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ContentsQuestion 13Question 25Question 363.1 Debtors Account63.2 Reconciliation of debtors balances6Question 474.1 Income statement of Orange trader for the year ended 29 February 201474.2 Statement of changes in equity for the year ended 29 February 20148

Question 11.1The perpetual inventory system show all changes in inventory in the Inventory account. Purchase accounts are not used in a perpetual inventory system whereas the periodic inventory system keep the inventory balance at the same value that it was at the beginning of the year, at year end the inventory balance is adjusted to a physical count. To account for inventory purchases in a periodic inventory system, an account called "Purchases" is used rather than debiting "Inventory".1.2 2 key fundamental assumptions when preparing financial statements are as follows:i)Going Concern - When financial statements are prepared on a going concern basis, it is assumed that the entity has neither the intention nor the need to liquidate or curtail materially the scale of its operations, but will continue in operation for the foreseeable future.ii)Accrual Basis - When financial statements are prepared on the accrual basis of accounting, the effects of transactions and other events are recognized when they occur (and not as cash or its equivalent is received or paid), and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.

1.3Two errors that could occur in the drawing up of a creditors ledger:i)Errors of omissionii)Errors of principle

1.4Three elements of financial statements are assets, liabilities and equity.

1.51.5.1 Asset are possessions that belong to the business. Assets are further divided into non-current and current assets. An example is a building.

1.5.2 Liabilities are debts of a business or organization. Liabilities are further divided into non-current and current liabilities. An example is long term debt1.5.3 Net Asset Value this the difference between the value of assets owned by an enterprise and the liabilities it has incurred.1.5.4 Current liabilities current liabilities are debts over a short term period usually a year. An example is a bank overdraft1.5.5 Non-current assets - these are possessions of the business that are used for the production of other goods or services. They are long term in nature. An example is land

Question 2NoSource documentSubsidiary BookA/C DrA/C CrA =O +L

1Bank deposit slipGeneral JournalBankCapital50000500000

2Purchase InvoiceCash Payments JournalPurchasesBank-50000-500000

3Sales InvoiceCash Receipts JournalDebtor: R RandleSales16000160000

4Purchase InvoicePurchases JournalPurchasescreditor: O Let-1800018000

5Purchase InvoiceGeneral JournalMotor VehicleCreditor: H Hak38000038000

6Cheque counterfoilCash Payments JournalAdvertising expenseBank-750-7500

7Cheque counterfoilCash Payments JournalCreditor: O letBank-180000-18000

8Purchase InvoiceGeneral JournalFurnitureCreditor: Furn Furnishers550005500

9Cheque counterfoilCash Payments JournalElectricity expenseBank-1500-15000

10Rent ReceiptCash Payments JournalRent expenseBank-6500-65000

Question 33.1 Debtors AccountDebtors Account

2014RR

Apr-01Balance b/d16000Cash received from debtors 13220

Payments to debtors100Discount allowed500

Sales11700Returns inwards1300

Interest charged on debtors account100Bad debts written off180

Dishonoured cheque550Contra300

Apr-30Balance c/d12950

2845028450

May-01balance b/d12950

3.2 Reconciliation of debtors balancesR

Total list of debtors balances at 30 April13610

Sales - N. Boddy90

Sales returns - R Stop-100

L. Long - R/D Cheque550

Bad debts w/o-180

Balance at 30 April12950

Question 44.1 Income statement of Orange trader for the year ended 29 February 2014RR

Sales (250620-250)250370

Cost of sales115800

Opening inventory13760

Purchases (116040-1150)114890

Railage on purchases2500

131150

Less closing inventory15350

GROSS PROFIT134570

Other Income9450

Rent Income9450

GROSS INCOME144020

Expenses104550

Salaries and wages77500

Railage on sales1600

Interest on loan8400

Depreciation on vehicles3400

Depreciation on equipment560

Insurance (660-120)540

Printing (1350+1350)2700

Stationery5400

Packaging material3600

Discount received400

bad debts300

Provision for bad debts150

NET INCOME39470

4.2 Statement of changes in equity for the year ended 29 February 2014R

Opening balance60500

Add: net Profit39470

99970

Less: Drawings3400

Closing balance96570

References