BANK 2019 Feb 28 Balance b/d Total Receipts CRJ 269 600 270 200 B 11

2019 Feb 28 NOMINAL ACCOUNTS SECTION BAD DEBTS RECOVERED N 16 2019 Profit and loss GJ 600 Feb 28 Bank CRJ 600 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 9 Details Bad debts recovered Profit and loss Closing transfer Fol N 16 F 2 Debit Credit 600 EFFECT ON ACCOUNTING EQUATION Journal Source Document CRJ Receipt Account debit Account credit Bank Bad debts recovered A = E + L + + 0

ADJUSTMENTS 6 Correction of error Repairs to the building, R 6 000 was erroneously debited to the land building account. R 6 000 ACCOUNT DEBIT ACCOUNT CREDIT Repairs to building Land Building

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 10 28 Details Repairs to building Land Building Correction of error Fol N 17 B 3 Debit 6 000 Credit 6 000 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION 2019 Feb 28 Balance 2019 Mar 1 Balance LAND BUILDINGS 2019 b/d 1 006 000 Feb 28 Repairs to building Balance 1 006 000 b/d 1 000 B 3 GJ 6 000 c/d 1 000 1 006 000

NOMINAL ACCOUNTS SECTION 2019 Feb 28 Land building REPAIRS TO BUILDING 2019 GJ 6 000 Feb 28 Profit and loss N 17 GJ 6 000 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 11 Profit and loss Repairs to building Closing transfer F 2 N 17 6 000 EFFECT ON ACCOUNTING EQUATION Journal GJ Source Document Journal voucher Account debit Account credit Repairs to building Land building A = E + L - - 0

ADJUSTMENTS 7 Amount from Trial Balance ACCOUNT DEBIT Accrued Income ACCOUNT CREDIT Interest on Fixed Deposit

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 10 28 Details Accrued Income Interest on fixed deposit is still receivable Fol B 15 N 8 Debit Credit 750 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION Accrued Income 2019 Interest on fixed Feb 28 deposit GJ 750 B 15

NOMINAL ACCOUNTS SECTION INTEREST ON FIXED DEPOSIT N 8 2019 Feb 28 Profit and loss GJ 3 750 Feb 28 Total b/d 3 000 Accrued GJ 750 Income 3 750 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 11 Interest on fixed deposit Profit and loss Closing transfer N 8 F 2 3 750 EFFECT ON ACCOUNTING EQUATION Journal GJ Source Document Journal voucher Account debit Account credit Accrued Income Interest on fixed deposit A = E + L + + 0

ADJUSTMENTS 8 Income received in advance The rent income was received for March 2019 R 110 500 ÷ 13 = R 8 500 ACCOUNT DEBIT ACCOUNT CREDIT Rent Income Received in Advance

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 10 28 Details Rent Income received in advance Rent income received for March 2019 Fol N 10 B 16 Debit 8 500 Credit 8 500 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION INCOME RECEIVED IN ADVANCE 2019 Feb 28 Rent income B 18 GJ 8 500

NOMINAL ACCOUNTS SECTION 2019 Income Feb 28 received in advance Profit and loss RENT INCOME 2019 GJ 8 500 Feb 28 N 10 b/d Total 110 500 102 000 110 500 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 11 Rent Income Profit and loss Closing transfer N 10 F 2 102 000 EFFECT ON ACCOUNTING EQUATION Journal GJ Source Document Journal voucher Account debit Account credit Rent Income Received in advance A = E + L 0 - +

ADJUSTMENTS 9 Prepaid Expense Included in the Insurance is an amount of R 1 440 paid for the period 1 June 2018 to 31 May 2019. R 1 440 ÷ 12 = R 120 X 3 = R 360 ACCOUNT DEBIT ACCOUNT CREDIT Expenses Prepared Insurance

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 12 28 Details Prepaid Expense Insurance paid in advance Fol B 17 N 9 Debit Credit 360 GENERAL LEDGER OF Nodada Traders BALANCE SHEET ACCOUNTS SECTION 2019 Feb 28 Insurance Prepaid Expense GJ 360 B 17

NOMINAL ACCOUNTS SECTION 2019 Feb 28 Total INSURANCE 2019 b/d 3 400 Feb 28 3 400 N 9 GJ Prepaid Expense Profit and loss GJ 360 3 040 3 400 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 13 Profit and loss Insurance Closing transfer F 2 N 9 3 040 EFFECT ON ACCOUNTING EQUATION Journal GJ Source Account debit Document Journal Prepaid Expense voucher Account credit A = E + L Insurance + + 0

ADJUSTMENTS 10 Accrued Expense The telephone account, R 400, for February is still outstanding R 400 ACCOUNT DEBIT ACCOUNT CREDIT Telephone Accrued Expense

GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 10 28 Details Telephone Accrued Expense Rent income received for March 2019 Fol N 6 B 18 Debit Credit 400 GENERAL LEDGER OF Nodada TRADERS BALANCE SHEET ACCOUNTS SECTION Accrued Expense 2019 Telephone Feb 28 B 18 GJ 400

2019 Total Feb 28 Accrued Expense NOMINAL ACCOUNTS SECTION TELEPHONE N 6 b/d 2 800 2019 Profit and GJ 3 200 Feb 28 loss GJ 400 3 200 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ 11 Profit and loss Telephone Closing transfer F 2 N 7 3 200 EFFECT ON ACCOUNTING EQUATION Journal Source Document GJ Journal voucher Account debit Account credit Telephone Expense Accrued A = E + L 0 - +

ADJUSTMENTS 11 Loan and Interest on loan Loan statement received from E. C. Bank reflected the following: R Balance at beginning of financial year 112 000 Repayments during the year, including interest Interest at 15% per year capitalised Balance at end of financial year 27 000 ? 100. 000 Calculate the interest on loan. The business is expected to pay R 18 000 of the loan the following year

ADJUSTMENTS 11 - CONTINUED DR LOAN: E. C. Bank DATE DETAILS F AMOUNT 2019 Feb 28 DATE DETAILS Bank 27 000 2018 Mar 01 Balance 2009 100 000 Feb 28 c/d CR F AMOUNT Balance 112 000 Interest on loan 15 000 127 000 R 127 000 – R 112 000 = R 15 000 ACCOUNT DEBIT Interest on loan 127 000 2019 Mar 01 Balance b/d 100 000 ACCOUNT CREDIT Loan: E. C. Bank

GENERAL JOURNAL OF Nodada Traders FOR FEBRUARY 2019 Doc Day Details 12 28 Interest on Loan: E. C. Bank Interest on loan taken into account Fol. N 18 B 12 GJ Debit 15 000 Credit 15 000 NOMINAL ACCOUNTS SECTION 201 9 Feb INTEREST ON LOAN 28 Loan: E. C. 2019 28 Profit and Bank GJ 15 000 Feb loss N 18 GJ GENERAL JOURNAL OF Nodada Traders FOR FEBRUARY 2019 13 Profit and loss Interest on loan Closing transfer 15 000 GJ F 2 N 18 EFFECT ON ACCOUNTING EQUATION Journal Source Account debit Account credit Document GJ Journal Interest on loan Loan: E. C. voucher Bank 15 000 A = E + L 0 - +

12 Transfer of Debtors allowances to Sales and closing transfers of sales and cost of sales GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc D 22 28 Details Sales Debtors Allowances Closing Transfer Fol N 1 N 3 Debit 2 000 Credit 2 000 GENERAL LEDGER OF Nodada TRADERS NOMINAL ACCOUNTS SECTION 2019 Debtors GJ Feb 28 allowances 2019 Feb 28 Total SALES 2 000 2019 Total Feb 28 DEBTORS ALLOWANCES 2019 b/d 2 000 Feb 28 Sales N 1 b/d 880 000 N 3 GJ 2 000

GENERAL LEDGER OF Nodada TRADERS NOMINAL ACCOUNTS SECTION SALES 2 000 2019 Total Feb 28 878 000 2019 Debtors GJ Feb 28 allowances Trading GJ Account 880 000 N 1 b/d 880 000 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc 23 D Details Sales Trading Account Closing Transfer Fol Debit 878 000 Credit 878 000

GENERAL LEDGER OF Nodada TRADERS NOMINAL ACCOUNTS SECTION 2019 Feb 28 Total COST OF SALES 2019 b/d 440 000 Feb 28 N 2 Trading Account GJ 440 000 GENERAL JOURNAL OF Nodada TRADERS FOR FEBRUARY 2019 GJ Doc 24 D Details Trading Account Cost of Sales Closing Transfer Fol Debit 440 000 Credit 440 000

Nodada TRADERS POST- ADJUSTED TRIAL BALANCE ON 28 FEBRUARY 2019 Balance Sheet account section Capital Drawings Land Building (1 006 000 – 6 000) Vehicles (at cost) Accumulated depreciation on vehicles (80 000 + 16 000) Equipment Accumulated depreciation on equipment (36 000 + 12 000) Fixed Deposit: E. C. Bank Trading stock (29 900 – 1 400) Debtors control (18 000 – 200) Bank (235 000 + 600) Loan: E. C. Bank (112 000 – 27 000 + 15 000) Creditors control Consumable Stores on hand Accrued Income received in advance Prepaid Expense Accrued Expense Debit 19 600 1 000 240 000 60 000 Credit 963 000 96 000 48 000 50 000 28 500 17 800 235 600 500 750 360 100 000 26 000 8 500 400

Nominal accounts section Sales Cost of sales Debtors Allowances Discount allowed Bad debts (1 200 + 200) Discount received Telephone (2 800 + 400) Interest on fixed deposit (3 000 + 750) Insurance (3 400 – 360) Rent Income (110 500 – 8 500) Salaries Stationery (2 500 – 500) Bank charges Trading stock deficit Depreciation (16 000 + 12 000) Bad debts recovered Repairs to building Interest on loan 440 000 2 000 600 1 400 3 200 3 040 72 000 900 2 500 1 400 28 000 6 000 15 000 2 229 150 880 000 900 3 750 102 000 600 2 229 150