FAC1502 - Financial Accounting Principles, Concepts And Procedures EXAM PACK.

FAC1502 - Financial Accounting Principles, Concepts And Procedures EXAM PACK. QUESTION 1 SOLUTION DR P HEAL CASH RECEIPTS JOURNAL (CRJ) Doc Number Date MARETT Details BANK Debtors Control Fees earned VAT Output VAT Input SUNDRIES Amount Details 450 1 K. Kelly 275 275 451 1 J. Jail 452 9 Y. Old 383 440 (7) (50) Settlement 453&491 12 Deposit Discount allowed (7) (50) HINTS a) Whenever you sell a good or offer a service, you are required to levy output VAT. Any VAT paid out is recoverable from SARS if you are a registered vendor and any VAT received is payable to SARS. b) If goods are sold on credit, the transactions regarding VAT output would have been recorded in the Sales journal. VAT is charged at the point of sale and not at the point of payment. In the CRJ, the VAT is accounted for on cash sales. c) When goods are sold at a discount, the VAT is debited to the VAT Input Account to reduce the amount owing to SARS since the part that is relating to the discount will no longer be received. d) To remove VAT from a figure you multiply that figure by 100 114 e.g. 1710 x 100 114 = 1500. e) Calculation of the discount and the VAT element in discount: Discount= Amount Paid-Amount owed = 440-383 = 57 VAT element= 14/114*57 = 7 We use 14/114 because the discount is at selling price inclusive of VAT. If it was exclusive of VAT, we could have used 14/100. f) The transaction on 15 March is not entered in the CRJ as information is not given on the payment of the consultation fees and unlike on other similar transactions involving receipt of funds, the receipt number is not quoted. CASH PAYMENTS JOURNAL (CPJ) DOC NUMBER DATE DETAILS BANK CREDITORS CONTROL VAT INPUT SUNDRIES AMOUNT DETAILS C114 1 Spacious Properties Rental paid 5 C115 2 Cash Electricity C116 2 Pharmacy Trading C117 10 Fillup Garage 300 300 Petrol C118 12 Cash 1000 259 1000 3150 Drawings HINTS 1. When you buy a good or make payment for services rendered you are charged VAT input. 2. If you buy a good on credit the VAT transactions are recorded in the Purchases Journal. VAT is charged at the point of purchase, whether for cash or on credit. This means no VAT is adjusted when settling accounts for goods or services previously acquired on credit if the purchase was recorded at the point of purchase. Adjusting VAT again will result in double accounting. 3. Any account not part of the required columns is entered under sundries. 4. All VAT calculations are done using the factor 14/114 since the given payments are inclusive of VAT. If the given amount was exclusive of VAT, we could have used 14/100. 5. When an invoice is received as on the transaction on 4 March, no cash is paid on that date. An invoice is a source document for credit purchases. QUESTION 2 SOLUTION BOPA STORES Statement of changes in equity for the year ended 30 April 20.9 Balance at beginning of the year 500 000 Additional Equity Contributions (Bank & Equipment: 100 000+45000) 145 000 Drawings (15 000) Total Comprehensive Loss for the year (77 000) 6 Balance @ end of year 553 000 NOTES a) The entries on the debit side of the capital account represent reductions in equity whilst those appearing on the credit side represent increases in equity. b) Total comprehensive loss reduces the owner`s equity whilst total comprehensive income increases the owner`s equity. 7 8 QUESTION 3 SOLUTION BERTA TRADERS NOTES AS AT 28 FEBRUARY 2009 NOTE ON PROPERTY PLANT & EQUIPMENT LAND & BUILDINGS VEHICLES EQUIPMENT TOTAL Carrying amount at beginning of year 79000 Cost Accumulated depreciation - (95000) (51000) () Additions 25000 Depreciation - (60000) (26000) (86000) Disposals @ carrying amount - (22000)2 (19000)3 (41000) Carrying amount at end of year Cost 59000 Accumulated depreciation - () (66000) HINTS a) Disposals should be recorded @ carrying amount that is cast minus accumulated depreciation. b) Any assets bought during the year are recorded as additions. c) The depreciation per line item of assets refers to the total depreciation as added in the Accumulated Depreciation account. d) Assets acquired in previous years are recorded as an opening balance so as their related accumulated depreciations. e) The cost prices of assets disposed and so as their related accumulated depreciations are subtracted when finding the closing balance. f) The carrying amount at the end of the year is determined by subtracting the accumulated depreciation at the end of the year, which is the balance brought forward at the end of the year in the respective accumulated depreciation accounts from the cost at the end of the year which is the balance brought down in the assets at cost accounts at the end of the year. Calculations 1 Additions: Vehicles Gumbi Motors 90 000 China Cycles 30 000 120 000 2Cost of Vehicles sold (Vehicles at cost account shown as realisation) 65 000 9 Accumulated Depreciation: shown as realisation 43 000 Carrying amount upon disposal 22 000 3Cost of Equipment sold (Equipment at cost account shown as realisation 30 000 Accumulated Depreciation: shown as realisation 11 000 Carrying amount upon disposal 19 000 .