SOLE TRADER ACCOUNTS
Learner Note: Ensure that you know and understand all the adjustments completed in Grade
10.
QUESTION 1: 66 Marks 40 Minutes (Adapted from New Generation Accounting) Complete the following table. The first adjustment has been done for you.
Adjustment General Ledger Concept Effect on: Reversal
Debit Credit Applied A O L Required
1. Bad debt written off. Bad debts Debtors Control
Prudence - - 0 No
2. Depreciation on equipment.
SECTION A: TYPICAL EXAM QUESTIONS
HINTS
Always identify the two accounts involved Classify the two accounts involved
Identify the concepts
Know the effect on the accounting equation
Adjustment General Ledger Concept Effect on: Reversal
Debit Credit Applied A O L Required
3. Interest charged on debtors account
4. The tenant owes rent for one month
5. Provision for bad debts to be increased
6. Telephone account has not been paid at year end
7. Interest on overdraft has been wrongly classified as bank charges
8. Commission Income received in advance at year-end
9. Packing materials on hand at the year-end per
physical count
10. Interest on loan owed at Year-end.
11. Wages paid in advance at year-end.
12. A trading stock deficit is identified
Adjustment
General Ledger Concept
Applied
Effect on: Reversal
Required
Debit Credit A O L
1. Bad debt written off. Bad debts Debtors control Prudence - - 0 No
2.Depreciation on Depreciation
Accumulated
dep- Matching/ - - 0 No
equipment. reciation on equip- Prudence ment 3.Interest charged on Debtors control Interest income Matching + + 0 No Debtors account 4. The tenant owes rent
Accrued
income Rent income
Matching
+ + 0 Yes
for one month 5. Provision for bad debts to Provision for bad Profvision for bad Prudence - - 0 No be increased debts adjustment debts 6. Telephone account has Telephone Accrued expenses Matching 0 - + Yes
not been paid at year end
7. Interest on overdraft has
Interest on
over- Bank charges
Materiality 0 -+ 0 No been wrongly classified as draft bank charges 8. Commission Income Commission income Income received Matching 0 - + Yes Received in advance at in advance year-end
9. Packing materials on
Consumable stores
Packing
material Matching/ + + 0 Yes hand at the year-end
per on hand Materiality physical count 10. Interest on loan owed at Interest on loan Accrued expenses Matching 0 - + Yes year-end. 11. Wages paid in advance Prepaid expenses Wages Matching + + 0 Yes at year-end. 12. A trading stock
deficit is Trading stock Trading stock
Prudence
- - 0 No
Identified deficit
Learner Note: Always show calculations to earn part marks.
An adjusting journal entry is necessary in the books and financial statements to adhere to the matching principle.
All adjustments must then be recorded in the General Journal and posted to the General Ledger.
The following year-end adjustments were dealt with in Grade 10.
Accrued income Accrued expense Prepaid expense
Income received in advance Consumable stores on hand Trading stock deficit/Surplus Depreciation
Etc
GRADE 11
Provision for bad debts
Increase in provision for bad debts
QUESTION 1 REQUIRED:
1. Adjusting journal entries.
2. Journal entry for the closing transfers of revenue and expenses.
The following balances appeared, amongst others, in the pre-adjustment trial balance of Cells And ALL at year-end, 28 February 2010.
The business uses the perpetual inventory system.
Creditors control R69 000
Debtors control 62 800
Provision for bad debts 4 000
Equipment 86 000
Accumulated depreciation on equipment 33 600
Trading stock 88 600
Stationery 2 900
Bad debts 2 200
Packing material 6 800
Interest on fixed deposit 720
Rent income 7 800
Wages 28 800
Advertising 4 800
ADJUSTMENTS:
1. The following items were on hand at the year-end according to a physical Stocktaking;
2. The account of IM Bad, R800, must be written of as irrecoverable. 3. The provision for bad debts is to be adjusted to 5% of the book debts. 4. Wages owed to an employee at the year—end, R950.
5. The tenant has paid 1 month rent in advance.
6. Interest on the fixed deposit has been received for only nine months.
7. An amount of R420 has been recorded in respect of an advertisement which will appear in the newspaper in March 2010.
8. Depreciation on equipment is to be provided at 10% p.a. on the diminishing balance method.
Trading stock R87 100
Packing material 1 860
Stationery 900
Learner Note: As you attempt the homework, you need to ensure that you are able to
answer the questions in the allocated time frames. If you get stuck, you should refer to either the additional notes or your class teacher.
PURCHASES Fe b 2 8 Total B / f 140 000
Feb 28 Loss due to theft
G J
2 450
Creditors
control / Bank 21 000 Trading a/c
G J
158 550
161 000 161 000
Calculate cost of sales
Opening stock 7 700 Purchases 158 550 Carriage on purchases 13 200 Custom duty (14 000 + 2 100) 16 100 Less: closing stock (4 200)
Cost of sales 191 350
Number of racquetssold
22 + 400 + 60 – 12 - 7 = 463
TRADING ACCOUNT
Feb 28 Opening stock GJ 7 700 Feb 28 Sales GJ 478 375 Purchases GJ 158 550 Closing stock GJ 4 200 Carriage on purchases GJ 13 200 Custom Duty GJ 16 100 Profit & loss a/c GJ 287
025
482 575 482 575
OPINION: Yes
Very good mark up Only supplier
Has monopoly
