EZ Revision - EZ Learn Rev - Acc 11 2012 - sample.pdf · With special thanks to the Independent...

EZ Revision

Accounting Grade 11

2012 edition

Name: _________________________________

Compiled by Barbara Williamson

EZ Learn Books cc Tel/Fax (011) 4623550, Cell 082 322 0005

Website www.ezlearn.co.za, E-mail [email protected]

Postnet Suite #100, Private Bag X1, Jukskei Park, 2153

CK 1987/008514/23, Member Barbara Williamson

2012 edition

Barbara Williamson 2010, ISBN-13 978-0-9802631-0-7

All rights reserved. No part of this book may be reproduced or

transmitted in any form or by any means, electronic or mechanical,

including photocopying, recording, or any information storage or

retrieval system, without permission in writing from EZ Learn Books CC.

http://www.ezlearn.co.za/

mailto:[email protected]

Contents

1. How to make the most of this guide ............................... 1

2. Analysing ethical behaviour .............................................. 5

3. VAT calculations .................................................................... 6

4. Reconciliations ................................................................... 12

5. Disposal of tangible assets ................................................ 30

6. Periodic inventory system .................................................. 46

7. Manufacturing accounts ................................................. 56

8. Cash budgets ..................................................................... 88

9. Partnerships ....................................................................... 110

10. Non-profit organisations ................................................. 150

11. Internal auditing ............................................................... 174

With special thanks to the

Independent Examinations Board (IEB)

and the

Department: Basic Education (DBE)

for permission to publish their question papers. All memoranda are the responsibility of the author.

1. How to make the most of this guide

www.ezlearn.co.za 1

1. How to make the most of this guide This revision guide has been specially designed to help you prepare for your year end

examination. If you work through it carefully, using the suggestions given here, you

should find that you are able to walk into the exam at the end of the year with

confidence!

Exam papers from past years have been divided up into the different sections taught.

Each of chapter starts out with crash course notes to help you get started. This means

that when you discover that your understanding of a particular area is weak, you can

focus on that section as it is taught during the year, as well as during revision just

before exams when you want to brush up on everything you have been taught.

Your revision plan

Completing the exercises A revision plan has been specially devised for you, taking into account when you

would have studied the different sections, your holidays and exam times etc., and

working within these parameters to ensure that you cover a variety of questions on a

regular basis so as not to forget any particular section. It is very important that you

stick to this revision plan as closely as possible. If you fall behind for any reason, catch

up in the order given, NOT by trying to work ahead and then going back to fill in the

gaps.

The first time you complete a question from a particular chapter, you should work

through the crash course notes, making sure that you understand everything along

the way (if you don’t, I would suggest you go back to your text book for more

detailed explanations – EZ Accounting would be good if you like the EZ approach, or

any other text book that you may be using).

When you feel ready, attempt your question set by the revision plan. Note the time

allowed, and try to keep to this. When the time is up, complete the question in a

different colour, and note the actual time taken once you have completed the

question in full. This will help you to be aware of the time constraints you are expected

to work within, while allowing you to finish the question so that you can see how much

you are able to complete without time constraints.

Try not to refer to the memo at all until you have completed the question in full. If you

get really stuck, you may peek at the solutions at the back of the book, but I would

suggest that when you do this you change the colour of the pen or pencil with which

you are working. The reason for this is that if you don’t, it is very easy to peek lots and

think you’ve hardly peeked at all. You will then think you know what you are doing, as

it is very easy to understand when the answer is literally staring you in the face! The

bad news is that in an exam there is no chapter of solutions, and you will definitely

come unstuck. If, on the other hand, you change the colour of your pen or pencil

each time you have to peek, it is very easy to see how well (or terribly badly) you

know your work – if it is very pretty and colourful, that’s great, but you know you still

have lots of work to do!

Be sure also to mark your work very carefully after completing each question, so that

you can figure out your mistakes quickly, while the information is still fresh in your mind.

When you find an error and understand what you did wrong, make a note of it on

your “My Mistakes” page given in each chapter, so that you can refer to this before

attempting another question from that section in future and learn from your mistakes.

If used properly these mistakes pages will also make a very valuable revision tool in

preparation for tests and exams.

EZ Revision – Accounting Grade 11

Learn the EZ way! 2

Following your plan The revision planner on the next few pages is based on the assumption that you are

covering the sections in the same order as in EZ Accounting. If you cover work in a

different order, you will of course have to switch some of the exercises as you can’t

practice something you have not yet learnt. The key word is switch, not ignore!

Replace what you cannot do with an exercise on the work you have covered,

making sure that you continue to work through two exercises per week. Tick off the

exercises as you do them – you will enjoy seeing the progress you make!

During the weeks you are at school and should be working, it is very important to set

aside specific times to complete the exercises planned below. Plan two time

allocations of approximately half an hour that suit you and are realistic. If you know

you finish school late on a Monday, and have sport in the afternoon as well as some

other evening activity, this is not a good day to choose! A quiet Sunday afternoon

might be a better idea. Try to ensure that the two days you choose are spread across

the week, so that you are completing a revision exercise every three or four days. If

this is really not possible, then yes, you can set aside a double slot over the weekend,

but this is not ideal.

There will of course be some times when you have the best intentions, but

circumstances get the better of you and you are not able to complete the necessary

revision. Just make sure that you catch up as quickly as possible, and don’t let this

happen too often! Completing all these exercises throughout the year as suggested

will be much more beneficial than being lazy during the first term, working like mad in

the second term, and then doing nothing in the third term, for example. Although you

may have finished all the exercises either way, the end result will definitely not be the

same.

If you find that you would like to complete more than the required two exercises per

week, go ahead. Just ensure that you continue in the same order as given in the plan

below. When you run out of exercises and would like more work to practice, ask your

teacher, or e-mail me ([email protected]). Don’t delay working earlier in the

year so that you “have more to practice before exams”!

Two plans are given here, based on whether you follow the government or private

school terms. No exercises have been set during holidays and from the time your final

exams begin, but this does NOT mean that you don’t have to do any work! It simply

means that you should structure your own study plan for this time, to allow for times

when you may go away on a family holiday for a week, for example. You can use this

time to redo exercises you struggled with earlier, or additional exercises from class or

the website (www.ezlearn.co.za). Use the blank space given to plan what you will do

during this time. On the other hand, questions have been set throughout the times

you will be writing mid year exams. This is because you can’t stop working on your

accounting at any time – keep going, even if you have just written the accounting

exam! Of course, you may want to restructure your plan slightly at these times, but

don’t slack off!

Remember that the better you hope to do in your year end exam, the more work you

need to put in during the year. Although you may not now like the idea of working

throughout the year, if you discipline yourself to do stick to your revision plan you will

relieve a lot of the pressure you would otherwise experience later in the year. The

choice is yours ...

mailto:[email protected]

http://www.ezlearn.co.za/

1. How to make the most of this guide

www.ezlearn.co.za 3

Revision planner How to use this planner Set aside specific time(s) each week to complete the given exercises, and stick to

this e.g. Saturday afternoon.

Identify your plan i.e. 3 term or 4 term, and follow that one.

Exercises have not been allocated for your holidays, but it would obviously benefit

you to set yourself work to do at these times if you are struggling with certain

sections. Space has been provided for you to record what you do.

Time yourself carefully, and note the time you took to complete the exercise (if

you go over time, remember to change colour to help you see how much you

could actually do in the time given). Note: time allocations given are based on

the time you will get based on the new FET curriculum requirements.

Tick off exercises as you complete them. This will help you to see how much you

have achieved over time, and will hopefully motivate you!

Week

Private school calendar Government school calendar

Exercise Time Time

taken Exercise Time

Time

taken

22 Jan – 4 Feb 3.1. VAT 8 min 3.1. VAT 8 min

30 Jan – 5 Feb

6 – 12 Feb 4.1. Recon 23 min 4.1. Recon 23 min

13 – 19 Feb

20 – 26 Feb 4.2. Recon 22 min 4.2. Recon 22 min

27 Feb – 4 Mar

5 – 11 Mar 5.1. TA 30 min 5.1. TA 30 min

12 – 18 Mar

19 – 25 Mar 4.3. Recon 20 min 4.3. Recon 20 min

26 Mar – 1 April 5.2. TA 35 min

2 – 8 April 4.4. Recon 15 min

9 – 15 April 5.2. TA 35 min

16 – 22 April 4.4. Recon 15 min

23 - 29 April 3.2. VAT 12 min

30 April – 6 May 3.2. VAT 12 min 6.1. Per 30 min

7 – 13 May 6.1. Per 30 min 4.5. Recon 10 min

7.1. Man 30 min

14 – 20 May 7.1. Man 30 min 4.5. Recon 10 min

7.2. Man 7 min

21 – 27 May 4.5. Recon 10 min 5.3. TA 18 min

7.2. Man 7 min 7.3. Man 18 min

28 May – 3 June 5.3. TA 18 min 6.2. Per 12 min

7.3. Man 18 min 7.4. Man 20 min

4 – 10 June 6.2. Per 12 min 7.5. Man 10 min

7.4. Man 20 min 8.1. Bud 35 min

11 – 17 June 7.5. Man 10 min 7.6. Man 24 min

8.1. Bud 35 min 8.2. Bud 36 min

18 – 24 June 7.6. Man 24 min 4.6. Recon 15 min

8.2. Bud 36 min 8.3. Bud 25 min

25 June – 1 July 4.6. Recon 15 min

8.3. Bud 25 min

2 – 8 July

9 – 15 July

5.4. TA 24 min

7.7. Man 30 min

8.4. Bud 20 min

EZ Revision – Accounting Grade 11

Learn the EZ way! 4

16 – 22 July

6.3. Per 22 min 5.4. TA 24 min

9.1. Part 30 min 7.7. Man 30 min

9.2. part 25 min

23 – 29 July

8.5. Man 24 min 6.3. Per 22 min

9.3. Part 30 min 8.4. Bud 20 min

9.4. Part 40 min

30 July - 5 Aug

7.8. Man 11 min 9.1. Part 30 min

9.5. Part 30 min 9.2. part 25 min

9.6. Part 11 min

6 – 12 Aug

7.9. Man 40 min 8.5. Man 24 min

8.6. Bud 16 min 9.3. Part 30 min

9.7. Part 16 min

13 – 19 Aug 7.8. Man 11 min

9.4. Part 40 min

20 – 26 Aug 9.5. Part 30 min

9.6. Part 11 min

27 Aug – 2 Sep

7.9. Man 40 min

8.6. Bud 16 min

9.7. Part 16 min

3 – 9 Sep

3.3. VAT 10 min

7.10. Man 50 min

9.8. Part 32 min

10 – 16 Sep

3.3. VAT 10 min 6.5. Per 30 min

7.10. Man 50 min 4.7. Recon 25 min

9.8. Part 32 min 9.9. Part 60 min

17 – 23 Sep

6.5. Per 30 min 5.5. TA 35 min

4.7. Recon 25 min 10.1. NPO 18 min

9.9. Part 60 min 10.2. NPO 35 min

24 - 30 Sep

5.5. TA 35 min 6.4. Per 9 min

10.1. NPO 18 min 9.10. Part 47 min

10.2. NPO 35 min 10.3. NPO 17 min

1 - 7 Oct

6.4. Per 9 min

9.10. Part 47 min

10.3. NPO 17 min

8 – 14 Oct

7.12. Man 18 min 7.12. Man 18 min

10.4. NPO 27 min 10.4. NPO 27 min

11.1. Aud 7 min 11.1. Aud 7 min

15 – 21 Oct


10.5. NPO 20 min 10.5. NPO 20 min

11.2. Aud 20 min 11.2. Aud 20 min

22 – 28 Oct

8.7. Bud 16 min 8.7. Bud 16 min


10.6. NPO 20 min 10.6. NPO 20 min

11.3. Aud 24 min 11.3. Aud 24 min

29 Oct – 4 Nov

8.8. Bud 60 min 8.8. Bud 60 min

9.13. Part 30 min 9.13. part 30 min

10.7. NPO 27 min 10.7. NPO 27 min

10.8. NPO 30 min 10.8. NPO 30 min

Good luck for your year end exam!

www.ezlearn.co.za 5

4. Reconciliations

The point of a reconciliation is to check that your records agree with those of a third

party – the bank or a creditor (i.e. to reconcile them) to ensure that no errors have

been made and to update your records.

In an exam This may be asked as an adjustment to be taken into account in preparing

financial statements.

The adjustment will usually involve bank charges etc., which have still to be taken

into account. You will have to add the amount to the relevant account (e.g. Bank

Charges) and adjust the Bank account balance.

The adjustment may specify a post-dated cheque either received or issued, which

has already been recorded by the business. You will have to reverse the entry in

the Bank account and the Debtors or Creditors Control account, as the money

has not yet actually been received / paid.

You may be required to complete the Bank or Creditors’ Reconciliation

Statement. Follow the steps laid out below.

What to do … 1. Use each piece of information in the order in which it is given, to save you having

to go back and reread information later. You will have an answer sheet laid out

for you, enabling you to enter items as you deal with each bit of information. Each

piece is dealt with as described below.

2. Record relevant information in business records (cash journals / bank account or

creditors’ ledger)

3. Record relevant information in the reconciliation statement – this acts as an

extension of the bank or creditor’s statement and shows all entries they have not

yet taken into account.

4. Check that totals in our records and reconciliation statement agree.

Balances and totals

The bank or creditor account balance at the beginning of the month must be

entered into the Bank or Creditor’s account in the General or Creditors’ Ledger if

this is required, or used as your starting balance in your calculation. The bank

amount may be given, but if it is not, it can be calculated from the previous

month’s Bank Reconciliation Statement as the balancing figure.

The statement balance at the end of the month must be entered into the

Reconciliation Statement. A bank balance will appear from the banks point of

view i.e. credit a favourable balance.

The cash journals’ sub totals must be used to start calculating the final journal

totals when doing a bank reconciliation.

Discrepancies (see diagram on next page)

Any items in the statement but not already recorded, must be recorded in the

business records.

Any items in the business’ books but not in the statement must be entered into

the Reconciliation Statement.

Items in the previous Reconciliation Statement which do not yet appear in the

current statement must be shown in the new Reconciliation Statement (unless

cheques are stale or cancelled – see below)

Business errors are corrected in the business records.

Bank or creditor errors are reflected in the Reconciliation Statement

Learn the EZ way! 6

BANK OR CREDITOR’S STATEMENT BANK OR CREDITOR’S ACCOUNT

(CRJ and CPJ / Creditors’ ledger)

Entries in the statement but not in your

books

Bank: stop orders, direct deposits by

customers, bank charges, dishonoured

cheques etc.

Creditor: recent invoices or credit notes,

interest charged etc.

Entries in your books, but not the

statement

Bank: outstanding deposits and

cheques not yet cashed

Creditor: Returns not yet acknowledged

etc.

Entries in last month’s reconciliation

statement, but not yet in the current

statement (representing previous entries

in your books but not in the bank

statement)

RECONCILIATION STATEMENT

Representing what the bank or creditor

must still do. Remember that the bank

statement will treat amounts oppositely

to the business – a favourable balance

will show as a debit in the business

books, but as a credit on the bank

statement!

BANK ACCOUNT

(CRJ and CPJ)

CREDITOR’S ACCOUNT

(Creditor’s’ ledger)

Additional notes Dishonoured cheques

When a cheque is dishonoured, you will simply have to REVERSE the original

transaction, because although you originally thought you had received the payment,

you did not actually get the money.

Original transaction

CRJ

Debit bank

Credit debtors

Reversal when cheque is

dishonoured

CPJ

Debit debtors

Credit bank

Post dated cheques

Post dated cheques issued will have been recorded when written, and appear

in the Bank Reconciliation Statement with the other outstanding cheques.

Post dated cheques received should not have been recorded or deposited at

all. If they have been entered and deposited in error, they will have been

dishonoured by the bank (see treatment above).

Stale / cancelled cheques issued

Cheques which had been issued but are now stale (more than 6 months old) or

have been lost and must be cancelled, are cancelled in the CRJ. They will then

no longer appear in the Bank Reconciliation Statement.

If a new cheque is issued it must be recorded in the CPJ and shown in the Bank

Reconciliation Statement.

The cheque is returned by the bank (bounces), as it cannot be paid.

This might be because there is no money in the person’s account, or

for some other reason e.g. it was not filled out correctly.

To make them agree, the

obvious thing to do is add into

each side those entries that are

not yet there

The totals of the bank statement and the

bank account after these additional

transactions are taken into account should

agree but be opposite, so by adding in

the bank account balance, the bank

reconciliation totals should balance.

www.ezlearn.co.za 7

My mistakes

Learn the EZ way! 8

www.ezlearn.co.za 9

4.1. DoE 2007 SG Question 2 (38 marks; 23 minutes)

The following information appears in the books of Fralize Stores for

May 2007.

Required:

1. Use the information below to complete the Cash Receipts Journal and the Cash

Payments Journal for May 2007. Total the bank columns only. (26)

2. Prepare the Bank Reconciliation Statement on 31 May 2007. (12)

NOTE: it is the policy of the business to correct errors in the cash journals, wherever

possible.

Information:

1. The bank account in the ledger reflects an unfavourable balance of R1 535 on

1 May 2007.

2. The provisional totals of the cash journals for May 2007 are:

Cash receipts journal

Bank R34 190

Sundry accounts R34 190

Cash payments journal

Bank R32 500

Sundry accounts R32 500

3. Cheque no. 235 for R416 was issued to BB Stores and entered in April for

stationery purchased. This cheque was lost and payment was stopped. It was

replaced with cheque no. 444. No entry has been made for this cheque which is

still in the post.

4. A comparison with the bank statement from Lion Bank for May 2007 with the

cash journals reflects the following differences:

4.1. A debtor, C Magape, deposited R860 directly into the business bank account

as part payment of his account.

4.2. An unpaid cheque of R566, received from a debtor, L van Zyl, was returned by

the bank, marked ‘refer to drawer’.

4.3. A stop-order in favour of Rasbanski Insurers for R800 comprises the following:

4.3.1. insurance of the business buildings and contents, R680.

4.3.2. Insurance of the owner’s private vehicle, R120. The business pays this on

behalf of the owner.

4.4. Lion Bank debited the current bank account of Fralize Stores with bank

charges of R310 and interest of R75.

4.5. A deposit on 31 May 2007, R4 234, did not appear on the bank statement.

4.6. The following cheques have not been presented for payment yet:

4.6.1. No. 432 for R633

4.6.2. No. 439 for R451

Learn the EZ way! 10

4.7. The bank statement reflects an unfavourable balance of R3 470 on

31 May 2007.

1. Cash receipts journal of Fralize Stores – May 2007 CRJ6 (7)

Doc D Details Bank Sundry accounts

Amount Details Fol

30 Total 34 190 34 190

2. Cash payments journal of Fralize Stores – May 2007 CPJ6 (19)

Doc D Details Bank Sundry accounts

Amount Details Fol

30 Total 32 500 32 500

3. Bank reconciliation statement of Fralize Stores – 31 May 2007

Debit Credit

38 marks

www.ezlearn.co.za 11

4.2. IEB 2007 SG Question 3 (37 marks; 22 minutes)

The bookkeeper of Grey Medical Supplies has gone on leave and you have been

asked to prepare the bank reconciliation statement at the end of the month of

March 2007.

Required

1. Show the amounts that would appear in the Cash Receipts Journal and Cash

Payments Journal in the table provided in the answer booklet. The provisional

totals for the CRJ (R11 560) and the CPJ (R12 520) have been put in for you in

your answer booklet. (11)

2. Calculate the Bank account balance in the General Ledger as at

31 March 2007 using the table provided in your answer book. (4)

3. Prepare the Bank Reconciliation Statement as at 31 March 2007. (10)

4. Answer the questions that follow. (12)

Information

1. Bank reconciliation statement as at 28 February 2007

Debit Credit

Cr balance as per bank statement 5 560

Cr outstanding deposits 6 490

Dr cheques not yet presented for payment

No. 897 (28 December 2006) 875

No. 991 (23 February 2007) 1 525

No. 994 (25 February 2007) 8 760

No. 996 (26 February 2007) 3 240

Cr balance as per bank account 2 350

14 400 14 400

2. The bank statement reflected a favourable balance of R14 685 on

31 March 2007.

3. On comparing the bank statement with the cash journals the following

differences were noted:

3.1. The following entries appeared in the bank statement only:

3.1.1. A deposit for R6 490.

3.1.2. Cheque no. 991 for stationery purchased from Sharp Stationers.

3.1.3. The bank charges for March amounted to R255.

3.1.4. Interest on favourable balance amounted to R215.

3.1.5. A stop order to Eagle Insurers for insurance premium amounted to R1 300.

Included in this insurance premium is R250 for the owner's personal vehicle.

3.1.6. A direct deposit for R3 000 received from the tenant being rent for his office.

3.2. The following information appeared in the cash journals only:

3.2.1. A deposit for R4 560 on the 31 March 2007.

3.2.2. The following cheques had not yet been presented for payment:

Cheque no. 1202 for R2 310 issued to George Suppliers.

Cheque no. 1207 being A. Smith's salary cheque for R5 710.

3.3. Other information:

3.3.1. Cheque no. 897 is stale and must be cancelled. The cheque was issued to

Hillcrest Aged as a donation.

3.3.2. A cash cheque no. 994 was lost in the post. The cheque was issued for stock

purchased. A new cheque no. 1220 was issued to Needles and Pins. No

entries have yet been made.


1. Amounts that would appear in the cash journals (11)

Cash receipts

journal

Cash payments

journal

11 560 12 520

2. Calculation of Bank Balance in the ledger of Grey Medical Suppliers (4)

3. Bank reconciliation statement as at 31 March 2007 (10)

Debit Credit

Questions During February 2007 Grey Medical Supplies sent a cash cheque to Needles and Pins

for stock purchased. Needles and Pins claim that they never received the cheque

and have asked for a new cheque to be sent to them. You have investigated this

and have noticed that the cheque had been cashed and it appeared in the March

Bank Statement.

4.1. Explain what you think could have happened to the cheque that was sent to

Needles and Pins. (2)

4.2. How will this problem affect Grey Medical Supplies profits? (2)

4.3. What are the dangers of sending a cash cheque in the post? (4)

4.4. Give two ways that a business can go about reducing the possibility of being

exposed to cheque fraud. (4)

37 marks


4.3. DoE November 2007 Question 1 (35 marks; 20 minutes)

Bravo Traders sells goods for cash and accepts credit cards. On 31 May 2007 Bravo

Traders compared the Bank Statement for May 2007 from Safe Bank with the Bank

Reconciliation Statement on 30 April 2007 as well as with the Cash Receipts Journal

and Cash Payments Journal for May 2007.

Required:

Study the information provided and answer the questions which follow.

Information:

The following information appeared in the Bank Reconciliation Statement of

Bravo Traders on 30 April 2007:

Credit balance as per Bank Statement R10 911

Outstanding deposit dated 29 April 2007 R1 500

Outstanding cheques:

No. 597 dated 22 November 2006 R600

No. 686 dated 18 April 2007 R7 250

No. 721 dated 15 June 2007 R2 800

Debit balance as per bank account in the ledger R1 761

The comparison of the Bank Statement for May 2007 with the Bank Reconciliation

Statement and the Cash Receipts and Cash Payments Journals for May 2007,

revealed the following differences:

Item 1 The Bank Statement reflected an unfavourable balance of R1 550 on

31 May 2007. Item 2 The outstanding deposit of R1 500 appeared on the Bank Statement for May

2007. Item 3 Cheque No. 597 for R600 is stale. It had been issued to the Red Cross

Hospital as a donation. Cheque No. 753 was issued on 31 May 2007 to

replace the donation, but the donation was increased by R400. This cheque

has not been entered in the books yet and is in the post. Item 4 Cheque No. 686 for R7 250 appeared on the Bank Statement, but not in the

journals of May 2007. Item 5 Cheque No. 760 for R3 245 appeared in the Cash Payments Journal, but not

on the Bank Statement. Item 6 The Bank Statement reflected a dishonoured cheque for R720. This had

originally been received from R Rod in settlement of his debt of R750. Item 7 The Bank Statement reflected a monthly stop order representing the

monthly repayment of R2 500 on a loan from Alfa Bank. Item 8 The Bank Statement received from Safe Bank reflected an amount of R3 120

in respect of bank charges. Item 9 The Bank Statement reflected interest on a fixed deposit of R1 340 which

had been directly deposited into the current account of the business. Item 10 A deposit of R5 700 appeared in the CRJ on 31 May 2007, but not in

the Bank Statement.


Questions to be answered

1. Consider the items listed above. Indicate by means of a cross (X) in the table

provided in the answer book, whether these items will be entered in the:

Cash Receipts Journal (CRJ)

Cash Payments Journal (CPJ)

or indicate whether no entry will be made in the journals when reconciling the

Cash Journals with the Bank Statement. Also provide the TWO missing amounts.

Item 1 has been done as an example for you. (12)

Item CRJ CPJ No entry Amount

Item 1

X R1 550

Item 2

R1 500

Item 3.1.

R600

Item 3.2.

Item 4

R7 250

Item 5

R3 245

Item 6

Item 7

R2 500

Item 8

R3 120

Item 9

R1 340

Item 10

R5 700

2. Prepare the Bank Reconciliation Statement on 31 May 2007. (14)

Bravo Traders

Bank reconciliation statement on 31 May 2007

Balance as per bank ______________________

Balance per ledger _________________________

(Please turn over – question continued on next page)


3. Bravo Traders paid bank charges of R3 120 to Safe Bank in May 2007. The owner,

Wayne Bravo, noticed the following cartoon in a newspaper that drew his

attention to the problem of high bank charges in South Africa.

Wayne Bravo also noticed the following newspaper article. Three paragraphs

have been extracted for you.

Consumers will benefit from an inquiry into bank charges

Business report: 21 April 2006, based on an article by Ethel

Hazelhurst Johannesburg - Banking is a facility many people

do not like paying for and banks are often criticised by their

clients, so news that the competition commission will hold a

public inquiry into bank charges will be welcomed.

Like any other business, banks are entitled to maximise profits

and it may be that local banks perform better because they

are more efficient than their international competitors.

The main victims are those who can't afford to bank. People

who earn small, irregular amounts can't pay the fees levied on

banking transactions. This excludes millions of people from

participating in business activities.


3.1. Are bank clients in this country justified in complaining about bank charges?

Briefly explain in your own words. (3)

3.2. If you were the manager of Safe Bank, how would you justify charging Bravo

Traders fees of R3 120 in May? State THREE points. (6)

35 marks


4.4. Barbara Williamson 2007 (30 marks; 15 minutes)

The bank statement of Shaista’s Shoe Shop for May 2004 has been received by the

business and compared to the business records. A number of discrepancies have

been noted, and Shaista has asked you to explain why this is so.

Differences between the bank statement and business records

1. The bank statement shows a credit balance on 31 May 2004 of R3 200, whereas

the bank account in the general ledger shows a debit balance of R1 500 on this

day.

2. The bank statement includes the following items that do not appear in the May

journals:

Sundry bank charges and interest totalling R120

A cheque for R2 500 post-dated for 1 June is reflected as unpaid. (A

replacement cheque has already been received from the customer, and will

be deposited on 1 June. Shaista says it should not be cancelled in the business

journals, as this would be a waste of time).

A cheque for R3 000 has been dishonoured as the debtor had forgotten to

sign it. The debtor must still be contacted.

A deposit of R250 that was actually made by Shaista into her personal bank

account, but had been credited to the business account in error.

3. The cash journals include the following items that do not appear on the bank

statement:

A deposit of R9 430 made by the business on 31 May 2004

Cheque 429 for R700 (15 November 2003)

Cheque 630 for R800 (20 June 2004)

Cheque 635 for R1 200 (28 May 2004)

Cheque 636 for R600 (this cheque has been lost, and the creditor has asked

that it be cancelled. A new cheque will be issued during June).

The bookkeeper forgot to enter the amount for cheque 637 when it was

issued on 28 May 2004. This cheque does not appear on the bank statement.

4. The salaries journal includes the following cheques that do not appear on the

bank statement:

Cheque 640 for R5 600

Cheque 643 for R7 200

5. Cheque 625 is reflected as R775 on the bank statement and R725 in the cash

payments journal. The cheque was issued for an amount of R725.

6. Cheque 629 is reflected as R370 on the bank statement and R320 in the cash

payments journal. The cheque was issued for an amount of R370.


Required

1. Explain why you would expect to find differences between the bank statement

and business journals. (4)

2. Draw up the bank reconciliation statement on 31 May 2004 to illustrate your point.

Show all your calculations in brackets. (26)

Shaista’s Shoe Shop

Bank reconciliation statement on 31 May 2004

Debit Credit

30 marks


4.5. IEB November 2007 Paper 1 Question 6 (13 marks; 10 minutes) The bank reconciliation statements below was prepared by a Grade 11 learner.

Information: Bank statement of Tyson Traders as at 30 September 2007

Debit Credit

Cr balance as per bank statement 4 117

Dr outstanding deposit 8 762

Cr outstanding cheques

No. 609 (12 April 2007) 876

No. 712 (24 September 2007) 8 900

No. 803 (26 September 2007) 4 500

No. 810 (6 October 2007) 960

No. 813 (7 October 2007) 1 346

Cr balance as per bank account 1 988

Additional information from the question paper 1. The bank statement reflected an unfavourable balance at the end of

September.

2. Cheque no. 609 was for a donation to a sports club that had closed down. The

cheque needs to be cancelled.

3. The bookkeeper was unsure how to treat the following items (adjust the bank

account amount where necessary):

3.1. A stop order to pay for the cellular phone contract of R149 per month

3.2. Cheque no. 803 appeared correctly on September's bank statement as

R5 400. Correct the error.

3.3. A cheque for R1 500 dated 15 October 2007 was received from a debtor.

3.4. The bank returned J. Clarke’s cheque for R4 400. The cheque was dishonoured

due to insufficient funds. The cheque was in settlement of his account of

R4 500.

3.5. Cheque 712 was lost in the post. No entry has been made for cancelling the

cheque and reissuing a new cheque no. 900.

Required: 1. Calculate the correct bank account balance for the general ledger. (5)

Incorrect balance (1 988)

2. Correct the bank reconciliation statement using the information. (8)

Debit Credit

____ balance as per bank statement

____ outstanding deposit

____ outstanding cheques

____ balance as per bank account

13 marks


4.6. Barbara Williamson Paper 1 2009 (20 marks; 15 minutes)

Andile Mlotshwa, owner of Mlotshwa Motors, received the business bank statement

dated 28 February 2009. The bank account in the general ledger shows a credit

balance of R34 000. Unfortunately the final bank statement balance has not printed

clearly.

Information:

1. The receipts for 27 and 28 February, R35 000, were deposited on 28 February, but

do not yet appear on the bank statement.

2. Cheque 320 for R5 000 was issued to the SPCA on 1 August 2008.

3. Cheque 394 issued to Mark’s Motor Manufacturers for spare parts on

20 February, R19 000, has not yet been cashed.

4. Cheque 395 for R4 500 appeared correctly on the bank statement, but has

been entered in the journals as R5 500.

5. Cheque 398 issued to O’Hagan Rentals for the March rent, R25 000, was dated

5 March 2009.

6. A cheque for R12 000 was received from Bhika Buyers, dated 31 March 2009. No

entry has been made for this.

7. The bank statement shows a deposit made by Masedi Paile, a customer, for

R30 000 on 10 February. This was a deposit on a vehicle she had just purchased.

8. The bank statement shows an unpaid cheque. It was originally received from

J Bradlow for R20 000, but was dishonoured as the written and numerical

amounts disagreed.

9. The bank statement shows the following charges: a stop order for insurance,

R3 000, bank charges totalling R300 and interest on overdraft, R200.

Required:

1. Calculate the correct bank account balance (10)

2. Draw up the bank reconciliation statement on 28 February 2009. (10)

Debit Credit

20 marks



Jessica Molefe owns Diva Jewellery. The bank statement dated 28 February 2008 has

been received and compared to the business’s accounting records.

Information

1. On 28 February the bank statement reflected a credit balance of R8 000, while

the bank account in the general ledger had a debit balance of R23 160.

2. The following information appeared on the bank statement but not in the

February journals:

2.1. The outstanding deposit of R3 000 reflected on the January bank reconciliation

statement appeared on the bank statement on 1 February 2008.

2.2. Bank charges of R150 appear on the bank statement.

2.3. Simone Nduna deposited R6 500 directly into the business’s bank account.

2.4. A cheque originally received from Lusanda Oliphant for R10 000 in settlement

of her account has been dishonoured by the bank as she forgot to sign it.

3. Sam Taule, the owner of BabyPhat Diamonds, called to ask that cheque 518 for

R5 000 be stopped, as it had been lost. A new cheque (no. 535) must be issued.

4. The following transactions were recorded in the February journals but are not yet

reflected on the bank statement:

4.1. Zanele Zungu deposited R2 500 into the business’s bank account by EFT on

27 February and faxed proof of payment to Jessica. This is not yet reflected on

the February bank statement.

4.2. Cheque 529 for R3 990 has not yet been cashed, as it is dated 31 March 2008.

5. Cheque 531 for R2 000 appeared on the bank statement as R20 000. The bank

has been notified of the error.

Required 1. Calculate the correct bank account balance in the general ledger. (4)

23 160

2. Draw up the bank reconciliation statement on 28 February 2008. (8)

Debit Credit

Balance as per bank statement

Outstanding deposits

Outstanding cheques

Correction of bank error

Balance as per bank account


3. Cheque 529 was for an invoice for jewellery bought from BabyPhat Diamonds.

3.1. Calculate the input VAT that would have been shown on this invoice. (3)

3.2. If the business uses a mark-up of 150%, calculate the exclusive selling price

when the jewellery was sold on 27 February. (4)

3.3. Calculate the VAT due to SARS as a result of this purchase and sale of

jewellery. (4)

4. Jessica, the owner, sold this jewellery (see no. 3 above) for cash and did not

issue an invoice to the customer, Nombuso Mathibela. When the stock clerk

queried the missing stock, Jessica told him the stock had been damaged and

thrown away.

4.1. How is Jessica benefiting from this fraudulent transaction? (2)

4.2. To whom is Jessica accountable for her actions in this case? (2)

4.3. Discuss the transparency of her actions. (3)

30 marks


5. Disposal of tangible assets

Depreciation At the end of the year, depreciation must be calculated for assets such as vehicles

and equipment. It may be calculated:

On cost: cost price x % depreciation = depreciation for the year

On carrying value / book value / diminishing balance: (cost price –

accumulated depreciation) x % depreciation = depreciation for the year.

Debit Credit

Depreciation

(Statement of Income)

Accumulated depreciation on vehicles

/ equipment (Statement of Financial

Position)

Asset disposal When an asset such as vehicles or equipment is sold, you have to take into account

both the cost price as well as the accumulated depreciation. It is therefore not a

straightforward transaction. To make things easier, an Asset Disposal account is

created, and all the amounts involved are transferred to this account. The profit or loss

can then be calculated in this account.

In an exam This can appear as an adjustment in preparing financial statements, or you may be

asked to draw up the ledger accounts.

The transaction may have been left out completely (record the entire transaction

from scratch, following the steps below)

The transaction may have been partially recorded (take this into account and

only record that which was NOT recorded)

Part of the transaction may have been recorded incorrectly (reverse the incorrect

entry and then record the transaction properly)

ALWAYS use T-accounts to record asset disposal if you are not asked to draw up the

ledger accounts, as this adjustment can get very complicated. T-accounts will help to

ensure you remember to record everything correctly, and will help you draw up your

Tangible Assets note to the financial statements much more easily!

Step 1

Open the cost (Vehicles / Equipment) and Accumulated Depreciation accounts with

the given balances in T-accounts, or the General Ledger if required. (If using T-

accounts, leave some space above the balance in case you want to recreate what

happened during the year by taking into account transactions which were recorded

and are therefore included in the balance.)


Step 2

Calculate and record the depreciation on the asset sold for the current year,

remembering to calculate it for the correct number of months until it was sold.

The required information could be given to you in two ways:

The accumulated depreciation on the item up to the beginning of the year may

be given to you. In this case, calculate depreciation as normal for this item only.

The purchase date of the item may be given to you. In this instance, you will

have to work out the accumulated depreciation up to the beginning of the

year as well as for the current year. Draw up a simple table and then calculate

the depreciation for each year of the asset’s life as follows:

Year end date Depreciation

(Year 1) (Amount of depreciation for correct number of months)

(Year 2) (Depreciation for year)

… (Depreciation for year)

(Date sold in current

year)

(Amount of depreciation for correct number of months) –

record this amount

TOTAL: (Total depreciation to be written off to asset disposal –

see point 3)

Step 3

Transfer all relevant amounts to Asset Disposal:

Cost price of sold item

Accumulated depreciation on sold item (accumulated depreciation to

beginning of current year PLUS current depreciation just calculated and

recorded!)

Selling price of sold item (contra account is bank if sold for cash, debtors if sold

on credit, creditors if traded in)

Remember to record these in ALL the contra accounts at the same time!!

Step 4

Calculate the balancing figure in Asset Disposal and record it as the Profit or Loss on

Sale of Asset. (HINT: to easily see if it is a profit or loss, look at which side of the Profit or

Loss on Sale of Asset account it appears – a credit is a profit, a debit a loss).

Don’t forget! If the asset was traded in, record the purchase of the new asset in the asset

account.

At the year end calculate the depreciation on the remaining assets, both old

and new.

OLD: use the balance in the cost account, excluding any new purchases. If

depreciation is to be calculated on the diminished balance / carrying value,

calculate the balance in the Accumulated Depreciation Account and

subtract this from the balance in the cost to find the book value of the old

assets. Calculate depreciation at the required rate (%) for the full year.

NEW: Use only the cost price, regardless of the method of calculating

depreciation. Calculate depreciation at the required rate (%) for the correct

number of months that the asset has been owned.

Add these two (OLD and NEW) figures together to find depreciation for the year

and record this. (Depreciation on the sold asset has already been recorded).

If completing General Ledger accounts, balance all the Statement of Financial

Position accounts, and close off the Nominal Accounts to Profit and Loss.


Financial Statements

Statement of Income

Other operating income

Profit on sale of asset

Operating expenses

Loss on sale of asset

Depreciation

Statement of Financial Position

NON CURRENT ASSETS

Tangible assets (note 1)

CURRENT ASSETS

Trade and other receivables (includes adjusted debtors figure)

Cash and cash equivalents (includes adjusted bank figure)

CURRENT LIABILITIES

Trade and other payables (includes adjusted creditors figure)

Notes to the financial statements

1. Tangible assets

When drawing up this note, ALWAYS take the figures directly from your T-accounts (or

General Ledger accounts if these were required) for the cost price and the

accumulated depreciation. Make sure that you use ALL the figures ONCE.

For each column of the Tangible Assets note, use the following two accounts. Tick off

each amount as you use it to ensure you don’t forget anything!

Cost (Vehicles / Equipment account)

1. Balance b/d

3. Bank / Creditors

4. Asset disposal

7. Balance b/d

Accumulated depreciation

5. Asset disposal

2. Balance b/d

6. Depreciation (on SOLD item during

year)

6. Depreciation (year end on OLD & NEW)

8. Balance b/d

Cost 1

Accumulated depreciation (2)

Carrying value at beginning of year

1 – 2

Movements

Additions at cost 3

Disposals at carrying value (4-5)

Depreciation for the year (6+6)

Carrying value at end of year 1-2+3-(4-5)-(6+6)

EQUALS 7-8

Cost 7

Accumulated depreciation (8)


My mistakes


5.1. DoE 2006 HG Question 7 (50 marks; 30 minutes)

1. Cosmos Taxi Service

Ron Lucas is the sole owner of Cosmos Taxi Service. He started business on

1 March 2002. On that day he introduced land and buildings into the business at a

value of R300 000 and he bought three similar taxis for R330 000 (i.e. R110 000 each).

Cosmos Taxi Service did not buy or sell any vehicles during the first three financial

years.

Required:

The following for the year ended 28 February 2006, the last day of the fourth financial

year:

1.1. Asset disposal account (8)

1.2. Accumulated depreciation on vehicles (13)

1.3. Note to the Statement of Financial Position: Fixed assets

(The total column is not required) (17)

Information:

2005

May 31

Cosmos Traders sold one taxi for R45 000 cash. This vehicle was purchased

on 1 March 2002 for R110 000. The vehicle is depreciated annually at the

rate of 20% p.a. on cost price.

Aug 31 A new taxi was purchased on credit from Mamelodi Motors for R200 000.

Oct 31 A new garage was built at a cost of R60 000 and repairs were done to the

roof of the office for R12 000.

2006

Feb 28

The policy for depreciation has not changed since Cosmos Taxi Service

started business operations. Depreciation on vehicles is calculated at 20%

p.a. on cost price.


1.

1.1. Dr General ledger of Cosmos Taxi Service Cr

Asset disposal

1.2. Accumulated depreciation on vehicles 2005

Mar

1 Balance b/d 198 000

1.3. Note to the Statement of Financial Position

Fixed assets / tangible assets Land and

buildings Vehicles

Cost at beginning of the year 300 000

Accumulated depreciation (0) (198 000)

Movements

Additions 200 000

Disposals

Depreciation

Cost at end of the year


(Please turn over for 2. Jupiter Taxi Service)


2. Jupiter Taxi Service

Syd Allan runs a competing taxi business called Jupiter Taxi Service.

He is concerned that his revenue from taxi fares has not met his budget of R1 500 000

and that the fuel and repair costs have exceeded his budget of R710 000.

He has extracted the following information from his ledger, the fixed assets register

and other records on 28 February 2006, the last day of the financial year.

Required:

Consider the information provided below. Explain whether or not Syd should be

concerned about any problem or aspect relating to each vehicle. Quote amounts to

support your opinion. (12)

Information:

Taxi 1 Taxi 2 Taxi 3

Name of driver Freddy Robbie Shirley

Date purchased 1 March 1995 1 March 2003 1 March 2005

Cost price of

vehicle R45 000 R180 000 R300 000

Accumulated

depreciation R44 999 R36 000 R60 000

Amount of revenue

brought in R618 300 R222 800 R279 900

Kilometres covered

for the past year 68 700 km 69 200 km 31 100 km

Fuel and repair

costs for the year R439 680 R290 640 R136 840

Fuel and repair

costs per kilometre R6,40 R4,38 R4,40


2. Explain whether or not Syd should be concerned about any problem or aspect

relating to each vehicle. Quote amounts to support your opinion.

Taxi 1:

Taxi 2:

Taxi 3:

50 marks



Sharika Bhoodhia is very proud of herself as she has drawn up her financial statements

for the year ended 28 February 2008 all on her own, and her business shows a

pleasing profit of R45 000. However, when she shows them to you, you notice that the

profit on sale of asset shown in the Statement of Income is very high at R20 000, and

no depreciation is shown under operating expenses. When you discuss this with her,

she explains that the profit is the amount she received for the vehicle that was traded

in for the new vehicle, and she has not calculated depreciation because it is not an

amount that was actually paid.

Information: 1. The following (correct) balances appeared in the books of Bhoodhia Traders on

1 March 2007:

Vehicles R100 000

Accumulated depreciation on vehicles R 60 000

2. On 30 June 2007 an old delivery vehicle was traded in for R20 000 when a new

vehicle was purchased at a price of R120 000. The old vehicle had originally cost

R70 000 and had accumulated depreciation of R49 000 on 1 March 2007.

3. Depreciation should be calculated at 20% p.a. on the carrying value.

Required: 1. Explain to Sharika

1.1. Why her profit on sale of asset is incorrect (4)

1.2. The importance of calculating and recording depreciation. (3)

2. Show the following general ledger accounts as they should appear for the

period 1 March 2007 to 28 February 2008:

1.1. Vehicles (6)


1.2. Accumulated depreciation on vehicles (15)

1.3. Depreciation (6)

1.4. Asset disposal (8)

2. Draw up the correct the Vehicles column of the Tangible Assets note to the

Statement of Financial Position on 28 February 2008. (13)

Vehicles

Cost


Carrying value (1 March 2007)

Movements

Carrying value (28 February 2008)

Cost


3. Calculate the correct net profit for the year. (5)

60 marks


5.3. DoE Exemplar 2007 Question 4.1. (29 marks; 18 minutes)

You are provided with information relating to Maduna & Son Traders.

Required:

1. Calculate depreciation on vehicles for the year ended 28 February 2007. (7)

2. Prepare the Asset Disposal account on 31 December 2006. (9)

3. Complete the note to the Statement of Financial Position for fixed assets on 28

February 2007. A total column is not required. Some of the figures have already

been entered for you. (13)

Information:

1. Depreciation on vehicles is calculated at 20% p.a. on the straight line method.

Depreciation on equipment for the year amounts to R11 400.

2. The following balances appeared in the ledger on 1 March 2006:

Vehicles at cost R880 000

Accumulated depreciation on vehicles R250 000

Equipment at cost R336 000

Accumulated depreciation on equipment R257 000

3. Bought new equipment on credit for R105 000 on 1 November 2006.

4. Paid Urban Technics the following on 28 February 2007:

R8 000 for installing a sound system in a vehicle.

R3 000 for repairing the air-conditioning system in the vehicle.

5. Traded in a vehicle at Pretoria Motors on 31 December 2006. The trade-in value

offered by Pretoria Motors was R32 000, while the cost of the new vehicle was

R180 000. The balance of R148 000 due to Pretoria Motors ill be paid over the

next six months.

Details of the old vehicle traded in were obtained from the fixed assets register:

FIXED ASSETS REGISTER

Vehicle: Toyota Corolla Model: 2003

Date bought: 1 May 2003 Date sold: 31 December 2006

Cost price: R144 000

Depreciation written off:

28 Feb 2004 R24 000

28 Feb 2005 R28 800

28 Feb 2006 R28 800

R81 600

31 Dec 2006 ?


1. Calculate depreciation on vehicles for the year ended 28 February 2007.

2. Ledger of Maduna & Son Traders

Asset disposal

3. Notes to the Statement of Financial Position on 28 February 2007

Tangible assets

Land and

buildings Vehicles Equipment

Carrying value at the beginning of the year 255 600 79 000

Cost 255 600 336 000

Accumulated depreciation - (257 000)

Movements

Additions -

Disposals -

Depreciation -

Carrying value at the end of the year 255 600 602 400

Cost 255 600 924 000

Accumulated depreciation - (321 600)

29 marks


5.4. IEB Exemplar 2007 Paper 1 Q4 (40 marks; 24 minutes)

Required:

This question consists of two parts. Part A involves the Tangible Assets note and Part B

is a theory question.

Part A

From the information that follows, draft the notes to the Statement of Financial

Position of Natal Carpets for the year ended / as at 28 February 2007. (35)

Natal Carpets

Pre-adjustment trial balance as at 28 February 2007

Statement of Financial Position accounts section

Equipment 82 000

Accumulated depreciation: equipment (1/3/2006) 9 600

Vehicles 102 000

Accumulated depreciation: vehicles (1/3/2006) 50 400

Adjustments and additional information:

1. NB! This adjustment needs to be read in conjunction with adjustments 2 and 3.

Both vehicles and equipment are depreciated as a percentage of the cost

price.

Use information provided in adjustment 2 to calculate the rate at which vehicles

are depreciated. (If you are unable to calculate the rate with which to

calculate the depreciation on vehicles, then use the rate of 25% on cost. This is

not the correct rate.)

2. Natal Carpets has two identical vehicles originally bought on the same day.

One of the vehicles was sold on 31 January 2007 for R16 000 on credit, and at a

loss of R450. This entry has still to be processed.

3. New equipment costing R50 000 was purchased and correctly entered on

1 December 2006. (Equipment is depreciated at a rate of 10% on cost).

Tangible / fixed assets

Vehicles Equipment Total

Carrying value

Carrying value


Part B

There is a thin line between what an asset is, and what an expense is.

Why do we not treat vehicles as an expense, and write the full purchase price off

against revenue (income) in a single year? Give two reasons. Explain what the main

difference is between assets and expenses. (5)

40 marks


5.5. Barbara Williamson Paper 1 2009 (50 marks; 35 minutes)

Kyle’s Kool Karts is a business that manufactures go-karts. On 31 December 2008 stray

fireworks caused a factory fire which destroyed a number of pieces of machinery.

Fortunately the factory and its contents are insured, and these pieces were replaced

on 2 January 2009.

Required:

1. Complete the following general ledger accounts for the year ended

28 February 2009:

1.1. Machinery (6)

1.2. Accumulated depreciation on machinery (18)

1.3. Asset disposal (showing the machinery destroyed and insurance payout) (9)

2. Draw up the tangible assets note to the financial statements on

28 February 2009. (13)

3. Answer the questions that follow.

Information:

1. Balances in the general ledger on 1 March 2008:

Machinery R 400 000

Accumulated depreciation on machinery 240 000

2. Machinery is depreciated at 20% p.a. on cost.

3. The fire destroyed machinery that had originally cost R90 000, and had

accumulated depreciation of R30 000 on 28 February 2008.

4. The insurance company paid out R40 000 for the loss of machinery due to fire.

5. The burnt machinery was replaced with new machinery costing R96 000 cash

on 2 January 2009.

6. Depreciation must be calculated at the year end.

1. Dr General ledger of Kyle’s Kool Karts Cr

1.1. Machinery (6)

1.2. Accumulated depreciation on machinery (18)


1.3. Asset disposal (9) 2008

Dec 31

2008

Dec 31

2. Notes to the financial statements on 28 February 2009

Tangible assets (13)

Cost

Accumulated depreciation on machinery

Carrying value at 1 March 2008

Movements

Additions at cost

Disposals at carrying value

Depreciation for the year

Carrying value at 28 February 2009

Cost


Questions

Kyle is concerned that the fire has cost the business R56 000, being the difference

between the insurance payout and the cost of new machinery.

3.1. What is the actual loss to the business? (1)

3.2. Explain why there is this difference between the actual loss and the cash

outlay incurred. (3)

50 marks

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