FAC 1502 Adjustments and Closing transfers ADJUSTMENTS The

FAC 1502 Adjustments and Closing transfers

ADJUSTMENTS • The life of an entity is divided into equal periods (financial periods), usually 12 months, and the profit or loss is determined for that period. • The closing off of accounts and the determination of the profit, are recorded under the above assumption. • This does not always happen and the accounts (and eventually statements) have sometimes to be adjusted to ``correct'' the balances in accounts before the final accounts and financial statements can be prepared.

ADJUSTMENTS (continued) �For more accurate financial statements at the end of a financial period, additional entries, which do not originate from source documents, may therefore be necessary. �These adjustment entries are necessary in order to comply with the accrual basis of accounting as well as the realisation principles.

GOLDEN RULE �One entry or ``leg'' of the adjustment journal always affects a nominal account and thereby the trading or profit or loss account. �The other entry or ``leg'' of the journal always affects a statement of financial position account.

5 Steps to effect adjustments Step 1: Identify the accounts that must be adjusted. Step 2: Determine how the accounts would be affected and what the balances of these accounts should be. Step 3: Calculate the amount(s) involved in the adjustment. Step 4: Record the necessary adjustments in the general journal and post the entries to the ledger(s) Step 5: Ensure that the new balances of the accounts are now correct.

Current financial year 30/6/2011 1/9/2010 1/7/2010 1/4/2010 1/1/2010 31/12/2010 Fin yr end Begin of fin yr Next financial year If eg. expenditure Profit or loss Payment in advance 31/12/2011 Adjustments

SHORT-TERM ADJUSTMENTS The apportionment of income and expenditure to consecutive periods within a year e. g. Income received in one period but which is earned in an earlier or a later period. The same applies to expenses which are incurred in another period: • Prepaid expenses • Accrued expenses • Consumable inventory adjustments • Income received in advance • Accrued income • Credit losses (Bad debts) • Allowance for credit losses

LONG-TERM ADJUSTMENTS Depreciation • Business entities buy tangible assets (property, plant and equipment) which are not for resale, but are used in the operation of the business. • As these assets are used, they decrease in value. • This decline in value is charged against the profits of the business and is spread (apportioned) over the expected useful life of the asset. • The apportionment of the cost of the asset usually takes the form of depreciation entries.

CLOSING ENTRIES �The trial balance consists of all the accounts with balances before the closing procedures �All the nominal accounts (income & expenditure) are closed off and they provide the details for compiling the statement of profit or loss and comprehensive income �The remaining accounts, namely assets, liabilities and capital, form the basis of the information which is included in the statement of financial position

• Closing entries transfer the balances from the nominal (temporary) accounts to the profit or loss account • Recorded in the general journal before they are posted to the general ledger • Expenses > income, then a net loss with a negative effect on equity • Drawings account to be closed off against the capital account. • Trading account (nominal acc), is closed off to the profit or loss account • Profit or loss acc (also nominal acc) is closed off to the capital account – disclosed in statement of changes in equity.

CLOSING-OFF of NOMINAL ACCOUNTS • To determine the financial result of an entity, the nominal accounts are closed by means of closing journals and transferred to the trading account (a nominal account) in the case of trading entities and/or to the profit or loss account. • The gross profit, as determined, is debited to the trading account and credited to the profit or loss account. • All the other nominal accounts with balances such as rent income, telephone expenses, rent expenses and salaries are (closed off) and the profit or loss account is accordingly debited or credited. • The difference between the debit and credit sides of the profit or loss account results in the profit or loss which is, in turn, transferred to the capital account. • The profit or loss account is therefore, also closed off.

TRAIL BALANCE • Pre-adjustment trial balance – to test the correctness of the entries after the posting from the subsidiary journals to the general ledger – to test whether the requirements of the double-entry principle have been met. • Post-adjustment trial balance – compiled after all the journalised adjustments have been posted to the general ledger. • Post-closing trial balance – compiled after the closing journal entries have been posted to the ledger. – all the nominal accounts are closed and the profit or loss as well as drawings are transferred to the capital account. – All that remains in the trial balance at this stage are the assets, liabilities and equity accounts - items in the statement of financial position.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Required: (1) Open the above accounts in the general ledger. (2) Record the adjustments and post to the general ledger accounts. (3) Record the closing journals and show the partial profit or loss account in the ledger. (4) Show the necessary items in the partial statement of financial position. (5) Show the property, plant and equipment note.

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

A ABBO (1) General Ledger Dr Date 20. 2 Jun 30 Rent income Detail Profit or loss Fol R Date J 2 20. 2 7 200 June 30 1 Detail Fol R Balance b/d 6 600 Accrued income J 1 600 7 200 Dr Date 20. 2 Jun 30 7 200 Stationery Detail Balance Fol b/d R Date 20. 2 350 Jun 30 350 Cr Detail 2 Cr Fol R Inventory: Stationery J 1 50 Profit or loss J 2 300 350

A ABBO General Ledger Dr Date 20. 2 Jun 30 Accrued income Detail Rent income Dr Date 20. 2 Jun 30 R J 1 Date Detail Stationery Fol R J 1 Date Detail Fol R 10 Cr Fol R 11 Cr Fol R 50 Accrued expenditure Detail Cr 600 Inventory: Stationery Dr Date Fol 9 R Date 20. 2 Jun 30 Detail Water and electricity J 1 160

A ABBO (4) Statement of Financial Position as at 30 June 20. 2 (extract) ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables R(11 000 + 600) Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables R(160 + 600) Total equity and liabilities Note R 140 000 1 140 000 X XXX 50 11 600 XXX 760 20

A ABBO (2) General Journals Adjustment entries: 30 June 20. 2 Date Details Fol Total Debit 30 30 Credit Accrued income Rent income To adjust the above GL 9 GL 1 600 Inventory: Stationery To adjust the above GL 10 GL 2 50 Commission income Income received in advance To adjust the above GL 4 GL 12 600 Credit losses Debtors control To adjust the above GL 5 GL 7 150 600 150

A ABBO (1) General Ledger Dr Date 20. 2 Jun 30 Rent income Detail Profit or loss Fol R Date J 2 20. 2 7 200 June 30 1 Detail Fol R Balance b/d 6 600 Accrued income J 1 600 7 200 Dr Date 20. 2 Jun 30 7 200 Stationery Detail Balance Fol b/d R Date 20. 2 350 Jun 30 350 Cr Detail 2 Cr Fol R Inventory: Stationery J 1 50 Profit or loss J 2 300 350

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (3) Closing transfers Date Details Fol Total Debit 30 30 Rent income Commission income Profit or loss Closing off of accounts against the profit or loss account GL 1 GL 4 GL 14 7 200 5 000 Profit or loss Stationery Water and electricity Credit losses Depreciation Closing off of accounts against the profit or loss account GL 14 GL 2 GL 3 GL 5 GL 13 32 690 Credit 12 200 300 1 960 430 30 000

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

A ABBO (1) General Ledger Dr Date 20. 2 Jun 30 Rent income Detail Profit or loss Fol R Date J 2 20. 2 7 200 June 30 1 Detail Fol R Balance b/d 6 600 Accrued income J 1 600 7 200 Dr Date 20. 2 Jun 30 7 200 Stationery Detail Balance Fol b/d R Date 20. 2 350 Jun 30 350 Cr Detail 2 Cr Fol R Inventory: Stationery J 1 50 Profit or loss J 2 300 350

A ABBO General Ledger Dr Date 20. 2 Jun 30 Accrued income Detail Rent income Dr Date 20. 2 Jun 30 R J 1 Date Detail Stationery Fol R 10 Cr Fol R 11 Cr Detail Fol R Water and electricity J 1 600 R J 1 Date Detail 50 Accrued expenditure Detail Fol Cr Fol Inventory: Stationery Dr Date Fol 9 R Date 20. 2 Jun 30 160

A ABBO (4) Statement of Financial Position as at 30 June 20. 2 (extract) ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables R(11 000 + 600) Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables R(160 + 600) Total equity and liabilities Note R 140 000 1 140 000 X XXX 50 11 600 XXX 760 29

A ABBO (2) General Journals Adjustment entries: 30 June 20. 2 Date Details Fol Total Debit 30 30 Credit Accrued income Rent income To adjust the above GL 9 GL 1 600 Inventory: Stationery To adjust the above GL 10 GL 2 50 Commission income Income received in advance To adjust the above GL 4 GL 12 600 Credit losses Debtors control To adjust the above GL 5 GL 7 150 600 150

A ABBO (1) General Ledger Dr Date 20. 2 Jun 30 Rent income Detail Profit or loss Fol R Date J 2 20. 2 7 200 June 30 1 Detail Fol R Balance b/d 6 600 Accrued income J 1 600 7 200 Dr Date 20. 2 Jun 30 7 200 Stationery Detail Balance Fol b/d R Date 20. 2 350 Jun 30 350 Cr Detail 2 Cr Fol R Inventory: Stationery J 1 50 Profit or loss J 2 300 350

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (3) Closing transfers Date Details Fol Total Debit 30 30 Rent income Commission income Profit or loss Closing off of accounts against the profit or loss account GL 1 GL 4 GL 14 7 200 5 000 Profit or loss Stationery Water and electricity Credit losses Depreciation Closing off of accounts against the profit or loss account GL 14 GL 2 GL 3 GL 5 GL 13 32 690 Credit 12 200 300 1 960 430 30 000

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

A ABBO General Ledger Dr Date 20. 2 Jun 30 Water and electricity Detail Fol R Date Balance b/d 20. 2 1 800 June 30 Accrued expenditure J 1 Detail Profit or loss 3 Cr Fol R J 2 1 960 Dr Date 20. 2 Jun 30 1 960 Commission income Detail Fol R Date 20. 2 Jun 30 Income received in advance J 1 600 Profit or loss J 2 5 000 5 600 Detail Balance 4 Cr Fol R b/d 5 600

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (4) Statement of Financial Position as at 30 June 20. 2 (extract) ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables R(11 000 + 600) Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables R(160 + 600) Total equity and liabilities Note R 140 000 1 140 000 X XXX 50 11 600 XXX 760 38

A ABBO (2) General Journals Adjustment entries: 30 June 20. 2 Date Details Fol Total Debit 30 30 Credit Accrued income Rent income To adjust the above GL 9 GL 1 600 Inventory: Stationery To adjust the above GL 10 GL 2 50 Commission income Income received in advance To adjust the above GL 4 GL 12 600 Credit losses Debtors control To adjust the above GL 5 GL 7 150 600 150

A ABBO General Ledger Dr Date 20. 2 Jun 30 Water and electricity Detail Fol R Date Balance b/d 20. 2 1 800 June 30 Accrued expenditure J 1 Detail Profit or loss 3 Cr Fol R J 2 1 960 Dr Date 20. 2 Jun 30 1 960 Commission income Detail Fol R Date 20. 2 Jun 30 Income received in advance J 1 600 Profit or loss J 2 5 000 5 600 Detail Balance 4 Cr Fol R b/d 5 600

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (3) Closing transfers Date Details Fol Total Debit 30 30 Rent income Commission income Profit or loss Closing off of accounts against the profit or loss account GL 1 GL 4 GL 14 7 200 5 000 Profit or loss Stationery Water and electricity Credit losses Depreciation Closing off of accounts against the profit or loss account GL 14 GL 2 GL 3 GL 5 GL 13 32 690 Credit 12 200 300 1 960 430 30 000

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

A ABBO General Ledger Dr Date 20. 2 Jun 30 Credit losses (Bad debts) Detail Fol R Date Balance b/d 20. 2 280 June 30 Debtors control J 1 150 Detail Profit or loss 5 Fol Cr R J 2 430 Dr Date 430 Accumulated depreciation: machinery Detail Fol R Date 20. 2 Jun 30 Detail 6 Fol Cr R Balance b/d 30 000 Depreciation J 1 30 000 60 000

A ABBO General Ledger Dr Date 20. 2 Jun 30 Debtors control Detail Balance Fol b/d R 7 Date 20. 2 11 150 June 30 Detail Fol Balance Dr Date 20. 2 Jun 30 b/d J 1 150 Balance c/d 11 000 11 150 11 000 Machinery (at cost) Detail Balance R Credit losses (Bad debts) 11 150 20. 2 Jul 1 Cr Fol R b/d 200 000 Date 8 Detail Fol Cr R

A ABBO (2) General Journals Adjustment entries: 30 June 20. 2 Date Details Fol Total Debit 30 30 Credit Accrued income Rent income To adjust the above GL 9 GL 1 600 Inventory: Stationery To adjust the above GL 10 GL 2 50 Commission income Income received in advance To adjust the above GL 4 GL 12 600 Credit losses Debtors control To adjust the above GL 5 GL 7 150 600 150

A ABBO General Ledger Dr Date 20. 2 Jun 30 Credit losses (Bad debts) Detail Fol R Date Balance b/d 20. 2 280 June 30 Debtors control J 1 150 Detail Profit or loss 5 Fol Cr R J 2 430 Dr Date 430 Accumulated depreciation: machinery Detail Fol R Date 20. 2 Jun 30 Detail 6 Fol Cr R Balance b/d 30 000 Depreciation J 1 30 000 60 000

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (3) Closing transfers Date Details Fol Total Debit 30 30 Rent income Commission income Profit or loss Closing off of accounts against the profit or loss account GL 1 GL 4 GL 14 7 200 5 000 Profit or loss Stationery Water and electricity Credit losses Depreciation Closing off of accounts against the profit or loss account GL 14 GL 2 GL 3 GL 5 GL 13 32 690 Credit 12 200 300 1 960 430 30 000

A ABBO General Ledger Dr Date 20. 2 Jun 30 Debtors control Detail Balance Fol b/d R 7 Date 20. 2 11 150 June 30 Detail Fol Balance Dr Date 20. 2 Jun 30 b/d J 1 150 Balance c/d 11 000 11 150 11 000 Machinery (at cost) Detail Balance R Credit losses (Bad debts) 11 150 20. 2 Jul 1 Cr Fol R b/d 200 000 Date 8 Detail Fol Cr R

A ABBO (4) Statement of Financial Position as at 30 June 20. 2 (extract) ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables R(11 000 + 600) Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables R(160 + 600) Total equity and liabilities Note R 140 000 1 140 000 X XXX 50 11 600 XXX 760 52

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

A ABBO Notes for the year ended 30 June 20. 2 Property, plant and equipment Carrying amount: Beginning of period Cost Accumulated depreciation Additions Depreciation Carrying amount: End of period Cost Accumulated Depreciation Equipment R 170 000 200 000 (30 000) Total R 17 000 200 000 (30 000) 140 000 200 000 (60 000) 55

A ABBO General Ledger Dr Date 20. 2 Jun 30 Credit losses (Bad debts) Detail Fol R Date Balance b/d 20. 2 280 June 30 Debtors control J 1 150 Detail Profit or loss 5 Fol Cr R J 2 430 Dr Date 430 Accumulated depreciation: machinery Detail Fol R Date 20. 2 Jun 30 Detail 6 Fol Cr R Balance b/d 30 000 Depreciation J 1 30 000 60 000

A ABBO Notes for the year ended 30 June 20. 2 Property, plant and equipment Carrying amount: Beginning of period Cost Accumulated depreciation Additions Depreciation Carrying amount: End of period Cost Accumulated Depreciation Equipment R 170 000 200 000 (30 000) Total R 17 000 200 000 (30 000) 140 000 200 000 (60 000) 57

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO Notes for the year ended 30 June 20. 2 Property, plant and equipment Carrying amount: Beginning of period Cost Accumulated depreciation Additions Depreciation Carrying amount: End of period Cost Accumulated Depreciation Equipment R 170 000 200 000 (30 000) Total R 17 000 200 000 (30 000) 140 000 200 000 (60 000) 59

A ABBO (2) General Journals Adjustment entries: 30 June 20. 2 Date Details Fol Total Debit 30 30 Depreciation Accumulated depreciation: machinery To make provision for depreciation GL 13 Water and electricity Accrued expenditure To adjust the above GL 3 GL 11 Credit 30 000 GL 6 160

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (3) Closing transfers Date Details Fol Total Debit 30 30 Rent income Commission income Profit or loss Closing off of accounts against the profit or loss account GL 1 GL 4 GL 14 7 200 5 000 Profit or loss Stationery Water and electricity Credit losses Depreciation Closing off of accounts against the profit or loss account GL 14 GL 2 GL 3 GL 5 GL 13 32 690 Credit 12 200 300 1 960 430 30 000

A ABBO Notes for the year ended 30 June 20. 2 Property, plant and equipment Carrying amount: Beginning of period Cost Accumulated depreciation Additions Depreciation Carrying amount: End of period Cost Accumulated Depreciation Equipment R 170 000 200 000 (30 000) Total R 17 000 200 000 (30 000) 140 000 200 000 (60 000) 63

A ABBO (4) Statement of Financial Position as at 30 June 20. 2 (extract) ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables R(11 000 + 600) Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables R(160 + 600) Total equity and liabilities Note R 140 000 1 140 000 X XXX 50 11 600 XXX 760 64

Exercise ADDITIONAL INFORMATION: (a) Only 11 months’ rent was received (b) Stationery on hand on 30 June 20. 2 amounted to R 50. (c) R 600 commission was received in advance. (d) An additional amount of R 150 must be written off as irrecoverable. (e) Provision must be made for depreciation of R 30 000 on machinery. (f) June 20. 2’s water and electricity account of R 160 has not yet been paid.

Exercise Balances at 30 June 20. 2 (Extract) Dr R Rent income Stationery Water and electricity Commission income Credit losses Accumulated depreciation: machinery Debtors control Machinery at cost Cr R 6 600 350 1 800 5 600 280 30 000 11 150 200 000

A ABBO General Ledger Dr Date 20. 2 Jun 30 Water and electricity Detail Fol R Date Balance b/d 20. 2 1 800 June 30 Accrued expenditure J 1 Detail Profit or loss 3 Cr Fol R J 2 1 960 Dr Date 20. 2 Jun 30 1 960 Commission income Detail Fol R Date 20. 2 Jun 30 Income received in advance J 1 600 Profit or loss J 2 5 000 5 600 Detail Balance 4 Cr Fol R b/d 5 600

A ABBO General Ledger Dr Date 20. 2 Jun 30 Accrued income Detail Rent income Dr Date 20. 2 Jun 30 R J 1 Date Detail Stationery Fol R 10 Cr Fol R 11 Cr Detail Fol R Water and electricity J 1 600 R J 1 Date Detail 50 Accrued expenditure Detail Fol Cr Fol Inventory: Stationery Dr Date Fol 9 R Date 20. 2 Jun 30 160

A ABBO (4) Statement of Financial Position as at 30 June 20. 2 (extract) ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade and other receivables R(11 000 + 600) Total assets EQUITY AND LIABILITIES Total equity Capital Current liabilities Trade and other payables R(160 + 600) Total equity and liabilities Note R 140 000 1 140 000 X XXX 50 11 600 XXX 760 69

A ABBO (2) General Journals Adjustment entries: 30 June 20. 2 Date Details Fol Total Debit 30 30 Depreciation Accumulated depreciation: machinery To make provision for depreciation GL 13 Water and electricity Accrued expenditure To adjust the above GL 3 GL 11 Credit 30 000 GL 6 160

A ABBO General Ledger Dr Date 20. 2 Jun 30 Water and electricity Detail Fol R Date Balance b/d 20. 2 1 800 June 30 Accrued expenditure J 1 Detail Profit or loss 3 Cr Fol R J 2 1 960 Dr Date 20. 2 Jun 30 1 960 Commission income Detail Fol R Date 20. 2 Jun 30 Income received in advance J 1 600 Profit or loss J 2 5 000 5 600 Detail Balance 4 Cr Fol R b/d 5 600

Dr Date Income received in advance Detail Fol R Date 20. 2 Jun 30 Dr Date 20. 2 Jun 30 Commission income Depreciation Detail Accumulated depreciation Dr Date Detail Fol R Date 20. 2 Jun 30 J 1 Detail Profit or loss Stationery Water and electricity Credit losses Depreciation Fol J 2 J 2 Fol Cr R J 1 600 13 Cr Fol R J 2 30 000 Profit or loss (extract) Detail 12 R Date 20. 2 300 Jun 30 1 960 430 30 000 Detail Rent income Commission income 14 Cr Fol R J 2 7 200 J 2 5 000

A ABBO (3) Closing transfers Date Details Fol Total Debit 30 30 Rent income Commission income Profit or loss Closing off of accounts against the profit or loss account GL 1 GL 4 GL 14 7 200 5 000 Profit or loss Stationery Water and electricity Credit losses Depreciation Closing off of accounts against the profit or loss account GL 14 GL 2 GL 3 GL 5 GL 13 32 690 Credit 12 200 300 1 960 430 30 000