1

SECONDARY SCHOOL IMPROVEMENT

PROGRAMME (SSIP) 2024/2025

GRADE 10

SUBJECT: ACCOUNTING

LEARNER NOTES

SESSION 6 -10

(Page 1 of 128 pages)

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TABLE OF CONTENTS

SESSION TOPIC PAGE

3-35
6 Combined Transactions

36-63
7 Debtors’ and Creditors’ Reconciliations

64-84

8 Salaries and Wages

85-119

9 Year-end adjustments for a sole trader

120-128

10 Final accounts for a sole trader

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SESSION 6: COMBINED TRANSACTIONS

INTRODUCTION
This session summarises all the journals that have been covered in the previous sessions. The
content to be covered will focus on the analysis of transactions and will indicate the effect on the
equation.

SUBSIDIARY JOURNALS
Cash Receipts Journal The Cash Receipts Journal (CRJ) is used to record all money
received by the business.
Cash Payments Journal The Cash Payments Journal (CPJ) is used to record all
payments made by the business.
Petty Cash Journal The Petty Cash Journal (PCJ) is used to record small (petty)
expenses. The business will specify the limit of payments.
Debtors Journal The Debtors Journal (DJ) is used to record credit sales to
debtors.
Debtors Allowances The Debtors Allowances Journal (DAJ) is used to record
Journal returns of trading stock from debtors.
Creditors Journal The Creditors Journal (CJ) is used to record credit purchases
from creditors.
Creditors Allowances The Creditors Allowances Journal (CAJ) is used to record
Journal returns of items, such as trading stock or stationery to
creditors.
General Journal The Journals above are used for a specific purpose. However,
there are certain transactions or corrections that will not fit in
any of the journals above. But, as you know, all transactions
must first be entered in a journal and then be posted to the
ledger. For this reason, the General Journal (GJ) is created,
where all these transactions can be entered.

NOTE: The subsidiary ledgers were extensively covered

in the previous sessions.

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SUMMARY OF TRANSACTIONS

The following is a summary of transactions of a sole trader. Assume that bank has a favourable (debit) balance.

General Ledger Accounting Equation

Transaction Journal Account Account A OE L

debited credited

Owner contributed capital CRJ Bank Capital + + 0

Cash sales CRJ Bank Sales + + 0

Cost of sales Trading Stock - - 0

Received money from a CRJ Bank Debtors control +- 0 0

debtor in settlement of his
account and allowed a Discount Debtors control - - 0
discount Allowed

Received rent from a tenant CRJ Bank Rent income + + 0

Received a loan from RSA CRJ Bank Loan: RSA Bank + 0 +

Bank

Received interest on fixed CRJ Bank Interest on fixed + + 0

deposit deposit

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A fixed deposit from Perm CRJ Bank Fixed Deposit: +- 0 0

Bank matured. Received an Perm Bank
amount that was invested
and interest. Bank Interest on fixed + + 0
deposit

Interest received from CRJ Bank Interest on + + 0

favourable bank balance current account

A Debtor is declared CRJ Bank Debtors control +- 0 0

insolvent, received amount
from estate, the rest is GJ Bad debts Debtors control - - 0
written off.

Cash withdrawal by owner CPJ Drawings Bank - - 0

Sundry expenses paid via CPJ Stationery Bank - - 0

EFT, example stationery.

Cash purchase of a fixed CPJ Equipment Bank +- 0 0

asset, example equipment.

Cash purchases of trading CPJ Trading stock Bank +- 0 0

stock.

Carriage on purchases was CPJ Trading stock Bank +- 0 0

paid through EFT.

Transferred or deposited an CPJ Fixed Bank +- 0 0

amount into fixed deposit Deposit: Perm
account at Perm Bank. Bank

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Interest on borrowed CPJ Interest on Bank - - 0

amount was paid via EFT. loan

Repaid capital portion of CPJ Loan: RSA Bank - 0 -

loan to RSA Bank via EFT. Bank

Settled an amount owing to CPJ Creditors Bank - 0 -

creditors and received a control
discount.
Creditors Discount received 0 + -
control

Withdrew cash for petty CPJ Petty cash Bank +- 0 0

cash from the ATM.

Bank charges reflected on CPJ Bank charges Bank - - 0

the bank statement.

Interest paid on bank CPJ Interest on Bank 0 - +

overdraft, bank balance is bank
unfavourable for this overdraft
transaction

Money from petty cash was PCJ Stationery Petty cash - - 0

used to pay for stationery.
stationery

Sold goods on credit. DJ Debtors Sales + + 0

control

Cost of sales Trading stock - - 0

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A debtor returned trading DAJ Debtor’s Debtors control - - 0

stock. allowances

Trading Stock Cost of sales + + 0

Stationery was bought on CJ Stationery Creditors control 0 - +

credit.

Equipment was bought on CJ Equipment Creditors control + 0 +

credit.

Trading stock was CJ Trading Stock Creditors control + 0 +

purchased on credit

Returned stationery to the CAJ Creditors Stationery 0 + -

creditor. control

Returned equipment that CAJ Creditors Equipment - 0 -

was bought on credit. control

Returned trading stock to a CAJ Creditors Trading stock - 0 -

creditor. control

Trading stock was taken by GJ Drawings Trading stock - - 0

owner for private use.

Trading stock was donated GJ Donations Trading stock - - 0

to the old age home. Donated goods
are recorded at
Charged a debtor an GJ Debtors Interest on + + 0 cost price
interest on overdue account. control overdue debtors
account

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A creditor charged a GJ Interest on Creditors control 0 - +

business an interest on overdue
overdue account. creditors
account

Write off a debtor’s account GJ Bad debts Debtors control - - 0

as a bad debt.

Received an amount from CRJ Bank Bad debts + + 0

debtor whose account was recovered
previously written off as a
bad debt.

Transfer a debit balance GJ Debtors Creditors control + 0 +

from creditors account to his Control
debtor’s account.

Transfer a credit balance GJ Debtors Creditors control + 0 +

from a debtors account to control
his creditors account. Page 91 of session 5
explains the transfers
Correction of errors, for GJ Donations Drawings 0 +- 0 better.
example donation wrongly
recorded as drawings.

Signs for accounts involved in transfer

of balances are always the same.

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ACTIVITY 1: ACCOUNTING CONCEPTS AND TRANSACTION ANALYSIS

1.1 ACCOUNTING CONCEPTS

Match the description in column A to the concept in column B. Write only the letter
(A–E) next to the question number (1.1.1. – 1.1.5) in the ANSWER BOOK. (5)

COLUMN A COLUMN B
A person/business that owes money to a
1.1.1 A Capital
business.
1.1.2 Possessions of the business. B Profit
Money earned by the business after paying all
1.1.3 C Assets
the costs of selling of goods and services.
Money owed by the business to suppliers of
1.1.4 D Debtor
goods and services or supplier of funds.
Money contributed by the owner to start a
1.1.5 E Liability
business

1.2 ANALYSIS OF TRANSACTIONS

The transactions appeared in the books of Pearl Stores. The business maintains a
gross profit mark-up of 25% on cost.

REQUIRED:
Analyse the following transactions according to the headings provided in the
ANSWER BOOK. (30)
NOTE: The business has a favourable bank balance at all times

Example: Capital contribution by the owner, R50 000.

TRANSACTIONS:
1.2.1 Sold goods on credit to B Bold, R2 500
1.2.2 The owner took goods for own use, cost R750.
1.2.3 Paid wages to T Mokobori by EFT, R4 000.
1.2.4 Bought goods on credit from Macro Suppliers for R15 000 less 10% trade
discount
1.2.5 A direct transfer R15 800 from FLB Bank was made into the account of Pearl
Stores in respect of a matured fixed deposit, this amount included interest
of R1 800.

35

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ANSWER SHEET

1.1 CONCEPTS

1.1.1

1.1.2

1.1.3

1.1.4

1.1.5
5

1.2 ANALYSIS OF TRANSACTIONS

GENERAL LEDGER AMOUNT EQUATION

Account Debited Account Credited R A O L
e.g. Bank Capital 50 000 + + 0
1.2.1 Debtors Control 2 500

Trading Stock

1.2.2 750

1.2.3 Wages 4 000

1.2.4 Creditors Control

1.2.5

30

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ACTIVITY 2 : CONCEPTS AND TRANSACTION ANALYSIS (45 Marks ; 34 Minutes)

2.1 CONCEPTS

Choose the correct word(s) from COLUMN B to match the description in COLUMN A.
Write only the letter (A – E) next to the number (2.1.1- 2.1.5) in the ANSWER BOOK.

COLUMN A COLUMN B
2.1.1 The financial affairs of a business must be A Internal control
kept separate from the financial affairs of its
owner.
2.1.2 Systems and processes used in a business B Trial Balance
to ensure that the goals of the business are
achieved.
2.1.3 List of balances for different ledger C Business entity
accounts where the total debits are equal to
the total credits.
2.1.4 Assets that can be converted into cash D Ethics
within 12 months.
2.1.5 Ideas and beliefs about what is morally E Current assets
right or wrong.
(5)

2.2 ANALYSIS OF TRANSACTIONS

The following transactions for March 2024 appeared in the books of Sophia
Shoe Shop. The business buys and sells shoes to customers. Sophia Shoe
Shop uses a mark-up of 70% on cost price.

REQUIRED:

Analyse the following transactions according to the headings provided in the

ANSWER BOOK. (40)

NOTE: The business has a favourable bank balance at all times.

Example: Bought stationery from Sam Traders for R1 200 and paid via EFT.

TRANSACTIONS:

2.2.1 Sold goods on credit to S. Radebe for R6 800 and issued invoice.

2.2.2 An amount of R380 was paid out of the petty cash to NM Distributors
for goods delivered to S. Radebe. The amount must be debited to his
account.

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2.2.3 Bought goods on credit from Petro Wholesalers for R12 800 less 15%
trade discount.
2.2.4 A printer bought on credit for R3 100 from RB Traders in February
2024 had a defect. After consultation with RB Traders, the printer was
returned to them. This transaction was not recorded.
2.2.5 Received R5 700 from G. Brown through EFT after 5% discount was
granted to her.

2.2.6 A fixed deposit at LM Bank matured on 31 March 2024, received

R66 000 through EFT. Included in the amount is interest of 10% per
annum.

ANSWER SHEET

2.1 ACCOUNTING CONCEPTS

2.1.1
2.1.2
2.1.3
2.1.4 5
2.1.5

2.2 ANALYSIS OF TRANSACTIONS

GENERAL LEDGER EQUATION

Account Debited Account Credited A OE L
E.g. Stationery Bank -1 200 -1 200 0
Sales
2.2.1

2.2.2
2.2.3
2.2.4 Creditors control
2.2.5 Bank

2.2.6 Bank

40

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ACTIVITY 3 : JOURNALS AND CREDITORS LEDGER (44 MARKS )

PEARL TRADERS

The following information was extracted from the financial records of Pearl Traders,the owner is
S Moses and the business uses a profit mark-up of 50%.The owner requested you to complete
the financial records listed below for March 2024.

REQUIRED:

3.1.1 Prepare the following Journals :

A Cash Payments Journal (25)
B Creditors Journal (9)
C Creditors Allowances Journal (2)

3.1.2 Prepare the creditors account of Jade Traders in the Creditors Ledger of Pearl (8)
Traders.

INFORMATION

A. Extract from the Creditors List on 1 March 2024 :

Rani Wholesalers CL1 5 200

Jade Traders CL2 6 600

D Transactions for March not yet recorded in the respective Journals:

Date Transactions
2 Paid R2 000 to creditor Jade Traders via an EFT.

3 Purchased merchandise for R6 870 and Stationery, R1 450, from Top Stores and
paid by EFT.
EFT payment made for an office chair purchased for R450 from Point Stores.

4 Paid wages directly into bank account of an employee, Mr Brown, R10 000 via EFT.
Unsatisfactory goods returned to Jade Traders, issued D/N No 124, R800.

5 Settled our overdue account of R6 000 via EFT, S Pillay charged us interest.The
acccount has not been paid for two months,interest is charged at the rate of 10% p.a.

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6 Made an electronic payment to Go Bank in part-payment of a loan, R7 000, plus

interest on loan, interest on loan is charged at 9.5% p.a. the repayments are done
quarterly. The current balance (after payment) of loan is R73 000.
Note: The payment above exclude interest.
Purchased stock, R3 200 and stationery, R200 on credit from Sunbird Stores, invoice
56.

8 Paid 60% of the amount owing to Jade Traders by EFT.

9 Bought trading stock on credit from Rani Wholesalers for R5 000, a 10% trade
discount was allowed on invoice no.270.

10 Bought goods on credit from Jade Traders ,R4 000 per invoice 38.

44 marks

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ACTIVITY 3.2 : GENERAL LEDGER (30 MARKS )

Thulani’s Pharmacy
You are provided with the subsidiary journals of Thulani Pharmacy for November 2023.

REQUIRED

3.2 Post to the following accounts in the General Ledger of Thulani Pharmacy:
• Debtors Control (7)
• Trading Stock (17)
• Cost of Sales (6)

INFORMATION

Balances on 1 November 2023:

Debtor Control R 19 000
Trading Stock 95 000
Cost of Sales 105 000

Totals from journals on 30 November 2023

A. Cash Receipts Journal

Bank Sales Cost of Discount Debtors’
Sales Allowed Control
92 200 87 000 43 500 700 5 700

B. Cash Payments Journal

Bank Trading Discount Creditors’ Wages
Stock Received Control
58 100 ? 1 800 23 800 25 100

C. Debtors’ Journal
Sales Cost of Sales
8 200 4 100

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D. Debtors’ Allowances Journal

Debtors’ Allowances Cost of Sales
1 370 685

E. Creditors’ Journal
Creditors control Trading Stock Equipment Stationery Sundries
25 560 17 460 7 570 530 400

F. Creditors’ Allowances Journal

Creditors control Trading Stock Equipment Stationery Sundries
15 550 8 980 4 880 1 420 270

G.The following information was recorded in the Petty Cash Journal:

• On 30 November 2023, the business purchased trading stock for R1 000 and
delivery charges on goods purchased amounted to R120.

30 marks

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3.3 - DEBTORS LEDGER (MARKS:14)

Vegas Stores
The information provided below is extracted from the financial records of Vegas Stores.

REQUIRED
Record the following transactions in the Debtors ledger account of Picadillay Stores.

Transactions For June 2023: Picadillay Stores

Date Details Amount
1 Amount owing by Picadillay Stores 18 200
4 Issued invoice No 228 to Picadillay Stores 12 027
7 Picadillay returned unsuitable goods (C/N 23). 1 400
12 Received the amount due from Picadillay Stores on 1 June 2023, after ?
granting a 5 % discount, as per EFT 214.
16 Picadillay Stores purchased goods for R8 000.They paid R3 000 cash ?
and were issued invoice A34 for the remainder of the amount.
22 Received EFT 234 from Picadillay Stores for 50% of the goods bought ?
on credit on the 16th of June.
25 C/N 52 was issued to Picadillay stores for stock returned, R80 (cost ?
price). A mark-up of 15% was used.

ACTIVITY 3.4 – INTERNAL CONTROL (MARKS:12)

INFORMATION

The debtors of Malibu’s Boutique are given a credit limit of R12 000 and 30 days to
settle their accounts. P Pinky’s account has a balance of R15 000 and J Jane’s
balance is R2 000 which is receivable in 60 days.
S Soloman is the administration clerk who controls debtors, collects cash and is
responsible for banking the cash received.

REQUIRED

3.4.1 Provide TWO measures a business can put in place to improve collection of (4)
outstanding amounts from debtors.
3.4.2 Suggest TWO strategies a debtors clerk should follow, before offering credit (4)
facilities to customers.
3.4.3 Provide TWO internal control measures that a business can use to control (4)
cash.

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ANSWER SHEET
ACTIVITY 3.1.1: JOURNALS AND CREDITORS LEDGER MARKS: 44

A. CASH PAYMENTS JOURNAL OF PEARL TRADERS FOR MARCH 2024 CPJ 1

Doc Day Payee F Bank Trading Creditors Wages Sundry accounts

stock control
Amount F Details

25

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B. CREDITORS JOURNAL OF PEARL TRADERS FOR MARCH 2024

Doc Day CREDITOR F Creditors Trading Stationery Sundry accounts

INV control Stock Amount F Details

C. CREDITORS ALLOWANCES JOURNAL OF PEARL TRADERS FOR MARCH 2024

Doc Day Creditor F Creditors Trading Stationery Sundry accounts

Control Stock
D/N Amount F Details

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3.1.2 CREDITORS LEDGER MARKS: 8

CREDITORS LEDGER OF PEARL TRADERS FOR MARCH 2024

JADE TRADERS CL 1
Date Details Fol Debit Credit Balance
1 Balance b/d 6 600

8
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ACTIVITY 3.2: GENERAL LEDGER MARKS: 30

GENERAL LEDGER OF THULANI PHARMACY

BALANCE SHEET ACCOUNTS SECTION

DEBTORS CONTROL
2023
Nov 1 Balance b/d 19 000

TRADING STOCK
2023
Nov 1 Balance b/d 95 000

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NOMINAL ACCOUNT SECTION

COST OF SALES
2023
Nov 1 b/d 105 000
Total

ACTIVITY 3.3 - DEBTORS LEDGER MARKS: 14

DEBTORS LEDGER OF VEGAS STORES

PICADILLAY STORES DL4

Date Details Fol Debit Credit Balance

2023 1 Balance (account rendered) b/d
June
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ACTIVITY 3.4: INTERNAL CONTROL MARKS: 12

INTERNAL CONTROL ON DEBTORS AND CASH

3.4.1 Provide TWO measures a business can put in place to improve collection
of outstanding amounts from debtors.

3.4.2 Suggest TWO strategies a debtor’s clerk should follow, before offering
credit facilities to customers.

3.4.3 Provide TWO Internal control measures that a business can use to control
cash.

TOTAL MARKS

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ACTIVITY 4: SUBSIDIARY JOURNALS AND POSTING (83 Marks;75 Minutes)

RAY’S STYLISH CLOTHES

The information provided relates to Ray’s Stylish Clothes, the business sells clothes and shoes.
The business is owned by Raymond Mafole and it uses a mark-up of 50% on cost.
The bookkeeper fell ill before completing ALL the Subsidiary Journals and posting for April
2024.You are presented with the source documents and information to complete the financial
records.

REQUIRED
4.1 Prepare the following Journals and close them off.

4.1.1. Creditors’ Journal (10)

4.1.1. Creditors’ Allowances Journal (3)

4.1.3 Debtors’ Allowance Journal (6)

4.1.4 General Journal [Narrations are not required] (13)

4.2 Post information in the Subsidiary Journals to the Debtors accounts in the (13)
Debtors’ Ledger.

4.3 Post the information from Journals to the following accounts in the General
Ledger:
4.3.1 Trading Stock (12)

4.3.2 Bank (6)

4.3.3 Debtors Control (12)

[ Note: Balance only the Bank Account]

4.4 Internal Control

Raymond Mafole is concerned about the time some debtors take to settle their
accounts. He is worried that the business may not be able to repay the creditors
timely. He is also concerned about the slow-moving goods that are kept in the
storage.

4.4.1 Name TWO strategies Raymond Mafole could use to encourage debtors to pay (2)
on time.
4.4.2 Mention TWO reasons for slow movement of stock and provide ONE strategy that (6)
can be implemented by the business to promote sales.
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INFORMATION A

EXTRACT FROM THE TRIAL BALANCE OF RAY STYLISH CLOTHES ON 31 MARCH 2024
Fol DEBIT CREDIT
Balance Sheet Accounts Section
Capital B1 470 400
Drawings B2 18 600
Land and buildings B3 350 000
Vehicles B4 120 000
Equipment B5 40 000
Trading stock B6 70 000
Bank B7 36 000
Debtors control B8 12 200
Cash float B9 1 200
Petty cash B10 2 500
Creditors control B11 17 500
Fixed deposit: Tshwane Bank 10% p.a B12 60 000

LIST OF DEBTORS ON 31 MARCH 2024

FOL DEBIT CREDIT
S. Nkala D1 ?
T P. Msibi D2 1 200
B. Zulu D3 5 200
12 200

LIST OF CREDITORS ON 31 MARCH 2024

Fol DEBIT CREDIT
Egoli Designers C2 8 400
Dabi Suppliers C3 9 100
17 500
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INFORMATION B

CASH RECEIPTS JOURNAL OF RAY STYLISH CLOTHES – APRIL 2024 CRJ 4

Bank Sales Cost of Debtors Discount Sundry
sales Control allowed accounts
132 680 25 680 ? 11 000 2 200 98 200

Note
On 1 April B Zulu settled his account and was allowed a discount of 5%, receipt no.627 was
issued.

CASH PAYMENTS JOURNAL OF RAY STYLISH CLOTHES – APRIL 2024 CPJ 4

Bank Trading Stationery Creditors Discount Sundry
inventory Control Received accounts
? 54 500 4 800 8 400 420 19 500

INFORMATION C

DEBTORS JOURNAL OF RAY STYLISH CLOTHES – APRIL 2024 DJ 4

Doc Day Debtors Fol Sales Cost of Sales
No
421 6 B Zulu D3 8 100 5400
422 9 S Nkala D1 4 800 3200
423 29 S Nkala D1 6 750 4500
424 B Zulu D3 ? 2400
? 15 500
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INFORMATION D

SOURCE DOCUMENTS

CREDIT INVOICES RECEIVED: (RENUMBERED)

INVOICE
VAAL NEWS
No. 436
19 April 2024
To: Ray Stylish Clothes
Advertisement placed in the newspaper 3 200 00

INVOICE
DABI SUPPLIERS
No. 437
29 April 2024
To: Ray Stylish Clothes
Quantity Description Price Amount
40 Denim jeans R180 7 200 00
50 Cotton dress R140 7 000 00
20 Denim Jacket R350 7 000 00
?

INVOICE
DUNCAN COMPUTERS
No. 438
29 April 2024
To: Ray Stylish Clothes
Quantity Description Price Amount
2 Laptops R8 000 ?
1 Laser printer R3 500 R3 500
?
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CREDIT NOTES ISSUED

CREDIT NOTE
RAY STYLISH CLOTHES

No. 66
08 April 2024
To: B Zulu

Quantity Description Price Amount

2 High Waist Denim Jeans R270 ?

CREDIT NOTE
RAY STYLISH CLOTHES
No. 67

25 April 2024
To: S Nkala
Quantity Description Price Amount
1 Linen Jacket R450 R450

DEBIT NOTE ISSUED

DEBIT NOTE
RAY STYLISH
CLOTHES
No.
54
28 April 2024
To: Vaal News

Quantity Description Price Amount

Advertising campaign not compliant with contract - 520
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JOURNAL VOUCHERS

JOURNAL VOUCHER- Ray Stylish Clothes JOURNAL VOUCHER- Ray Stylish Clothes
Date: 29 April 2024 Date: 29 April 2024
Details: Provide for the outstanding interest on Details: Charge B Zulu R150 interest on his
Fixed deposit for April @ 10% p.a overdue account
Note: interest is not capitalized.

Authorised: S Lithebe Authorised: S Lithebe

JOURNAL VOUCHER- Ray Stylish Clothes

Date: 29 April 2024
Details: The balance on Msibi’s account
must be written off as irrecoverable
The business only received 60% of the
amount owing.
Authorised: S Lithebe

ADDITIONAL INFORMATION:

• The owner took clothes for his family, the selling price amounted to R5 250.

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ANSWER SHEET
4.1 CREDITORS JOURNAL OF RAY STYLISH CLOTHES – APRIL 2024 CJ
Doc Creditors Trading Sundry accounts
no Day Creditors Fol control inventory Equipment
Amount Fol Details
435 8 Egoli Designers C2 17 400 17400

10

CREDITORS ALLOWANCES JOURNAL OF RAY STYLISH CLOTHES – APRIL 2024 CAJ 4

Doc Creditors Trading Packing Sundry accounts
no Day Creditors Fol control inventory materials
Amount Fol Details

3
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DEBTORS ALLOWANCE JOURNAL - RAY STYLISH CLOTHES APRIL 2024 DAJ 4

Doc Day Debtors Fol Debtors’ Cost of Sales
No allowances

GENERAL JOURNAL OF RAY STYLISH CLOTHES – APRIL 2024

Date Details Fol Debit Credit Debtors control

Debit Credit

13
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4.2 DEBTORS LEDGER OF RAY STYLISH CLOTHES

S Nkala D1
Date Details Fol Debit Credit Balance
2024 1 Account rendered
April
9 Invoice 422 DJ4 4 800

T P Msibi D2
Date Details Fol Debit Credit Balance
2024 1 Account rendered 1 200
April
2

B Zulu D3
Date Details Fol Debit Credit Balance
2024 1 Account Rendered 5 200
April

7
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4.3 GENERAL LEDGER OF RAY STYLISH CLOTHES

TRADING INVENTORY B6
2024 1 2024
April April 30
30

12

BANK B7

2024 1 Balance b/d 36 000 2024 30

April April
30

6
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DEBTORS CONTROL B8

2024 2024
April 1 April

12
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4.4 INTERNAL CONTROL

4.4.1 Name TWO strategies Raymond Mafole could use to encourage debtors to pay on time.

Mention TWO reasons for slow movement of stock, and provide ONE strategy that can
4.4.2 implemented by the business to promote sales.

Reasons for slow movement of stock

One Strategy to promote sales

6
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SESSON 7: DEBTORS AND CREDITORS RECONCILIATIONS

INTRODUCTION
Reconciliation of debtors and creditors can only be introduced after providing foundational
knowledge on transactions that involve debtors and creditors. Amongst other transactions include
credit purchases, credit sales, posting to ledger and subsidiary ledgers.

It is normal procedure to compare the balance of the Debtor’s Control account with the total of
the Debtor’s List at the end of each month. If the balance/total is not the same, the errors and
omissions should be identified and addressed to reconcile the books.
The Debtors Control account, Debtors Ledger and Debtors List
◼ Debtors Control Account - General Ledger account that contains all the related totals involving
debtors from the relevant subsidiary journals.
◼ The entries to the control account must correspond to the entries made to individual debtor’s
accounts in the debtor’s ledger.
◼ A list of all the debtors’ balances is compiled, and the total amount owed by the debtors must
then be equal to the balance of the Debtors Control account.

The entry (ies) in the journal (s) will be posted daily to the Debtor’s ledger and the
total at the bottom of the journal will be posted at the end of the month to the
Control Account.

NOTE: This procedure will also apply to reconciliation of creditors.

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FORMAT OF THE CONTROL ACCOUNTS AND THE SUBSIDIARY LEDGERS

GENERAL LEDGER OF KIMA TRADERS GENERAL LEDGER OF KIMA TRADERS

DR + Debtors Control (asset) CR DR - Creditors Control (liability) + CR

[1 000+ 800 + 50] [3 000 + 30]
Balance b/d 1000 Bank & discount CRJ 1 850 Bank & discount CPJ 3030 Balance b/d 5 000
Sales DJ 2000 Debtors’ allowances DAJ 250 Sundry allowances CAJ 500 Sundry purchases CJ 4 000
Journal debits GJ 65 Journal credits GJ 0 Journal debits GJ 0 Bank ( refunds) CRJ 0
[interest charged and [50] [bad debts & transfers] [bad debts & transfers] Journal debits GJ 35
cancel discount] [15] [interest charged [35]
And cancel discount]
Balance c/d 1765 Balance c/d 5505
3 065 965 9 035 9 035
Balance b/d 965 Balance b/d 5505

DEBTORS LEDGER OF KIMA TRADERS CREDITORS LEDGER OF KIMA TRADERS

DEBTORS LEDGER CREDITOR’S LEDGER

Debit Credit Debit Credit Bal
TRANSACTIONS Folio Balance BONGI Wholesalers Folio
+ - - +
1. Balance brought forward 1 000√ Account Rendered 5 000√
2. Invoice 222 DJ 2 000 3 000 Invoice 222 CJ 1 500 6 500
3. Credit note 89 DAJ 250 2 750 Debit note 45 CAJ 500 6 000
4. Receipt 567 CRJ 800 1 950 Bank Statement CPJ 3 000 3 000
5. Discount CRJ 50 1 900 Discount received CPJ 30 2 970
6. Cancel amount wrongly GJ 50 1 950 Invoice 345 CJ 2 500 5 470
discounted
7. Receipt 582 CRJ 1 000 950 General voucher -interest GJ 35 5 505
1% Interest charged GJ 15 965
8. Invoice 222 and 345 are combined (1 500 +2 500) =4 000

Debit side of Debtors Control Account is compared with the debit side of the Debtors
Ledger and credit is compared to credit. This will also apply to the Creditors
Reconciliations.
Control Accounts and Creditors/Debtors Ledger are prepared internally.
 38

REASONS FOR DIFFERENCES IN THE CONTROL ACCOUNT AND LIST/ ACCOUNT OF

DEBTORS AND CREDITORS

TYPE OF ERRORS /OMMISSIONS CORRECTION OF ERRORS

 Errors on source documents  Correct Control A/c and List
 Source document not recorded  Correct Control A/c and List
 Recording errors in Subsidiary Journals  Correct Control A/c and List
 Incorrect additions of TOTAL in journal  Only in the Control Account
 (overcast) or (undercast)
 Incorrect posting from journal to the  Only the Control Account.
control account.
 Incorrect posting from the Journals to the  Only the List / or the account of debtor
list/ or the account of the debtor
 Entry or total recorded on the wrong side  Double the entry on the correct side

ILLUSTRATIVE ACTIVITY: DEBTORS RECONCILIATON

SCHUMANN WHOLESALERS

The information below was taken from the books of Schumann Wholesalers.

REQUIRED

1.1 Prepare a correct Debtors Control account for 31 March 2024 after adjusting for all
errors and omissions and balance the account.
1.2 Prepare a correct list of debtors as at 31 March 2024.

INFORMATION Totals obtained from

different journals
GENERAL LEDGER OF SCHUMANN WHOLESALER
BALANCE SHEET ACCOUNTS SECTION
Dr DEBTORS CONTROL Cr
Mar 1 Balance b/d 89 560 00 Mar 31 Bank and CRJ 266 040 00
discount
allowed
31 Sales DJ 270 000 00 Debtors DAJ 1 200 00
allowances
Journal GJ 1 020 00 Journal GJ 1 950 00
debits credits
Balance c/d 91 390 00
360 580 00 360 580 00
Apr 1 Balance b/d 91 390 00
Balance is different from the
total in the list of debtors.
 39

List of debtors as at 31 March 2024

NAME Debit
Balances obtained
Cooper 17 900 00 from individual
Baloyi 16 380 00 ledger accounts of
Hope 14 400 00 debtors.
Smith 21 900 00
Williams 18 200 00
88 780 00
Total differs from
balance in the
Errors and omissions discovered during the month:
Debtors Control
Account.
A The Debtors Control opening balance was overcast by R6 000.

B The total column of the Debtors Allowances Journal was undercast by R210.

C A credit sales invoice for R2 900 issued to Baloyi was correctly entered in the
Debtors Journal, but was incorrectly posted to the account of Smith.
D A credit note of R520 for Cooper was not recorded at all.

E An EFT of R5 600 received from Hope in full settlement of his account of R6 000
was recorded correctly in the subsidiary journal. However, the bookkeeper forgot
to record the discount in the account of Hope.
F A credit note of R1 600 was correctly entered to the Debtors Allowances Journal;
but was incorrectly recorded as an invoice in the account of Williams.
G Charged Baloyi R300 interest on his overdue account of R8 000. No entry has
been made.
 40

SUGGESTED SOLUTION: DEBTORS RECONCILIATION

CORRECTION OF ERRORS AND OMISSIONS

No. Errors/omissions How to correct errors and omissions
A The Debtors Control opening balance SUBTRACT R6 000 from opening balance.
was overcast/overstated by R6 000.
B The total column of the Debtors Error in the journal, ADD R210 to Debtors
Allowances Journal was Allowances,in the control account.
undercast/understated by R210.
C A credit sales invoice for R2 900 issued Error in individual debtors accounts. ADD Do not
to Baloyi was correctly entered in the R2 900 to the account of Baloyi and touch the
Debtors
Debtors Journal, but was incorrectly SUBTRACT R2 900 from the account of Control
posted to the account of Smith. Smith. Account

D A credit note of R520 to Cooper was not Record in the Debtors Control and to the
recorded at all. account of a debtor. SUBTRACT R520
from Cooper’s account and ADD R520 to
the Debtors allowances in the debtors
control account.
E An EFT of R5 600 received from Hope Omission on Hope’s account, SUBTRACT
in full settlement of his account of R400 from account to reduce his balance.
R6 000 was recorded correctly in the
subsidiary journal. However, the
bookkeeper forgot to record the discount
in the account of Hope.
F A credit note of R1 600 was correctly Correct Williams’ account,SUBTRACT two
entered in the Debtors Allowances times.The first amount will cancel an error
Journal; but was incorrectly recorded as and the second and the econd amount will
an invoice in the account of Williams. correctly appear in the records.
G Charged Baloyi R300 for interest on his No entry was made,record in Baloyi’s
overdue account of R8 000. No entry account (+R300) and control account
has been made. (Sundry debits + R300)
 41

1.1 DEBTORS CONTROL ACCOUNT

GENERAL LEDGER OF SCHUMANN WHOLESALERS

BALANCE SHEET ACCOUNTS SECTION

Dr DEBTORS CONTROL Cr
Mar 1 Balance b/d 83 560 00 Mar 31 Bank and discount CRJ 266 040 00
allowed
30 Sales DJ 270 000 00 Debtors’ DAJ 1 930 00
allowances
[1 200 + 210+ 520]
Journal GJ 1 320 Journal credits GJ 1 950 00
debits
[1 020 + 300] Balance c/d 84 960 00

354 880 00 354 880 00

Apr 1 Balance b/d 84 960 00

1.2 LIST OF DEBTORS AS AT 31 MARCH 2024 Always show calculations

NAME Debit to earn part marks and
Cooper (17 900 – 520) 17 380 method marks ()

Baloyi (16 380 + 2 900 + 300) 19 580

Hope (14 400 – 400) 14 000
Smith (21 900 – 2 900) 19 000
Williams (18 200– 1 600– 1 600) 15 000

84 960
 42

ACTIVITY 1: DEBTORS RECONCILIATION

MOONLIGHT TRADERS
The information below relates to Moonlight for May 2023.
REQUIRED:

1.1. Prepare a correct Debtors’ Control Account for May 2023 by taking into account
errors and omissions. Balance the account. (16)

1.2. Prepare a correct list of debtors for the month ended on 31 May 2023. (20)

1.3. Discuss TWO strategies that can be implemented to encourage debtors to pay their
accounts on time (4)

Note: Show all your calculations in brackets to earn part marks.

INFORMATION:

INCORRECT GENERAL LEDGER

Dr DEBTORS’ CONTROL Cr
2023 2023 Bank and
01 Balance b/d 21 370 31 CRJ 24 980
May May discount allowed
31 Sales DJ 31 320 Journal credits GJ 580
Debtors’
DAJ 980
allowances
Journal Balance c/d 29 530
GJ 820
debits
55 090 55 090
2023
01 Balance b/d 29 530
June

Incorrect list of debtors as at 31 May 2023

DEBTOR DEBIT CREDIT
L. Luna 4 700
R. Rock 7 480
R.Ray 5 340
S. Sun 1 890
D. Dawn 6 760
N. Noon 800
S. Shine 1 800
29 770 800
 43

Errors and omissions:

A. The balance of the Debtors’ Control Account on 1 May 2023 is incorrect. The
list of debtors reflected a credit balance of R530, which was not taken into
account when determining the opening balance.

B. A receipt issued to S. Sun for R980 cash received was recorded correctly in
the subsidiary journal but was posted to her account as R890.

C. The total of the Debtor’s Allowances column in the Debtors’ Allowances

Journal was under-cast by R160.

D. An entry in respect of goods returned by S. Shine to the value of R300 was

correctly entered in the Debtors’ Allowances Journal but entered on the wrong
side of S. Shine account.

E. The Debtors’ Ledger reflects the credit balance in the account of

N. Noon, the amount must be transferred to the Creditors’ Ledger.

F. On 28 May 2023, R120 postage was paid on behalf of a debtor,

R. Ray from the petty cash. No entry was made in the books.

G. R. Rock paid R3 800 on her account after she received a 5% discount. The
payment and discount were recorded correctly in the subsidiary journal but
the discount was not posted to her account.
 44

ACTIVITY 1: DEBTORS RECONCILIATION

Dr DEBTORS’ CONTROL Cr
2023 01 Balance b/d 2023 31
May May
31

2023 01
June 16

1.2. List of debtors as at 31 May 2023

DEBTOR DEBIT CREDIT

L. Luna 4 700

R. Rock
R. Ray
S. Sun
D. Dawn

N. Noon
S. Shine

20

1.3. Discuss TWO strategies that can be implemented to encourage debtors to

pay their accounts on time

20
 45

ACTIVITY 2: DEBTORS RECONCILIATION

GUMEDE TRADERS
The following information was taken from the accounting records of Gumede Traders, and
it was prepared by an inexperienced bookkeeper.

REQUIRED:
2.1 Prepare the correct Debtors Control Account for July 2023. Balance the account. (20)
2.2 Prepare the correct Debtors list on 31 July 2023. (13)
2.3 Analyse the Debtors Control Account you have corrected and explain if debtors are (5)
managed properly. Mention TWO points to substantiate your answer and quote
figures.
2.4 List two internal control measures that can be applied to ensure that debtors pay (4)
their accounts on time.

INFORMATION

A. The balance of the Debtors Control in the General Ledger does not
correspond with Debtors list on 31 July 2023.

DEBTORS CONTROL
2023 1 Balance b/d 17 100 2023 31 Sales DJ 40 200
July July
31 Bank CRJ 10 520 Bank CPJ 5 080

Debtors DAJ 12 000 Sundry GJ 690

Allowances Accounts
Discount CRJ 750
Allowed
Sundry GJ 3 000
Accounts
Balance c/d 2 600

45 970 45 970
Balance b/d 2 600
 46

B. Debtors List on 31 July 2023.

B. Mpanza 18 440
N. Naidoo 16 900
R. Mzizi 8 000
P. Manyaka ( CR) 500
42 840

C. After investigating, the following errors and omissions were identified.

• The allowances journal was overstated by R 100
• The amount of R 1 320 received from B. Mpanza was recorded correctly in
the journals but was not posted to his account in the subsidiary ledger.
• Credit note no. 286, for R 1 900 was issued to N. Naidoo. This was entered
as R 190 in the relevant journal and posted as such.
• R. Mzizi’s account was overdue for 3 months. No entry was made for the
interest of R300 charged on his overdue account.
• There was no entry for the transfer of the account of P. Manyaka from his
account in the debtor’s ledger to his account in the creditors’ ledger.
• Goods sold to B. Mpanza were posted to the account of N. Naidoo, R 1 400.

42

ANSWER SHEET
2.1
DEBTORS CONTROL

July 1 July 1

20
 47

2.2 DEBTORS LIST ON 31 JULY 2023

B. Mpanza

N. Naidoo

R. Mzizi

P. Manyaka

13

2.3 Analyse the Debtors Control Account you have corrected and explain if debtors are
managed properly. Mention TWO points to substantiate your answer and quote
figures.

2.4 List TWO internal control measures that can be applied to ensure that
debtors pay their accounts on time.

4
 48

ACTIVITY 3: DEBTORS’ RECONCILIATION

You are provided with information relating to Naidoo Traders for September 2023.
3.1 Provide TWO steps that must be followed by a bookkeeper when he/she discovers a (2)
difference between the Debtors Control Account and the Debtors List.
3.2 DEBTORS RECONCILIATION
The balance of the Debtors Control account in the books of Naidoo Traders and the total of
the Debtors’ List at the end of September 2023 did not agree.
REQUIRED:
3.2.1 Draw up the correct Debtors Control account, take into account all the
errors and omissions. Balance the account on 30 September 2023. (22)

3.2.2 Prepare a correct list of Debtors on 30 September 2023. (16)

Note: Show calculations in brackets to earn part marks.

INFORMATION:

General Ledger of Naidoo Traders

DR Debtors’ Control CR
Sep 1 Balance b/d 24 800 Sep 30 Sales DJ 37 400
30 Bank and CRJ 34 480 Journal GJ 910
discount debits
allowed
Debtors’ DAJ 1 840 Balance c/d 24 210
allowances
Journal GJ 1 400
credits
62 520 62 520
Oct 1 Balance b/d 24 210

DEBTORS’ LIST ON 30 SEPTEMBER 2023

DEBTOR DEBIT CREDIT
M. Mahlangu 1 400
G. Rossouw 8 180
K. Abrahams 7 810
P. Botha 250
L. Radebe 70
P. Storm 10 360
28 000 70
 49

In addition to a few posting errors, the following errors and omissions were
identified:

A. The Debtors’ List showed the following totals on 1 September 2023:

• Debit total: R24 800
• Credit total: R240
B. The total of the Debtors Allowances column in the Debtors Allowances Journal
was overstated by R200.
C. An amount of R2 150 received from G. Rossouw and recorded correctly in the
relevant subsidiary book was not posted to G. Rossouw’s account.

D. Invoice 340 for R660 was issued to P. Storm, a debtor. The amount was
entered as R606 in the relevant subsidiary book and posted as such.
E. Credit note CN54 for R240 was issued to K. Abrahams, but has not been taken
into account at all.
F. The insolvent estate of debtor M. Mahlangu, who owed R2 000, paid 30 cents
in the rand. An EFT transfer for the relevant amount was received, recorded
and posted correctly. No other entry has been made.
G. A calculation error occurred when the Debtors Ledger of P. Botha was balanced,
the correct entry should be a credit balance of R250, correct this entry.
H. An amount of R329 in the Cash Receipts Journal was posted to the account of
debtor L. Radebe as R399.

3.3 INTERNAL CONTROL

The following balances appeared in the General Ledger of Zondo Traders on 29

February 2024:
Debtors Control R58 300
Sales R48 200
Debtors’ Allowances R10 400

Note: R15 400 was received from Debtors for payments on their accounts during
February 2024.

REQUIRED:
3.3.1 Calculate the percentage stock returned by debtors during February 2024. (2)
3.3.2 The owner of the business is not happy with the percentage of goods returned, (2)
mention one corrective measure that can be implemented by the business to reduce
the volume of returns. Provide ONE point.
3.3.3 Comment on the amount received from debtors during the month of February. (4)
Provide an internal control measure that can be implemented by the business to
improve collection from debtors. Use figures or percentages to support your answer.
48
 50

3.1 Provide TWO steps that must be followed by a bookkeeper when he/she
discovers a difference between the Debtors Control Account and the Debtors List.

2
3.2.1 GENERAL LEDGER OF GAUTENG TRADEDERS
DEBTORS’ CONTROL

22
3.2.2 DEBTORS’ LIST AS AT 30 SEPTEMBER 2023
DEBTORS DEBIT CREDIT

M. Mahlangu
G. Rossouw
K. Abrahams
P. Botha (250
L. Radebe
P. Storm

16
 51

3.3 INTERNAL CONTROL

3.3.1 Calculate the percentage stock returned by debtors during February 2024.

3.3.2 The owner of the business is not happy with the percentage of goods returned,
mention one corrective measure that can be implemented by the business to reduce the
volume of returns. Provide ONE point.

3.3.3 Comment on the amount received from debtors during the month of February. Provide
TWO internal control measure that can be implemented by the business to improve
collection from debtors. Use figures or percentages to support your answer.

4
 52

ILLUSTRATIVE ACTIVITY: CREDITORS RECONCILIATION

TSHABALALA WHOLESALERS

The information provided relates to the books of Tshabalala Wholesalers for February 2024.

REQUIRED:

Use the information below to correct and reconcile the Creditors’ Control account with the (17)
Creditors list

INFORMATION:

A: GENERAL LEDGER OF TSHABALALA WHOLESALERS

CREDITORS’ CONTROL ACCOUNT

2024 Bank & discount 2024
Feb 29 received CPJ 26 300 Feb 1 Balance b/d 5 790
Creditors CAJ 4 600 29 Total purchases CJ 43 250
allowances
Balance c/d 18 140
49 040 49 040
Mar 1 Balance b/d 18 140

B. CREDITORS’ LIST
Debit Credit
B Baloyi 7 600
C Kgatle 3 200
C. Gumbi 2 760
P. Tloome 5 780
19 340

ADDITIONAL INFORMATION:
(i) The opening balance in the Creditors’ control account is understated by R600

(ii) An amount of R2 100 has been transferred to B Baloyi via EFT, the transaction has not
been entered in the journals.
(iii) An invoice received from C Kgatle for R3 100 has not been entered in the Creditors’
Journal.
(iv) The amount owing to P. Tloome is recorded as R5 780, the correct amount appearing in
the invoice is R5 180.
(v) A debit note issued to P. Tloome for R80 has not been recorded in the journals.
 53

SUGGESTED SOLUTION
CORRECTION OF ERRORS AND OMISSIONS
NO Errors/omissions How to correct errors and omissions
i The opening balance in the Creditors’ Correct the control account,ADD R600 to
control account is undercast by R600 opening balance.
ii An amount of R2 100 has been No entry has been made.DEDUCT in
transferred to B Baloyi via EFT, the control account and the account of Baloyi in
transaction has not been entered in the the list.
journals.
iii An invoice received from C Kgatle for No entry has been made. Correct in control
R3 100 has not been entered in the and in list. ADD in control account and the
Creditors’ Journal. account of C Kgatle in the list.
iv The amount owing to P. Tloome is Error in the ledger account. Too much has
recorded as R5 780, the correct amount been recorded,SUBTRACT the difference
appearing in the invoice is R5 180. (R600) from the account of P.Tlome.
v A debit note issued to P.Tloome for R80 The transaction was not
has not been recorded in the journals. recorded,SUBTRACT in the control
account and in list of creditors.

Add (+) on the credit side

Subtract (-) on the debit side

GENERAL LEDGER OF TSHABALALA WHOLESALERS

CREDITORS CONTROL ACCOUNT

2024 Bank & discount 2024
Feb 29 received CPJ Feb 1 Balance b/d 6 390
(26 300+ 2100) 28 400 (5 790+600)
Creditors CAJ 29 Total purchases
allowance 4 680 (43 250+3100) CJ 46 350
(4 600+80)
Balance c/d 19 660
52 740 52 740
Mar 1 Balance b/d 19 660

CREDITOR’S LIST
Debit Credit
B. Baloyi (7 600-2100) 5 500
C. Kgatle (3 200+3 100) 6 300
C. Gumbi 2 760
P. Tloome (5 780-600-80) 5 100
19 660
 54

QUESTION 4: CREDITORS’ RECONCILIATION AND INTERNAL CONTROL

(43 marks ; 32 minutes)

4.1 BLUE WATER TRADERS

The bookkeeper of Blue Water Traders made errors when posting to the Creditors’
Control Account on 31 March 2024. The balance in the Control Account did not
correspond with the Creditors’ List extracted from the Creditors’ Ledger.

REQUIRED:

Take into account the errors and omissions provided in INFORMATION C and
prepare the following:

4.1.1 Correct the Creditors’ Control Account for March 2024 in the General
Ledger. Balance the account correctly. (17)

4.1.2 Correct the list of creditors as at 31 March 2024. (18)

INFORMATION A

GENERAL LEDGER OF BLUE WATER TRADERS

BALANCE SHEET ACCOUNTS SECTION

DR CREDITORS’ CONTROL B6 CR
Mar 31 Bank and CPJ 34 250 Mar 01 Balance b/d 4 380
Discount
received
Journal debits GJ 3 290 31 Creditors’ CAJ 2 108
Allowances
Balance c/d 15 038 Total CJ 44 800
purchases
Journal credits GJ 1 290
52 578 52 578
Apr 01 Balance b/d 15 038

INFORMATION B

LIST OF CREDITORS AS AT 31 MARCH 2024

Name Debit Credit
PE Traders 3 890
Together Stores 1 300
Lindiwe Traders 4 512
Number One Motors 3 100
Frans Distributors 260
260 12 802
 55

INFORMATION C

ERRORS AND OMMISSIONS

(i) Invoice 154 received from Together Stores for R1 480 was posted to the account
of Lindiwe Traders in the Subsidiary Ledger.

(ii) The business decided to transfer the balance of Frans Distributors to the Debtors’
Ledger. No entry was made.

(iii) Invoice 278 received from PE Traders for merchandise purchased on credit for
R2 300 was incorrectly recorded in the Creditors’ Journal as R3 200.

(iv) The business returned some parts bought for the delivery van to the value of
R860 to Number One Motors. The amount was correctly recorded in the
Creditors’ Allowances Journal but it was posted to the Creditors’ Ledger as credit
purchases.

(v) PE Traders supplies goods to Blue Water Traders and also buys from Blue Water
Traders. The debit balance of R640 on their account in the Debtors’ Ledger is to
be transferred to their account in the Creditors’ Ledger.

4.2 INTERNAL CONTROL

Blue Water Traders buys goods in large quantities from Lindiwe Traders. The
stock received from Lindiwe Traders normally include damaged goods or goods
that were not ordered.

Goods purchased from Lindiwe Traders are also delivered late and Blue Water
Traders has lost customers as a result of this. Blue Water Traders have decided
to change the supplier because they do not receive any discount from Lindiwe
Traders.

4.2.1 Provide TWO internal control measures that can be implemented by

Lindiwe Traders to manage stock effectively. (4)

4.2.2 Suggest the actions that should be taken by Lindiwe Traders to retain
(keep) his customers. Provide TWO points. (4)

Total Marks
43
 56

ACTIVITY 4: CREDITORS’ RECONCILIATION AND INTERNAL CONTROL

(43 marks ; 32 minutes)

4.1.1 GENERAL LEDGER OF BLUE WATER TRADERS

BALANCE SHEET ACCOUNTS SECTION

CREDITORS’ CONTROL
Mar 1

17

4.1.2 LIST OF CREDITORS’ OF BLUE WATER TRADERS AS AT 31 MARCH 2022

NAME Credit
PE Traders
Together Stores
Lindiwe Traders
Number One Motors
Frans Distributors

18
 57

4.2 INTERNAL CONTROL

4.2.1 Provide TWO internal control measures that can be implemented by

Lindiwe Traders to manage stock effectively.

4.2.2 Suggest the actions that should be taken by Lindiwe Traders to retain
(keep) his customers. Provide TWO points.

TOTAL

43
 58

ACTIVITY 5: CREDITORS RECONCILIATION

5.1 Jan’s Solar Supplies

Jan’s Solar Supplies has had a large turnover of staff in the accounting department
which resulted in both the Creditors’ Control and the Creditors List being prepared by
inexperienced bookkeepers. You have been asked to assist.

5.1.1 Explain why the balance of the Creditors’ Control Account and the total of the
Creditors’ List should correspond. (2)

5.1.2 Calculate the correct balance of the Creditors’ Control account and the
correct total of Creditors’ List. Preliminary balance for Creditors’ Control
Account is R73 434 and total for Creditors’ List is R37 994. (12)

An investigation revealed the following errors and omissions:

A. The total of the Creditors’ List was undercast by R800

B. An invoice for R9 400 for electric cables purchased from Maritha’s
Power Solutions, on account has been correctly recorded in the CJ,
but has not been posted to their account.
C. Trading stock returned to Pearl Ltd, R1 620, was entered correctly in
the CAJ, but posted to the creditor’s account as R1 260
D. The bookkeeper posted the total of the Creditors Control column in
the CPJ, R12 800 to the credit side of the Creditors’ Control
account.
E. Vuyi & Co charged Jan’s Solar Supply R56 interest for not paying
their account on time. The bookkeeper did not know how to enter it.
F. A credit purchase from Mongi Ltd for R4 210 was not entered in any
journal.

5.2. Jan is not completely satisfied with the service and quality of goods received
from Maritha’s Power Solutions. He is thinking about finding a new supplier.
State ONE factor that he should consider before changing to another supplier. (2)
 59

ANSWER SHEET

5.1.1 Explain why the balance of the Creditors’ Control Account and the total of
the Creditors’ List should correspond.

5.1.2 Creditors control Creditors list

Preliminary balance/ total R73 434 R37 994
A 900 ✓
B 3 720 ✓ 3 720 ✓
C

F 8 870 ✓
Correct balance/ total
45 678 ☑* 45 678 ☑ * 12

5.2 Jan is not not completely satisfied with the service and quality of goods
received from Maritha’s Power Solutions. He is thinking about finding a new
supplier. State ONE factor that he should consider before changing to
another supplier.

2
 60

ACTIVITY 6: CREDITORS’ RECONCILIATION

ACCOUNTING GRADE 10 EXAMPLAR P2: ADAPTED DBE 2018
The information below relates to Charl Traders for October 2023.
REQUIRED:
6.1 Explain why the Creditors Control account balance and the Creditors list total
should be equal. (2)

6.2 Refer to the Creditors Control Account (Information A) and Information C:

Show the corrections to the Creditors Control account by completing the table
provided. Use only positive figures in either the debit or credit column.
Calculate the correct Creditors Control balance on 31 October 2023. (11)

6.3 Refer to Information B and C:

Prepare the correct Creditors List on 31 October 2023.
Show all workings next to the appropriate Creditor. (18)

6.4 Charl wants to improve the management of his creditors. Provide TWO internal
control measures that he can use to achieve his goal. (4)

INFORMATION:

A. The Creditors’ Control account before taking into account Information C :

GENERAL LEDGER OF CHARL TRADERS

Dr CREDITORS CONTROL Cr
2023 2023
31 Bank and discount CPJ 62 910 1 Balance b/d 48 735
Oct received Oct
Total returns and
CAJ 3 510 31 Credit purchases CJ 72 480
allowances
Journal debits GJ 2 250 Journal credits GJ 1 450

B. The incorrect Creditors' list on 31 October 2023:

CREDITORS DEBIT CREDIT
Green Stores 14 255
Becker Ltd 13 505
Suns Warehouse 5 685
Lamb Suppliers 8 940
Brown Stores 1 315
ZZ Distributors 2 120
Best Bakery 9 615
 61

C. ADDITIONAL INFORMATION

(i) The total in the Creditors Journal was understated by R2 000.

(ii) Due to a calculation error, the balance of Becker Ltd’s creditor’s ledger
account was reflected as R13 505 instead of R23 505.

(iii) An invoice for goods bought from Suns Warehouse, R895, was recorded
in the Creditors' Journal as R985, and posted as such.

(iv) A debit note of R960 was issued to Suns Warehouse for goods returned to
them. They did accept the returns but no entry was made in the books of
Charl Traders for this transaction.

(v) An invoice for R1 460 received from Brown Stores and correctly recorded
in the journals, was incorrectly posted to the creditors ledger account of
Lamb Suppliers.

(vi) The Creditors’ Control column in the Cash Payments Journal included an
amount of R2 120 paid to ZZ Distributors for cash purchases.

(vii) Merchandise of R1 285 was returned to Best Bakery and correctly entered
in the Creditors’ Allowances Journal. However, it was posted to Best
Bakery's account in the Creditors’ Ledger as a purchase.

35
 62

ANSWER SHEET

6.1 Explain why the Creditors Control account balance and the Creditors list
total should be equal.

6.2 CORRECTIONS TO THE CREDITORS CONTROL ACCOUNT

DETAILS DEBIT CREDIT

Balance on 1 October 2023 48 735
Credit purchases of stock 72 480
Journal credits 1 450
Bank and discount received 62 910
Total returns and allowances 3 510
Journal debits 2 250
Additional information (i)
(ii)
(iii)
(iv)
(v)
(vi)
TOTAL OF EACH COLUMN

Balance on 31 October 2023

11
 63

6.3 CREDITORS' LIST ON 31 OCTOBER 2023

CREDITOR DEBIT CREDIT
Green Stores 14 255
Becker Ltd (13 505 

Suns Warehouse (5 685

Lamb Suppliers (8 940
Brown Stores
ZZ Distributors
Best Bakery

18
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









6.4 Charl wants to improve the management of his creditors. Provide TWO
internal control strategies that he can use to achieve his goal.

4
 64

SESSION 8: SALARIES AND WAGES

DIFFERENCE BETWEEN SALARIES AND WAGES

SALARIES WAGES
 Paid monthly, funds are transferred to the Paid weekly, funds are transferred to :
employer’s bank account. o The employee’s bank account
o The employee can be paid in cash or
online using e wallet.
 The fixed salary is negotiated before the  The rate is negotiated before the
employee starts his job. employee starts his job and the following
rates are applicable :
o Hourly rate – paid for each worked
o Piece work rate – worker is paid
according to number of units produced.
 Usually there in no pay for overtime, but  Overtime is calculated added to the gross
employees can receive incentive bonuses, wage.
housing subsidies or medical or car
allowance.

Definition of Concepts for salaries and wages

Concept Definition
Employer A person or an institution that provides employment to others and
pays them for services rendered.
Employee A person employed by the employer and paid for services
rendered
Clock card  A clock-card system is used to calculate the number of hours
worked.
 Each employee is given a card which is inserted into a clock
card machine at the start and end of each working day.
Payslip/salary advice A “payslip” is given to each employee, it reflects gross wage
(salary), deductions and net wage (net salary).
Rate of remuneration Calculate an amount per hour/week at which an employee will be
remunerated, e.g. at a rate of R20 per hour.
Gross wage It is the basic wage plus other payments such as overtime.
Net wage Gross wage less deductions
Gross salary It is the basic salary plus other payments such as bonuses.
Net salary Gross salary less deductions.
Bonus /  An employee can also receive a thirteenth cheque or bonus.
13th cheque  The employer determines the bonus and it is usually
calculated at a percentage.
 65

Contract of employment
It is a contract between the employer and employee it includes:
o Personal information of employee o Annual leave and sick leave
(name, ID number, home address)
o Commencement date o Salary scale
o Job title o Contributions (pension fund, medical aid , etc)
o Job description o Other allowances
o Working hours o Signature of employer and employee

Records to be kept by employer

Detailed records of each employee must be kept by the employer and they include:
o Records of work done (attendance registers, clock cards)
o Records of the calculation of gross and net pay
o Amount of tax deducted
o Employment contract

Employer has to register with the following institutions:

South African Revenue

Services (SARS)
 To pay SITE, PAYE, UIF and Skills Development Levy (SDL)
 Regulate the South African labour market.
Department of Labour  Ensure that working environment is not harmful to the health
and well-being of those in the workplace.

DEDUCTIONS
PAYE  This tax is paid by the employee to the South African Revenue
Pay As You Earn Services (SARS) and is calculated according to tax tables that
are issued by SARS.
 The more he earns, the higher the tax rate.
Trade unions  A monthly contribution by employees to their respective
unions
(Employers do not contribute towards this fund)
Staff association  Association of employees that is formed to function as trade
unions it represents their members in discussions with the
management.
 The associations aims at improving social engagement
amongst employees and at their professional growth or
advancement.
(Employers do not usually contribute towards this fund)
Pension Fund  A pension plan is a retirement plan in which an employer, and
often the employees, make contributions into a pool of funds
set aside for the workers' future benefit.
Unemployment Insurance  Compulsory deduction of 1% from the employees’
Fund (UIF) remuneration.
Medical Aid Fund  Members belonging to a Medical Aid Fund make
contributions to the Fund and in return receive medical cover
according to the rules of the Fund
 66

Contributions made by the employers :

Unemployment
Insurance Fund (UIF)
 The employer’s compulsory UIF, percentage contribution is currently
1% of gross salary.
 It is payable to SARS by the employer
(1% deducted from employee and 1% contributed by employer)
Medical Aid Fund  The employer’s contribution to the Medical Aid fund according to the
Contribution employer’s policy.
 It is a compulsory scheme to develop the skills of the work force. It
encourages employers to train their staff.
Skills Development Levy
(SDL)  SDL is payable to SARS and is kept in a special fund.
(Only the employer contributes towards this fund – not
employees)

SALARY SCALES
 It shows the starting salary (notch) of the employee, annual increment and the future notch.
 The employee can see what his future increment and notches will be.
ILLUSTRATED ACTIVITY - SALARY SCALES.
Salary scale of M Boshoff

Notch: R80 000 X R3 000 – R92 000 X R4 500 – R105 500

EXPLANATION
Year 1 start with R80 000
Year 2 + R3 000 = R83 000
Year 3 + R3 000 = R86 000 R3 000 increase p.a. until R92 000 p.a. is reached
Year 4 + R3 000 = R89 000
Year 5 + R3 000 = R 92 000
Year 6 + R4 500 = R96 500
Year 7 + R4 500 = R101 000 R4 500 increase p.a. until R105 500 p.a. is reached
Year 8 + R4 500 = R105 500

ACTIVITY 1
Sammy Traders employed M Radebe on 1 January 2020.
The following annual scale was agreed upon:
240 000 x 18 000 – 276 000 x 24 000 – 324 000

REQUIRED
Complete the following table:
Year Annual increase Annual salary Monthly salary
2020
2021
2022
2023
2024
 67

ILLUSTRATED ACTIVITY: WAGES JOURNAL

REQUIRED
Use the information to draw up the Wages Journal of Kgatle Traders for the week ended 9
April 2024.

INFORMATION

• Kgatle Traders has a working week of 40 hours. Workers who work for more than 40
hours per week are paid overtime at a rate of 1, 5 times the ordinary rate for the excess
hours worked.

• The basic rate for all workers is R20 per hour.

• The employees worked as follows for the week ended 9 April 2024.
J Bronkhorst 46 hours
B Mpanza 35 hours
M.Qaka 43 hours

Deductions for the week ended 9 April 2024:

A. PAYE
20% of gross wage

B. Pension Fund
8% of the amount for normal time. Kgatle Traders contributes R1, 50 for each R1
contributed by the employees to Sizwe Pension Fund.

C. Medical Aid
Members pay R50 per week towards DOS Medical Aid Fund. Kgatle Traders
contributes to the medical aid on a Rand for Rand basis.

D. UIF
A deduction of 1% of normal wage is made by each employee and the business
contributes the same amount.

E. Trade union
All the employees are members of CTU trade union and R15 is deducted each
week from all employees.
 68

WAGES JOURNAL OF KGATLE TRADERS FOR THE WEEK ENDING 9 APRIL 2024
Normal time Overtime Deductions Employer’s contribution
Employee Gross Pen- Medi- Net Pen- Medi-
Hrs Amount Hrs Amount wage sion PAYE cal aid UIF Union Total wage sion cal aid UIF
J Bronkhorst 40 800 6 180 980 64 196 50 8 15 333 647 96 50 8
B Mpanza 35 700 0 0 700 56 140 50 7 15 268 432 84 50 7
M.Qaka 40 800 3 90 890 64 178 50 8 15 315 575 96 50 8
2300 270 2570 184 514 150 23 45 916 1654 276 150 23
Overtime hours are multiplied by R30 (R20 X1.5)

This amount is Pension deduction x1.5

payable to = Pension contribution
employees 64 x 1.5 =96
The maximum norm time 40
hours
 69

GENERAL LEDGER OF KGATLE TRADERS- 30 APRIL 2024

BALANCE SHEET SECTION

Pension Fund
Apr 30 Bank CPJ Total Apr 9 Wages WJ 184
pension of
all the
Pension fund WJ 276
weeks contribution

Medical Aid Fund

Apr 30 Bank CPJ Total medicalApr 9 Wages WJ 5 790
of all the
weeks
Medical aid fund WJ 2 700
contribution
8 490

SARS (UIF)
Apr 30 Bank CPJ Total UIF of Apr 9 Wages WJ 23
all the weeks

SARS (SDL)
Apr 30 Bank CPJ Total SDL of
Apr 9 SDL contribution WJ1 No SDL in
all the this
weeks activity

SARS (PAYE)
Apr 30 Bank CPJ Total PAYE Apr 9 Wages WJ1 514
of all the
weeks

Creditors for wages

Apr 30 Bank CPJ Total PAYE Apr 9 Wages WJ1 1 654
of all the
weeks
 70

NOMINAL ACCOUNTS SECTION

Wages
Apr 9 Sundry WJ1 2 570
Accounts

Pension Fund Contribution

Apr 9 Pension Fund WJ1 276

Medical Aid Contribution

Apr 9 Medical Aid WJ1 150
Fund

Unemployment Insurance Fund contribution

Apr 9 UIF WJ1 23

Skill Development Levy Contribution

Apr 9 SDL WJ1 xxx

ACTIVITY 2

ILLUSTRATED ACTIVITY: SALARIES JOURNAL

VAN NIEKERK TRADERS

REQUIRED

Use the information in the Salaries Journal provided.

• Transfer funds electronically on 29 February 2024 to settle the outstanding amounts.

• Record the amounts in the Cash Payment Journal.

 71

INFORMATION

SALARY JOURNAL OF VAN NIEKERK TRADERS FOR FEBRUARY 2029 SJ11

Gross Deductions
Employee salary Pension PAYE Medical UIF Total Net salary
Fund aid
L Lindon 11 400 570 3 898,80 1 930 114 6512,80 4887,20
V Valley 17 100 855 5 848,20 1 930 171 8804,20 8295,80
K Kruger 12 800 640 4 377,60 1 930 128 7075,60 5724,40
41 300 2 065 14124,60 5 790 413 22 392,60 18 907,40

Employer’s contributions
Medical aid
Fund Pension fund UIF SDL Total
900 570 114 114 1698
900 855 171 171 2097
900 640 128 128 1796
2700 2065 413 413 5591

EXPECTED SOLUTION
CASH PAYMENT JOURNAL OF VAN NIEKERK TRADERS FOR FEBRUARY 2029
Doc day Name of payee f Bank Sundry accounts
Amount f Details
EFT 29 AA Pension 4 130 4 130 AA Pension Fund
Fund
EFT MM Medical Aid 8 490 8 490 MM Medical Aid Fund
Fund
EFT SARS 15 363,60 826 SARS (UIF)
EFT UIF+SDL+PAYE 413 SARS (SDL)
EFT 14 124, 60 SARS (PAYE)
EFT Sundry 18 907,40 18 907,40 Creditors for salaries
employees

CALCULATIONS
AA Pension Fund = R2 065 + R 2 065 = R4 130
Payable to SARS
MM Medical Aid Fund = R5 790 + R2 700 = R8 490 PAYE
UIF
UIF = R413 + R413 = R826 SDL
 72

ACTIVITY 2: WAGES JOURNAL, INTERNAL CONTROL AND ETHICS

2.1 WAGES JOURNAL AND INTERNAL CONTROL

Super Cleaning Services

Super Cleaning Services is a small business that renders cleaning services to other
businesses in Sekhukhune district municipality.

Super Cleaning Services recently received complaints from numerous clients. It is

alleged that the cleaners frequently gather in the restroom to smoke, take long
breaks and their service is substandard.

REQUIRED:

2.1.1 Prepare the Wages journal for the week ending 26 April 2024. (35)
2.1.2 B. Mashabela, is frequently late for work, and leaves early on Fridays. (4)
What steps should the owner of Super Cleaning Services take to
prevent this from becoming a habit to his staff? Mention TWO points.
2.1.3 Name TWO internal control measures the owner of Super Cleaning (4)
Service can implement in reaction/response to the complaints about smoking in
public areas, and poor service of his employees

INFORMATION:

A Extract from the attendance register of 26 April 2024.

Employees
B Mashabela MS Lekopo SK Matlala
Normal Time 40 hours 40 hours 35 hours
Overtime 05 hours Nil Nil
Total hours worked: 45 40 35

B Super Cleaning Services applies the following:

• Normal wage rate, R20 per hour
• Normal time is 40 hours per week
• Overtime rate is 1.5 times of the normal rate
 73

C
Deductions:
• PAYE – 18% of gross wages
• UIF – 1% of gross wages
• Pension fund – 8% of normal wages

Contributions:
D • UIF – 1% of gross wages
• Pension fund – R2 for R1 basis

2.2 ETHICS

Read the paragraph, then answer the Questions that follow:

SMALL BUSINESSES ARE FAILING TO PAY A LIVING WAGE

More than a third of small businesses in South Africa pay their workers less than the minimum
wage (as set by the government). This statement was based on the investigations carried out
at 1 744 workplaces in this sector, where compliance levels were found to be at 65%.

2.2.1 Why does the government set minimum wages? State ONE reason (2)
2.2.2 Would you regard the actions of these small businesses as ethical? Motivate your (2)
answer with ONE point.

ANSWER SHEET

2.1.1 WAGES JOURNAL OF SUPPER CLEANING SERVICES FOR THE WEEK ENDING 26 APRIL
2024
Gross Net
Overtime Deductions Contributions
Basic wages wages
Employee
wage Hours R/h R/c PAYE UIF Pension Total UIF
Pension
B Mashabela
MS Lekopo
SK Lekwapa

35
 74
INTERNAL CONTROL

2.1.2
B. Mashabela, is frequently late for work, and leaves early on Fridays. What
steps should the owner of Super Cleaning Services take to prevent this from
becoming a habit to his staff? Mention TWO points

2.1.3
Name TWO internal control measures that the owner of Super Cleaning
Services can implement in reaction/response to the complaints about smoking
in public areas, and poor service of his employees.

2.2 ETHICS

2.2.1
Why does the government set minimum wages? State ONE reason.

2
.

2.2.2
Would you regard the actions of these small businesses as ethical? Motivate
you answer with ONE point.

2
 75

ACTIVITY 3: WAGES CALCULATIONS AND PROBLEM SOLVING (33 marks: 25 min)

SAVE- RITE STORES
The following totals appeared in the Wages Journal of Save- Rite Stores for the week
ended 30 June 2023. All employees are paid the same rate, R25 per hour for normal time
and R30 per hour for overtime.

REQUIRED
3.1 Calculate the gross wages for the week. (5)
3.2 Calculate the net wages for the week ended on 30 June 2023. (4)
3.3 Calculate the percentage of deductions from gross wages? (2)
3.4 Explain how a business contribute towards the following funds:
3.4.1 Pension fund (2)
3.4.2 Medical aid fund (2)
3.5 Identify two ledger accounts affected by the calculation of net wages. Indicate (2)
whether the accounts must be debited or credited.
3.6 Assume that medical aid details have not changed during the past four weeks of (4)
June 2023. Calculate the amount that must be paid to the Medical Aid Fund on 30
June 2023.
3.7 State the double entry for the Pension Fund contribution made by the employer. (2)
3.8 What is the effect of the above (3.7) entry on the accounting equation? (2)
3.9 Save-Rite Stores employs 50 people. The owner finds it difficult to monitor the time (8)
of reporting to work by employees. Explain how the business will be affected by this
problem and provide strategies that can be implemented to manage this problem.
Provide TWO points in each case.

INFORMATION

Totals in the Wages Journal for the week ending 30 June 2023
Total hours (normal time) 2 000 hours
Total hours (overtime) 200 hours
Gross wages ?

Deductions Contributions
Pension fund 3 920 Pension fund 3 920
Medical aid fund 3 800 Medical aid fund 5 600
UIF 560 UIF 560
PAYE 14 000
 76

ANSWER SHEET

3.1. Calculate the gross wages for the week.

3.2 Calculate the net wages for the week ended on 30 June 2023.

3.3 Calculate the percentage of deductions from gross wages?

3.4. Explain how a business contributes towards the following funds:

3.4.1 Pension fund:
3.4.2 Medical aid fund:
4

3.5 Identify two ledger accounts affected by the calculation of net wages. Indicate
whether the accounts must be debited or credited.

Account debited
Account credited
2
 77

3.6 Assume that medical aid details have not changed during the past four weeks
of June 2023. Calculate the amount that must be paid to the Medical Aid Fund
on 30 June 2023.

3.7 State the double entry for the Pension Fund contribution made by the
employer.
Account debited
2
Account credited

3.8 What is the effect of the above (3.7) entry on the accounting equation?
A O L
2

3.9 Save-Rite Stores employs 50 people. The owner finds it difficult to monitor the
time of reporting to work by employees. Explain how the business will be
affected by this problem and provide strategies that can be implemented to
manage this problem. Provide TWO points in each case.
Effect on the business Strategies to solve the problem

8
 78
ACTIVITY 4: CONCEPTS, SALARIES, WAGES, ETHICS (47 Marks ; 42 Minutes)

4.1 CONCEPTS

REQUIRED:
Indicate whether the following statements are TRUE or FALSE. Write only 'true' or
'false' next to the question number (4.1.1 – 4.1.5).

4.1.1 Wage earners normally receive additional remuneration for working overtime. (1)
4.1.2 Skills Development Levy is paid by employers and employees. (1)
4.1.3 Net salary = gross salary – total deductions. (1)
4.1.4 Pension Fund contributions are paid to SARS. (1)
4.1.5 Medical Aid deductions are a compulsory deduction. (1)
4.2 SALARY SCALE
Martha Lengana was appointed as personal assistant at Lebombo Distributors on 1 January
2020 on the following salary scale:

180 000 x 18 000 – 216 000 x 24 000 – 264 000

REQUIRED:

4.2.1 Complete the template on the answer sheet by indicating the yearly (9)
increment and yearly salary of Martha Lengana.

4.2.2 Calculate the gross salary that Martha Lengana will receive on 31 March (2)
2023.

4.3 WAGES JOURNAL

Lebombo Distributors has four employees who receive weekly wages. Mary Nkosi was appointed
on 21 March 2024, the bookkeeper forgot to include her in the Wages Journal.

REQUIRED:

4.3.1 Complete the Wages Journal of Lebombo Traders for the week ending 25 March 2024
regarding Mary Nkosi. (20)

4.3.2 Indicate the account debited and account credited for Net Wages in the General
Ledger. (2)

4.3.1 Indicate what the abbreviation PAYE stands for. (2)

4.3.2 Briefly explain the concept “PAYE”. (2)

4.3.4 The owner Mr Sam Molefe decided that he would not pay the money over for
PAYE this month as he needed the cash, he will make a double payment the next
month. Why are you against the decision he took? Provide consequences (result) for
this action in ONE point. (3)
 79

INFORMATION

A. Mary worked 40 hours normal time and receive R50,00 per hour.
Mary worked 8 hours overtime. Overtime is calculated at 1½ times normal time.
B. All workers are liable for income tax at 18% of their gross salary.

C. Employees contribute R300 weekly for pension fund.

D. UIF is calculated at 1% of normal time.

E. Employers’ contributions are as follows:
• R1,50 for each R1 contributed by employees for Pension Fund.
• Skills Development Levy (SDL) is 1% of the gross wages.
• UIF – R0,50 for each R1 contributed by employee.

47
 80

ANSWER SHEET
4.1 CONCEPTS

4.1.1

4.1.2

4.1.3

4.1.4

4.1.5
5

4.2.1. SALARIES SCALE

YEAR INCREMENT ANNUAL SALARY

1/01/2020 – 31/12/2020

1/01/2021 – 31/12/2021

1/01/2022 – 31/12/2022

1/01/2023 – 31/12/2023

4.2.2 Calculate the gross salary that Martha Lengana will receive on 31 March
2023.

2
 81

4.3.1 WAGES JOURNAL OF LEMOMBO DISTRIBUTORS FOR THE WEEK ENDED 25 MAY 2024
Normal time Overtime Employees Employers Contribution
contribution
Employee Hrs Amount Hrs Amount Gross PAYE Pension UIF Total Net Pension UIF SDL
Wages Fund Deductions wages Fund

Mary Nkosi

20
 82

4.3.2 Indicate the account debited and account credited for Net wages in the
General Ledger
(2)
Account debited

Account credited

4.3.1 Indicate what the abbreviation PAYE stands for. (2)

4.3.2 Briefly explain the concept “PAYE”.

(2)

PAYE:

4.3.4 The owner Mr Sam Molefe decided that he would not pay the money over for
PAYE this month as he needed the cash, he will make a double payment the
next month. Why are you against the decision he took? Provide
consequences (result) for this action in ONE point. (3)

© Gauteng Department of Education

 83

ACTIVITY 5: SALARIES JOURNAL (23 marks; 21 minutes)

5.1 SALARY SCALE

Sandy Anderson was appointed as personal assistant at Star Traders on 1 January 2021 on
the following salary scale:

120 000 x 10 000 – 140 000 x 16 000 – 172 000

REQUIRED:

5.1.1 Complete the template on the answer sheet by indicating the yearly (9)
increment and yearly salary of Sandy Anderson.

5.1.2 Calculate the gross salary that Sandy Anderson will receive on 31 March (2)
2023.

5.2 SALARIES JOURNAL

S. Sithole has been appointed as a secretary on 1 April 2024. The bookkeeper of Thandi Traders
forgot to include her in the Salaries Journal for April 2024.

REQUIRED:

5.2.1 Calculate the missing amounts in the Salaries Journal indicated by A – D. (12)

INFORMATION:

B. Incomplete Salaries Journal for the month ended 30 April 2024:

Deductions Employers contributions
Employee Gross PAYE Medical Pension Medical Pension SDL
salary Aid Fund Aid Fund
S. Sithole 24 000 (A) 1 400 (B) 1 400 (C) (D)

A. All workers are liable for income tax at 18% of their gross salary.
B. Employees contribute 8% of their gross salary to Rest Easy Pension Fund.
C. Employers contributions are as follows:
• R2 for each R1 contributed by employees for Pension Fund.
• Skills Development Levy (SDL) is 1% of the gross salary

© Gauteng Department of Education

 84

ANSWER SHEET

5.1.1 SALARIES SCALE

YEAR INCREMENT ANNUAL SALARY

1/01/2021– 31/12/2021

1/01/2022 – 31/12/2022

1/01/2023– 31/12/2023

1/01/2024 – 31/12/2024

5.1.2 Calculate the gross salary that Sandy Anderson will receive on 31 March
2024.

2
5.2 SALARIES JOURNAL

Calculate the missing amounts:

(A)
(B)
(C)
(D)

12

© Gauteng Department of Education

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SESSION 9: YEAR-END ADJUSTMENTS

YEAR-END PROCEDURE

Pre-adjustment trial balance

On the last day of the financial year a trial balance is drawn up from
the balances of the General ledger accounts. It is a summary of all
transactions during the financial year. It is drawn up before any
changes have been made

Adjustments
(General journal entries)
Changes are made to certain amounts to reflect the correct position Post to
for the 12 months. the ledger

Post-adjustment trial balance

It is a list of balances from the general ledger accounts after
changes (adjustments) have been made

Closing transfers
(General journal entries)
The accounts in the nominal accounts section are income and Post to
expense accounts and are applicable for a specific financial year. the ledger
They are all closed off at the end of the financial year.

Final accounts
All nominal accounts are closed off to the Final accounts.
Final accounts consist of:

Trading account Profit and Loss account

It is drawn up to calculate the It is drawn up to calculate the
gross profit net profit
Subtract the cost of sales from the sales. Add incomes to the gross profit and subtract the
expenses from this amount.

Net profit is transferred

to the Capital account

Post-closing trial balance

It is drawn up after all expenses and incomes have
been closed off. It consists of only assets and
liabilities.(balance sheet accounts)

© Gauteng Department of Education

 86

CONCEPTS
Accounting period Length of time equal to twelve consecutive months over which financial
accounts are kept and reported on; also called a financial period or
financial year.
Consecutive Happening one after the other without interruption
Depreciation A reduction in the value of a fixed asset (vehicles and equipment) over
time due to wear and tear.
Appreciation An increase in the value of an asset over time, for example, Land and
Buildings
Accumulated Depreciation Is the total amount ‘of depreciation deducted from the fixed asset since
its acquisition?
Carrying value / Original cost price less the depreciation that has accumulated over the
book value period in which the asset has been in the business.

Accrued income Accrued income or income receivable is amounts that the business
earned during the financial year; but did not receive at the end of that
year.
Income received in Income received in advance or deferred income is amounts that the
advance business received by the end of the current financial year, but did not
earn yet
Accrued expenses Accrued expenses or expenses payable is amounts of any supplies
that the business used during the current financial year but did not pay
for by the end of that year.
Prepaid expenses Prepaid expenses are amounts that the business paid in the current
financial year for the next financial year.
Physical stock taking Action or process of counting and recording the amount of stock held
by a business.
Consumable stores on At year-end a physical stock taking is done on consumables
hand (stationery, packing material) to determine how many of the items
bought were not consumed (used up) during the year. This part of the
expense will be treated as an asset. The rest (consumed) will be
transferred to profit and loss account.
Bad debts If the business knows that a debtor is not going to pay his account
because he disappeared or was declared insolvent, the debt should be
written off. Bad debts is an expense.
Bad debts recovered Sometimes a debtor pays his debt after it has been written off. The
cash received is recorded in the CRJ. Because the debtor’s account
has been cleared, the transaction cannot be recorded in the Debtor’s
Ledger. Bad debts recovered is therefore seen as an income for the
business.

© Gauteng Department of Education

 87

YEAR-END ADJUSTMENTS

BAD DEBTS

ILLUSTRATED ACTIVITY: BAD DEBTS

REQUIRED
• Record the following transaction in the General Ledger and General Journal
• Indicate the effect on the accounting

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29

FEBRUARY 2024
Debtors control 28 200
Bad debts 1 500

Adjustment
• The debt of M Radebe (debtor), R480 must be written off as irrecoverable.

ANSWER
GENERAL LEDGER OF ZIZI TRADERS

Debtors Control
Feb 29 Balance b/d 28 200 Feb 29 Journal credits / 480
Bad debts

Bad Debts

Feb 29 Total b/d 1 500

M Radebe / GJ 480
Debtors

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Bad debts 480
M Radebe (Debtors control) 480
Write off the account of M Radebe as irrecoverable

© Gauteng Department of Education

 88

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Bad debts Debtors control -480 -480

ILLUSTRATIVE ACTIVITY: BAD DEBTS RECOVERED

REQUIRED
1. Record the following transaction in the General Ledger
2. Show the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY 2024

Debtors control 28 200
Bank 45 300
Bad debts 1 500

ADJUSTMENT

An amount of R650 was received on 27 February from B Baloyi, a debtor whose debt had
previously been written off. The transaction has not yet been recorded.

ANSWER
GENERAL LEDGER OF ZIZI TRADERS

Bank
Feb 29 Balance b/d 45 300
Bad debt 650
recovered

Debtors Control
Feb 29 Balance b/d 28 200

Bad Debts
Feb 29 Balance b/d 1 500

Bad Debts Recovered

Bank 650

© Gauteng Department of Education

 89

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Bank Bad debt recovered +650 +650

The bad debt account and Debtors Control account are not affected by the transaction, the
amount that was owing was already written off.

ACTIVITY 1

REQUIRED
• Record the following transaction in the General Ledger
• Indicate the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY

2024
Debtors control 48 500
Bank 37 100
Bad debts 2 800
ADJUSTMENT

M Basson, a debtor, was declared insolvent, a dividend of 60c in the rand was paid, R5 400 was directly
deposited into the current bank account of the business. The rest of the outstanding debt must be written
off as irrecoverable. This transaction has not yet been recorded.

ANSWER SHEET
GENERAL LEDGER OF BJ TRADERS

Debtors Control

Bad Debts

Bank

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Effect on the accounting equation

Accounting equation
Account debit Account credit A OE L

TRADING STOCK DEFICIT AND TRADING STOCK SURPLUS

 The business making use of the perpetual (or continuous) inventory system, keeps an ongoing
(continuous) record of all stock items purchased and sold.
 Therefore, the balance of the Trading stock account at the end of the financial year represents the
cost price of the trading stock on hand.

An example of a Trading Stock account

Opening balance
TRADING STOCK
Mar 1 Balance b/d 300 000 Mar 31 Drawings GJ 10 000
31 Bank CPJ 10 000 Cost of sales DJ 50 000
Creditors CJ 20 000 Creditors control CAJ 3 000
control
Cost of sales DAJ 2 000 Cost of sales CRJ 30 000
Balance c/d 239 000
332 000 332 000
Apr 1 Balance c/d 239 000 Closing balance

 Our stock on hand on 31 March according to records is R239 000

 The business should conduct physical stock count to verify if the actual stock agrees with the
balance reflected in the trading stock account.

Stock Deficit
When the physical count is less than the physical count, the shortage is called a deficit and it is a loss
to the business.

Possible reasons for a deficit:

 errors made during the year (like incorrect mark-ups)
 theft of stock
 damage / broken stock
 stock destroyed
 errors in stock-taking

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Stock surplus
When the physical count is more than the physical count, the surplus in stock will be regarded as
income
Possible reasons for a surplus:

 errors made during the year (incorrect mark-ups)

 errors in stock-taking
 omissions of stock purchases in the Trading stock account

ILLUSTRATED ACTIVITY: TRADING STOCK DEFICIT

REQUIRED
1. Record the following transaction in the General Ledger and General Journal
2. Show the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY 2024

Trading stock 63 800

Adjustment
No entry has been made for an invoice received from Ntini Stores for goods purchased on credit,
R1 080. Physical count showed stock for R63 000.

SOLUTION

Trading Stock
Feb 29 Balance b/d 63 800 Feb 29 Trading stock ?? 1 880
deficit
Creditors 1 080 Balance c/c 63 000
control
64 880 64 880
Mar 1 Balance c/c 63 000

Trading Stock Deficit

Feb 29 Trading stock 1 880

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GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Trading stock 1 080
Ntini Stores / Creditors control 1 080
Goods purchased on credit
Trading stock deficit 1 880
Trading stock 1 880
Trading stock deficit as per stock count

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Trading stock Creditors control +1080 +1080
Trading stock deficit Trading stock - 1880 - 1880

ILLUSTRATIVE ACTIVITY: TRADING STOCK SURPLUS

REQUIRED
1.Record the following transaction in the General Ledger and General Journal
2.Show the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY 2024

Trading stock 63 800

ADJUSTMENT
A credit note received from creditor B Baloyi Stores for goods returned, R700 has not yet been
entered. Physical count showed stock for R64 000.

POSSIBLE SOLUTION

Trading Stock
Feb 29 Balance b/d 63 800 Feb 29 Creditors control 700
Trading stock surplus Balance c/d 64 000
(unknown amount) ?? 900 (given)
64 700 64 700
Mar 1 Balance b/d 64 000

Trading Stock Surplus

Feb 29 Trading stock 900

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GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
B Baloyi Stores / Creditors control 700
Trading stock 700
Credit note for goods returned to creditor

Trading stock 900

Trading stock surplus 900
Trading stock surplus as per stock count

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Creditors control Trading stock - 700 - 700
Trading stock Trading stock surplus + 900 + 900

ACTIVITY 2: TRADING STOCK DEFICIT

REQUIRED
• Record the following transaction in the General Ledger and General Journal
• Indicate the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY 2024

Trading stock 124 300

Adjustment

• A debtor, M Baloyi, returned stock with a selling price of R1 800. The mark-up on these goods was 50%
on cost.
• The stock count at year-end was R122 800. No entries have been made in the books.

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ANSWER SHEET
GENERAL LEDGER OF BJ TRADERS

Trading Stock

Trading Stock Deficit

GENERAL JOURNAL OF BJ TRADERS

DEBIT CREDIT

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CONSUMABLE STORES ON HAND

 When a business buys packing material, stationery, and consumables, they are treated as
expenses.

 According to the accrual principle, only the value of the stationery, packing materials and
consumables USED during the year, may be shown as expenses when calculating the net profit
for the financial year.
 At the end of the financial year the trial balance will indicate total expenditure for the financial
year for stationery, packing material and consumables.

 At the end of financial period when the stock count is conducted, the consumables that have not
been used and cannot be shown as expenditure in this financial year. It will only be used in
the next financial year.

 The consumables, stationery and packing material not used is called consumable stores on
hand. It means that these consumable stores on hand, which was part of expenses, are now
converted to assets.

ILLUSTRATED ACTIVITY: CONSUMABLE STORES ON HAND

REQUIRED
1. Record the following transaction in the General Ledger and General Journal
2. Show the effect on the accounting equation
3. Show how these accounts will appear in the Financial Statements

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY

2024
Stationery 21 600

Adjustment

Physical stock count showed Stationery of R2 400 on hand.

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SUGGESTED ANSWERS

Record the transaction in the General Ledger and General Journal

GENERAL LEDGER OF ZIZI TRADERS

Expense account
Stationery
Feb 29 Balance b/d 21 600 Feb 29 Consumable 2 400
stores on hand
Profit and loss acc 19 200
21 600 21 600

Balance sheet account (Asset )

Consumable Stores on Hand
Feb 29 Stationery 180

Profit and Loss

Stationery 19 200
amount packing
material USED

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Consumable stores on hand 2 400
Stationery 2 400
Stationery on hand as per stock count

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L
Consumable stores on hand Stationery +2 400 +2 400 0

Show how these accounts will appear in the financial statements

NOTE 4 - INVENTORIES
Trading stock xxx
Consumables stores on hand 2 400

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ACTIVITY 3

REQUIRED

• Record the following transaction in the General Ledger

• Indicate the effect on the accounting equation

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE - 29 FEBRUARY 2024

Trading stock 87 500
Stationery 15 600
Packing material 23 400

ADJUSTMENTS

1. No entry has been made for an invoice received from RSA Transporters, R340 was for the
transport of goods purchased.
2. No entries were made for stock sold on credit for R7 200.The mark-up on cost is 100%.
3. After taking the above into account, a trading stock surplus of R1 450 was detected as per stock
count on 29 February 2024
4. The physical stock count showed Packing material of R1 200.
5. Stationery of R15 000 was used during the year.

ANSWER SHEET
GENERAL LEDGER OF BJ TRADERS

Trading Stock

Packing Material

Stationery

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Consumable Stores on Hand

Trading Stock Surplus

Show the effect on the accounting equation

Accounting equation
Account debit Account credit A OE L

CAPITALISED INTEREST ON LOAN

LOAN FROM BANK

 When the bank grants a loan to the business, the interest rate and monthly repayments are agreed
upon.

When the loan amount is received:

Debit - Bank account (Cash Receipt Journal) Assets increase

Credit - Loan account Liabilities increase

 The bank calculates monthly interest, which is added directly to the loan account - that is called the
“capitalization of interest”
 Interest on a loan is a finance cost – therefore an expense for the business.

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Monthly instalments
 The monthly instalments include the capital repayments and the interest.
When monthly loan repayments are made:

Debit - Loan account Liabilities decrease

Credit - Bank account (Cash Payment Asset decrease
Journal)

Financial year-end
 At the end of the financial year, the loan statement is received from the bank. This statement
shows the capital amount of the loan, the repayments made during the year and the monthly
interest charged by the bank.
 Some of the banks can arrange to send the statement every three months or a period less than a
year which is regarded as suitable for the client or loan account holder.

Procedure for determining and recording the amount of interest

 Reconcile the Loan account in the General ledger with the Loan statement received from the
bank.
 Recording of interest in the General Journal as follows:

Debit - Interest on loan Expense increases – Equity decrease

Credit - Loan account Liabilities increase

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ILLUSTRATIVE ACTIVITY

Zizi Traders received a loan on 1 March 2023 from ABC Bank for R200 000 at an interest
rate of 10% p.a.
The loan repayments amount to R5 000 per month payable on the 30th of each month,
starting 31 March 2023.

Loan statement received from ABC Bank on 28 February 2024.

ABC BANK
Loan statement of ZIZI TRADERS for the period 1 March 2023 to 29 February 2024
DATE DEBIT CREDIT BALANCE
01/03/2023 Balance 240 000
31/03/2023 Interest 2 000 238 000
Deposit 5 000 233 000
30/04/2023 Interest 1 942 234 942
Deposit 5 000 229 942
30/05/2023 Interest 1 916 231 858
Deposit 5 000 226 858
30/06/2023 Interest 1 890 228 748
Deposit 5 000 223 748
30/07/2023 Interest 1 865 225 613
Deposit 5 000 220 613
30/08/2023 Interest 1 838 222 451
Deposit 5 000 217 451
30/09/2023 Interest 1 812 219 263
Deposit 5 000 214 263
30/10/2023 Interest 1 786 216 049
Deposit 5 000 211 049
30/11/2023 Interest 1 759 212 808
Deposit 5 000 207 808
30/12/2023 Interest 1 732 209 540
Deposit 5 000 204 540
31/01/2023 Interest 1 705 206 245
Deposit 5 000 201 245
29/02/2024 Interest 1 677 202 922
Deposit 5 000 197 922

INFORMATION
Information from the Trial balance of Zizi Traders
Trial balance on 29 February 2024
Debit Credit
Loan: ABC Bank 180 000

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Adjustment
Determine the amount of interest paid on the loan from ABC Bank. The loan statement from
the bank showed a closing balance of R197 922 on 29 February 2024. Zizi Traders made
monthly repayments of R5 000 each.
SUGGESTED ANSWERS

LOAN: ABC BANK

Bank
Feb 29 (12 x R5 000) 60 000 Mar 1 Balance b/d 240 000
Balance c/d 197 922 Interest on loan 17 922
257 922 257 922
Balance c/d 197 922

INTEREST ON LOAN
Feb 29 Loan: ABC 17 922 Feb 29 Profit & loss 17 922
Bank

OR
240 000 -60 000 0R (5 000x12) =180 000

LOAN: ABC BANK

Balance c/d 197 922 Mar 1 Balance b/d 180 000
Interest on loan 17 922
197 922 197 922
Balance c/d 197 922

INTEREST ON LOAN
Feb 29 Loan: ABC Bank 17 922 Feb 29 Profit & loss 17 922
Closing
transfer

PROFIT AND LOSS

Interest on loan 17 922

GENERAL JOURNAL OF ZIZI TRADERS

DEBIT CREDIT
Interest on loan 17 922
Loan: ABC Bank 17 922
Interest on loan brought into account

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ACTIVITY 4: INTEREST ON LOAN
The following information was extracted from the accounting records of Coco Ltd. You are required
to prepare the Loan account and interest on loan account for the financial period ending 29 February
2024.

Information:

TROUBLE BANK R
Loan Statement on 29 February 2024
Balance on 1 March 2023 1 100 000
Interest capitalized during the year ?
Repayments, including interest, during the year 480 000
Balance on 29 February 2024 800 000

Interest capitalised has not been recorded.

ANSWER SHEET

GENERAL LEDGER OF COCO LTD

LOAN: TROUBLE BANK

INTEREST ON LOAN

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ACTIVITY 5: INTEREST ON LOAN

The following information was extracted from the accounting records of Julu Ltd. You are required to
prepare the Loan account and interest on loan account for the financial period ending 30 June 2023.

Information:

List of balances on:

Balance Sheet Accounts 30 June 2023 30 June 2022
Mortgage Loan: BBS Bank 2 057 000 2 431 400

BBS Bank R
Loan Statement on 30 June 2023
Balance on 1 July 2022 2 431 400
Repayments, including interest, during the year 374 400
Balance on 30 June 2023 2 246 000

Interest capitalised has not been recorded.

ANSWER SHEET

GENERAL LEDGER OF JULU LTD

LOAN: BBS BANK

INTEREST ON LOAN

ACCRUED EXPENSES AND ACCRUED INCOME

 Accrued income refers to the income earned during the year but not yet received at the end of
the accounting period.

 Accrued expense refers to the operating expenses incurred during the year but not paid at the
end of the accounting period.

 According to the Matching Principle these amounts (expenses or income) must be added or be
recorded in the Accounting period in which they were incurred.

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ILLUSTRATIVE ACTIVITY

BJ Traders

The information is extracted from the records of BJ Traders, their financial year ends on 29 February
2024.

REQUIRED
1. Record the following transaction in the General Ledger and General Journal
2. Indicate how they will be recorded in the financial statements

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE - 29 FEBRUARY 2024

Debit Credit
Rent expense 55 000
Interest on fixed deposit 10 000

ADJUSTMENTS
• Monthly rent is R5 000, rent for February 2024 has still to be paid.
• Interest on fixed deposit has been received for 10 months only.

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SUGGESTED SOLUTION
GENERAL LEDGER OF BJ TRADERS

Rent Expense
Feb 29 Total 55 000 Feb 29 Profit and loss 60 000
Accrued expense 5 000
60 000 60 000

R5 000 is owing and added Total rent expense

to the amount paid (55 000 + 5 000)

Accrued Expense
Feb 29 Rent expense 5 000
This amount is regarded as a current
liability

Interest on Fixed Deposit

Feb 29 Profit and Loss 12 000 Feb 29 Total 10 000
Accrued Income 2 000
12 000 1 440

10 000 / 10 months = 1 000

1 000 x 2 = 2 000

Accrued Income
Feb 29 Interest on fixed 2 000
deposit
This amount is regarded as a current asset

Profit and Loss

Feb 29 Rent expense 55 000 Interest on fixed 12 000
deposit

GENERAL JOURNAL OF BJ TRADERS

Debit Credit
Rent expense 5 000
Accrued expense 5 000
Rent for February is still payable
Accrued income 2 000
Interest on fixed deposit 2 000
Interest for two months is accrued

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NOTES TO THE FINANCIAL STATEMENTS

5.Trade and other receivables
Accrued income 2 000

8. Trade and other payables (creditors)

Accrued expenses 5 000

PREPAID EXPENSES AND INCOME RECEIVED IN ADVANCE

 Prepaid Expenses are payments for goods or services to be received in the future. These
expenses should be excluded when reporting at the end of the accounting period, they will be
recorded in the next financial year. These expenses are regarded as current assets.

 Income received in advance for goods to be supplied in future or services to be provided in

future. The income received in advance or deferred income is regarded as a current liability.

ILLUSTRATIVE ACTIVITY

BJ Traders

The information is extracted from the records of BJ Traders, their financial year ends on 29 February
2024.

REQUIRED

1. Record the following transaction in the General Ledger and General Journal
2. Indicate how they will be recorded in the financial statements

INFORMATION

EXTRACT FROM PRE-ADJUSTMENT TRIAL BALANCE - 29 FEBRUARY 2024

Debit Credit
Insurance 14 800
Rent Income 39 000

ADJUSTMENT
• Included in the amount for insurance is the annual premium of R2 400 for the period starting on
1 August 2023 to 31 July 2024.
• Rent for March 2024 has already been received.

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SUGGESTED SOLUTION
GENERAL LEDGER OF BJ TRADERS

Insurance
Feb 29 Total 14 800 Prepaid expense 1 000
Profit and loss 13 800
14 800 14 800

Asset

Prepaid Expense
Feb 29 Insurance 1 000

1/3/2023 to 29/2/2024 (Current financial period ) 2024

Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Insurance expense for current year Insurance paid in advance

2 400 x7/12 = 1 400 2 400 x 5/12 = 1 000

Rent Income
Income received
Feb 29 in advance 3 000 Feb 29 Total 39 000
Profit and loss 36 000
39 000 39 000

Liability

Income Received in Advance

Feb 29 Rent income 3 000

1/3/2023 to 29/2/2024 (Current financial period )

Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Rent received in
advance
Rent income for 12 months is 39 000 x12/13 =36 000 39 000 /13 = 3 000

Profit and Loss

Feb 29 Insurance 13 800 Feb 29 Rent income 36 000

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GENERAL JOURNAL OF BJ TRADERS

Debit Credit
Prepaid expense 1 000
Insurance 1 000
Insurance paid in advance for 5 months
Rent Income 3 000
Income received in advance 3 000
Rent income received in advance

NOTES TO THE FINANCIAL STATEMENTS

5.Trade and other receivables
Prepaid expense 1 000

8. Trade and other payables (creditors)

Income received in advance 3 000

ILLUSTRATED ACTIVITY: CORRECTION OF ERROR

INFORMATION

Repairs to the buildings of R6 000 have been debited to the Land and Buildings account in error.

REQUIRED

Correct the error.

EXPLANATION

GENERAL LEDGER

Bank
Land and buildings 6 000
Step 1 Correct - original entry

Incorrect - original entry

Land and Buildings
Bank 6 000 Repairs 6 000
Step 1 Step 2
Correction of error –same amount entered on the credit side

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Repairs
Land and 6 000 Profit and loss 6 000
Buildings
Step 2 Closing transfer

 The entry on the credit side of the land and buildings account cancels the incorrect entry
 The correct account (repairs) will be debited

Note: to correct the wrong entry, always enter the same amount in the opposite side of the
account.

GENERAL JOURNAL
Debit Credit
Repairs 6 000
Land and Buildings 6 000
Correction of error
Profit and Loss 6 000
Repairs 6 000
Closing Transfer

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ACTIVITY 6

REQUIRED

Record the following transactions in the General Journal of Joseph Traders.

INFORMATION

EXTRACT FROM THE PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY

2024
Fixed deposit: Gauteng Bank 140 000
Debtors control 13 400
Drawings 8 300
Rent income 78 000
Advertising 18 350
Bad debts 480
Water and electricity 24 500
Interest on fixed deposit 7 500

ADJUSTMENT

1. The account of P. Selepe, a debtor, has to be written off as a bad debt, R280.

2. Included in the total amount for advertising is R2 800 for a seven-month contract which expires
on 31 May 2024

3. Water and electricity owed for February 2024, R2 100.

4. The fixed deposit account appeared in the books as follows:

Fixed Deposit: Gauteng Bank

Mar 01 Balance b/d 100 000
Sep 01 Bank 40 000

• Both amounts were invested at 15% p.a.

• Calculate interest for the accounting period.

5. An amount of R2 100 was transferred to the account of the local high school as a donation ,this
amount was debited to the Drawings account by mistake. Correct the error.

6. Part of the building has been let to J Molefe for R6 000 per month.

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ANSWER SHEET

GENERAL JOURNAL OF RADEBE TRADERS

DEBIT CREDIT
1

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DEPRECIATION ON TANGIBLE ASSETS
112
Depreciation

It is a reduction in the value of an asset over time due in particular to wear and tear. Depreciation
is an imputed expense (does not affect the cash position of the business). The cost price of the
business will affect the cash position, but it’s allocated a specific accounting period.

Tangible or Fixed assets

Are assets acquired/purchased by the business, they are not intended for resale but to be used for
daily operations of the business in order to generate profit.
 The examples of fixed assets are listed below :
▪ Land and buildings
▪ Vehicles
▪ Equipment

 The value of Tangible assets such as vehicles and equipment depreciate because of wear and
tear resulting from daily use.
 The value of land and buildings appreciates if the property is well maintained.

CONCEPTS UNIQUE TO TANGIBLE ASSETS AND DEPRECIATION

Accumulated Is the total amount ‘of depreciation deducted from the fixed asset since its
Depreciation acquisition.
Carrying value / Original cost price less the depreciation that has accumulated over the
book value period in which the asset has been in the business.

Age of Assets Businesses should monitor their assets to identify assets that need to be
replaced. Assets that are old due to wear and tear should be replaced
with efficient assets.
Replacement It refers to how often the business determines a fixed asset will be
Rate replaced.
Replacement When a fixed asset has to be replaced, the business needs to look if it is
Value of Assets worth replacing the old asset and what it will cost them to buy the new
asset.
Lifespan of Estimated length of time the asset can reasonably be used to generate
assets income and be of benefit to the business.

ACQUISITION OF ASSETS

 Assets can be bought for cash or on credit. The assets can also be donated to the business.

ASSET REGISTER

Is the list of assets that belong to the entity. The purpose of fixed asset register is to keep track of the
book value of assets and determine the depreciation to be calculated and recorded for management
and taxation purpose.

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DETAILS OF ASSETS RECORDED IN THE ASSET REGISTER

• Date of purchase • Rate of depreciation
• Cost Price • Book value
• Details of the seller • Life expectancy
• Type and model • Method of depreciation
• Serial number • Depreciation
• Receipt/Invoice • Accumulated depreciation

A FIXED ASSET REGISTER FORMAT

D M TRADERS
NO.1
Asset register
General ledger account: Vehicle account (B 6)
Item: Nissan delivery van 2 Date 1 March 2024
litre purchased:
From whom Nissan Monument Cost price:
R180 000
purchased:
Percentage 20 % p.a. at cost price/straight line method
Depreciation:
Details of depreciation
Dates Annual depreciation Accumulated Book value
Calculations depreciation or known as
“Carrying value”

NOTE: only one asset will be recorded in this register

The business should keep every transaction relating to an asset in the fixed asset register. Each asset
owned by the business should have a detailed entry page in the register.

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DEPRECIATION METHODS

FIXED INSTALMENT/ COST PRICE METHOD DIMINISHING BALANCE/CARRYING

VALUE
 Takes place over the useful life of the asset  Writing off of depreciation on the carrying
at a fixed rate. (e.g. over 5 years at 20% p.a.) value at a fixed percentage (e.g. 15% p.a.)
 Writing off takes place over a longer
period.

BASELINE ACTIVITIES

ILLUSTRATIVE ACTIVITY 1

INFORMATION
The financial year ends on the last day of February each year.
Bought a delivery van for R180 000 on 1 March 2023.

REQUIRED
Calculate depreciation on 29 February 2024 at 20% p.a. on cost price

ANSWER

180 000 x 20% = 36 000

ACTIVITY 7

INFORMATION
The financial year ended on 31 December 2023.
Balance of the Equipment account in the General Ledger on 1 January 2023: R120 000.
Bought a new computer and printer for R15 000 on 1 July 2023.

REQUIRED
Calculate depreciation on 31 December 2023 at 10% p.a. on cost price.

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ANSWER SHEET

ILLUSTRATIVE ACTIVITY 2

INFORMATION
The following balances appear on 1 March 2023 as follows:
Equipment R140 000
Accumulated depreciation on equipment R14 000.

REQUIRED
Calculate depreciation on 29 February 2024 at 10% p.a. on the diminishing balance method.

ANSWER

Cost price –Accumulated Depreciation = Carrying Value

140 000 – 14 000 = 126 000
126 000 x 10% = 12 600

ACTIVITY 8

INFORMATION
• Balances appear in the books on 1 March 2023 as follows:
o Equipment R280 000
o Accumulated depreciation on equipment R28 000
• Bought new equipment for R48 000 on 1 November 2023.

REQUIRED
Calculate depreciation on 29 February 2024 at 10% p.a. on the diminishing balance method.

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ANSWER SHEET

AN EXAMPLE OF AN ASSET REGISTER:

NOTE: The financial year ends on the last day of February each year.

ASSET REGISTER
Mzansi Traders
Item : Delivery Vehicle STV 565 GP
Date of purchase : 2020 March 01
Cost price : R120 000
Purchased from : Speedy Motors
Rate of depreciation : 20%p.a. on cost
Date Current Accumulated Carrying value
Depreciation Depreciation
2021-02-28 24 000 A 24 000 96 000 B
2022-02-28 24 000 48 000 C 72 000 D
2023-02-28 24 000 72 000 48 000
2024-02-29 24 000 96 000 24 000

120 000 x 12/12 x 20% = 24 000 A

120 000 -24 000 = 96 000 B (Cost price –Accumulated depreciation = Carrying Value)
24 000 + 24 000 = 48 000 C
120 000 – 48 000 = 72 000 D

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ACTIVITY 9: Consolidation of adjustments

MOTSEPE VACUUM CLEANERS

John Motsepe, is the owner of Motsepe Vacuum Cleaners. The business buys and sell vacuum
cleaners and service vacuum cleaners at a fixed fee. The financial year of the business ends on 31
December each year.

REQUIRED:

Use the adjustments and additional information to complete the columns provided on the
answer sheet.

INFORMATION:
A. Extract from the Pre-Adjustment Trial Balance of Motsepe Vacuum Cleaners for the
year ended 31 December 2023.
Debit Credit
Land and buildings 980 000
Vehicles 740 000
Equipment 320 000
Accumulated Depreciation on Vehicle (1 January 2023) 148 000
Accumulated Depreciation on Equipment (1 January 2023) 58 200
Trading stock 480 200
Debtor’s control 56 200
Loan: RSA Bank ?
Fixed Deposit: Perm Bank (7% p.a.) 70 000
Rent expense 92 800
Interest on current account 580
Fee income 124 500
Salaries and wages 345 600
Stationery 21 700
Rates and taxes 32 500
Advertising 18 400
Bad debts 9 200
Interest on fixed deposit 3 675
Bank charges 4 200

B. ADDITIONAL INFORMATION AND ADJUSTMENTS:

1. According to the physical stock taking, trading stock of R480 640 was on hand
on 31 December 2023.
2. Stationery used during the financial year amounted to R20 400.
3. The fixed deposit at Perm Bank was invested on 30 November 2022. Provide for
outstanding interest. Interest is not capitalized.

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4. The rates and taxes account for December 2023 was received but not paid,
R1 800.
5. A debtor, K. Fouche who owes the business R3 800 has been declared insolvent.
The insolvent estate paid out 40 cents for each rand he owes. Write off the rest
as irrecoverable.
6. A vacuum cleaner has been serviced for R1 400 for M Molefe on 28 December
2023, however, M Molefe will only pay on 4 January 2024.
7. Advertising include R7 200, this amount is for an advertisement placed in the
local newspaper for the period 1 April 2023 to 31 March 2024.
8. The following entries appeared in the December 2021 bank statement but were
not recorded in the books of the business:
• Cash handling fees, R450
• Interest on favourable bank balance, R120

9. Write depreciation of on vehicles at 15% per annum on straight line method and
on equipment at 10% per annum at carrying value.

10. The loan statement from RSA Bank on 31 December 2023 reflects the
following:

Balance on 1 January 2023 350 000

Total repayment during the year (including interest) 56 000
Balance on 31 December 2023 310 000

• The interest for the year is capitalised.

11. Rent has been paid for 11 months. According to the lease agreement, the rent
will increase annually on 1 August with 15%.

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ANSWER SHEET

General Ledger
No Calculations Account debited Account credited
1

10

11

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SESSION 10: FINAL ACCOUNTS

INTRODUCTION
The final accounts are used to determine the profit made by the business at the end of the financial
year. The accounts are:
 Trading Account - used to determine the Gross Profit.
 Profit and Loss Account - used to determine the Net Profit.

Gross Profit = Sales - Cost of Sales

Net Profit = Gross Profit + Income - Expenses

ILLUSTRATIVE ACTIVITY
The information provided below is extracted from the records of Mzizi Traders, you are expected to
prepare the following accounts for the year ended 31 December 2023:
o Trading Account
o Profit and Loss Account

INFORMATION:
Extract from the Pre-Adjustment trial balance on 31 December 2023
Balance sheet account section Fol Debit Credit
Capital 2 345 600
Vehicle at cost 140 000
Accumulated depreciation on vehicle 80 000
Equipment 230 000
Accumulated depreciation on equipment 86 000
Trading stock 70 000
Fixed deposit: Bank of Africa 6% p.a. 250 000
Debtors control 45 000
Bank 87 000
Nominal account section
Sales 720 000
Debtors’ allowances 13 800
Cost of sales 400 000
Rent income 13 750
Interest on fixed deposit 11 250
Salaries and wages 164 000
Employers’ contribution 10 800
Insurance 8 800
Stationary 2 998
Water and electricity 6 220
Bad debts 8 290

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ADJUSTMENTS

1. The tenant paid rent up to 30 November 2023. The rent was increased by R80 from 1
December 2023.
2. One employee is omitted in the salaries journal for December 2023
• Net salary R9 200
• Deductions R2 400
• Employers contributions R 350
• Gross salary ?
3. Insurance amount includes a premium of R2 400 paid for the period 1 August 2023 to 31
July 2024.
4. The stock taking records on 31 December 2023 reflected the following on hand:
• Trading stock R64 700
• Stationary R107
5. The water and electricity account of R412 for December 2023 is still payable.
6. Debtor C Peter is overseas for an unlimited period and cannot be traced. Write off his
debt of R890 as irrecoverable.
7. Interest on fixed deposit excluded interest for the last quarter of the financial year.
8. Depreciation must be taken into account as follows:
• On equipment at 15% p.a. on diminishing balance method
• On vehicle at 10% p.a. on cost price method.

EXPECTED ANSWER

DR TRADING ACCOUNT F1 CR

2023 2023
Dec 31 Cost of sales 400 000 Dec 31 Sales 706 200
[720 000 – 13
800]
Profit and loss 306 200
a/c
This amount is the 706 200 706 200
gross profit

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DR PROFIT AND LOSS ACCOUNT F2 CR

2023 Water and 6 632 2023 Trading Account 306 200
electricity
Dec 31 Stationery 2 891 Dec 31 Rent income 15 080
Trading stock 5 300 Interest income 15 000
deficit
Salaries and 175 600
wages
Insurance 7 400
Employers’ 11 150
contribution
Bad debts 8 290
Depreciation 35 600
Capital 83 417
(net profit)
336 280 336 280

NO. CALCULATIONS ANSWER

1. Water and electricity (6 220 + 412) 6 632
2. Stationery (2 998 + 107) 2 891
3. Trading stock deficit (70 000 – 64 700) 5 300
4. Rent 13 750/11 = 1 250
income 1 250 + 80 = 1 330
(13 750 + 1 330) 15 080
5. Salary and wages (164 000 + 9 200 + 2 400) 175 600
6. Insurance 8 800 – (2 400 x 7/12) 7 400
1 400
7. Employers contribution (10 800 + 350) 11 150
8. Bad debts (7 400 + 890) 8 290
9. Interest of fixed deposit 11 250 + (11 250 /3) 260 000 x 6% 15 000
OR
3750
10. Depreciation (14 000 + 21 600) 35 600
Equipment (230 000 - 86 000) x 15% = 21 600
144 000
Vehicles 140 000 x 10% = 14 000

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ACTIVITY 1

The information provided below is extracted from the records of Mogashoa Traders, you are expected to
prepare the following accounts for the year ended 29 February 2024.

• Trading Account
• Profit and Loss Account

INFORMATION

PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY 2024

Balance sheet account section Fol Debit Credit
Capital 200 840
Drawings 10 520
Vehicle on cost 410 000
Equipment on cost 207 000
Accumulated depreciation on equipment 133 000
Accumulated depreciation on vehicle 160 000
Trading stock 55 690
Debtors control 38 690
Creditors control
Fixed deposit: 6% p.a. 60 000
Nominal account section
Sales 1 267 000
Cost of sales 597 000
Debtors allowances 15 800
Bad debts 5 900
Interest on fixed deposit 12 000
Rent income 52 000
Advertising 5 200
Insurance 8 700
Salaries and wages 247 000
Water and electricity 27 400
Commission income 24 000
Telephone 3 800
Sundry expenses 13 000
Consumable stores on hand 6 400
Bank charges 4 050

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ADJUSTMENTS
1. Bogatsu a debtor who owes R900 was declared insolvent on 29 February 2024. His
estate paid 45 cents of the rand, the balance must be written off
2. Rent for March has already been received.
3. On 1 January 2024 an amount of R960 was paid for the placement of weekly
advertisement for a three months period
4. The monthly insurance premium of R750 has been paid one month in advance.

5. An employee, M. Sadike was under-paid for February 2024 in error, the difference of
R2 500 will be paid in March 2024.
6. The interest on fixed deposit has been received three months in advance, R2 400.
7. Internal auditor found that bank charges, R500 has been incorrectly debited in the
sundry expenses account
8. Consumable stores unused at the end of the financial year are valued at R1 000
9. Provide depreciation on Vehicle at 20% p.a. on the diminishing balance method and on
Equipment on 10% on straight line method.
10. A physical count of stock on 29 February 2024 revealed an amount of R55 000

ANSWER SHEET

DR TRADING ACCOUNT F1 CR

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DR PROFIT AND LOSS ACCOUNT F2 CR

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ACTIVITY 2

You are provided with information related to Super Save Traders. The financial year
ends annually on 30 June. The business uses a mark-up of 70% on cost price.

REQUIRED:

Complete the trading account and profit and loss account of Super Save Traders for the
year ending 30 June 2023.

INFORMATION:
A. Extract from the Pre-Adjustment Trial Balance of Super Save Traders for the year
ended 30 June 2023.
Debit Credit
Capital ?
Drawings 12 300
Land and buildings 4 200 000
Vehicles 2 000 000
Equipment 840 000
Accumulated Depreciation on Vehicle (1 July 2022) 560 000
Accumulated Depreciation on Equipment (1 July 2022) 159 600
Fixed deposit (7% p.a. interest) 170 000
Trading stock 496 800
Debtor’s control 58 400
Loan: RSA Bank ?
Sales 2 380 000
Debtors Allowances 42 300
Cost of sales 1 400 000
Rent income 220 000
Bad debts recovered 1 800
Fee income 280 900
Interest on fixed deposit 5 950
Stationery 6 400
Telephone 22 800
Salaries and wages 840 300
Insurance 36 200
Bad debts 7 600
Bank charges 2 400
Sundry expenses 34 600
Interest on current account 2 400

B. ADDITIONAL INFORMATION AND ADJUSTMENTS:

(i) Joseph took goods for personal use, the selling price of the goods amounted
to R5 100.This transaction has not been recorded.

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(ii) Stock-taking on 30 June 2023 revealed the following on hand:

• Trading stock R489 700
• Stationery R1 400
(iii) M. Motloung paid R1 800 via EFT on 29 June 2023 to repair his washing
machine. The repairs will only be done on 4 July 2023. Income received is
recorded under fee income account.
(iv) The telephone account for June 2023 has been received but not yet paid,
R1 450.
(v) The following entries appeared in the June 2023 Bank Statement but are not
yet been recorded in the books of the business:
• Bank charges, R180
• Interest on bank overdraft, R240.
(vi) Rent has been received for 11 months, according to rental agreement rent a
monthly rent increased by R2 000 on 1 June 2023.
(vii) A debtor, M Kemp, has been declared insolvent, he owed R5 800. His insolvent
estate paid out 30 cents in every rand he owed, and the balance must be
written off as irrecoverable.
(xiii) An amount of R1 200 was received from A. Abrahams. Her account was
previously written off as irrecoverable. The bookkeeper recorded it correctly
in the Cash Receipts Journal, however the amount was recorded under
Debtors’ Control analysis column and posted as such. Correct the error.
(ix) Outstanding interest on fixed deposit must be taken into account. The fixed
deposit was invested on 1 January 2022. Interest on fixed deposit is not
capitalized.
(x) The loan statement from RSA Bank on 30 June 2023 reflects the following:
Balance on 1 July 2022 840 000
Total repayment during the year (including interest) 204 000
Balance on 30 June 2023 703 200

• Interest on loan is capitalized.

• Capital amount of R120 000 will be paid in the next financial year.
Included in the amount of insurance is an amount of R6 000 for the period 1
(xi) April 2023 to 31 March 2024.
(xii) Calculate depreciation as follows:
• On vehicles at 10% per annum on cost price method. Included in the amount of
vehicles is a delivery van purchased on 1 February 2023 on credit for
R540 000.
• On equipment at 10% per annum on the diminishing balance method.

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ANSWER SHEET
DR TRADING ACCOUNT F1 CR

DR PROFIT AND LOSS ACCOUNT F2 CR

© Gauteng Department of Education