Accounting English Paper 2 2015 Questions and Answers Part 1

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Question 1:

Concepts and Reconciliation (35 marks; 25 minutes)

Concepts

Give one term for each of the following descriptions by using a term from the list below. Write only the term next to the question number (1.1.1–1.1.4) in the answer book.

outstanding deposit; dishonored cheque; debit order; stale cheque; bank overdraft; outstanding cheque.

  • A facility whereby the business can use more money than they have in their current banking account

  • An item shown as an ‘unpaid’ cheque on the Bank Statement will be regarded as a/an …

  • Permission granted to a third party to automatically receive monthly payments from the current account of a business

  • A cheque that is more than six months old will not be cashed by the bank because it is a/an …

Bank Reconciliation

As the internal auditor, you are presented with information on the Bank Reconciliation Statement of Manto Traders. The owner is Roy Polls. Their financial year ends on 31 October 2014.

Required

Refer to the Figure of R24 000 in Information A

The bank has no record of R24 000 ever being deposited. This money cannot be found.

  • Explain how this loss would be treated in the books.

  • Explain how Roy can prevent a loss of this nature in the future. Provide two points.

Refer to Information a and B

  • The Bank account in the books of Manto Traders reflects a debit balance of R16 160 on 31 October 2014 before taking any adjustments into account.

  • Calculate the correct Bank account balance on 31 October 2014.

  • Give a suitable reason for the following entry from the Bank Reconciliation Statement: Credit amount incorrectly debited, R2 500.

  • The office assistant of Manto Traders takes money from the cash register to make payments for business expenses. Explain why this is bad accounting practice and provide one point of advice to Roy.

Information

Extract from the Bank Reconciliation Statement on 31 October 2014:

Extract from the Bank Reconciliation Statement on 31 October 2014

Deposits not yet recorded:

12 October 2014

24 000

30 October 2014

12 760

Outstanding cheques:

No. 713

24 October 2014

7 880

No. 738

15 December 2014

15 400

Credit amount wrongly debited

2 500

Balance as per Bank Statement

?

The following information appeared on the Bank Statement, but the bookkeeper did not take this into account when calculating the balance of the bank account:

  • The Bank Statement showed an unpaid cheque for R2 710 which had been received from a debtor

  • A stop order, R1 650, for insurance

  • The Bank Statement reflected cheque No. 688 as R4 270 (the correct amount). This appeared incorrectly as R4 720 in the relevant Cash Journal.

Creditors’ Reconciliation Nkomazi Traders

A statement of account received from ML Suppliers on 25 September 2014 reflects that Nkomazi Traders owes them R40 271. The Creditors’ Ledger account of ML Suppliers in the books of Nkomazi Traders reflects an outstanding balance of R47 064.

Required

  • Calculate the correct balance for ML Suppliers’ in the Creditors’ Ledger of Nkomazi Traders. Use R47 064 as your starting point.

  • Prepare a Creditors’ Reconciliation Statement on 30 September 2014.

Information

Creditors' Ledger of Nkomazi Traders ML Suppliers (CL7)

A.

Creditors’ Ledger of Nkomazi Traders

ML Suppliers (CL7)

DATE

DETAILS

FOL

DEBIT

CREDIT

BALANCE

2014

1

Account rendered

34 920

Sept

5

Invoice No. 346

11 808

46 728

7

Debit note No. 69

816

45 912

13

Cheque No. 207

22 788

23 124

Discount

3 532

19 592

14

Invoice No. 135

6 929

26 521

23

Invoice No. 378

7 188

33 709

24

Invoice No. 396

8 829

42 538

30

Invoice No. 407

4 526

47 064

B.

Statement of account received from ML Suppliers:

ML SUPPLIERS

20 Main Road

STATEMENT OF ACCOUNT

Tel: 013 809 4467

Komati Oort

Fax: 086 789 3567

1234

Date: 25 September 2014

ACCOUNT OF: Nkomazi Traders

ACCOUNT NO: NKZ 689

DATE

DETAILS

DEBIT (+)

CREDIT(-)

BALANCE

2014

1

Balance

34 920

SEPT

5

Invoice No. 346

10 296

45 216

7

Credit Note No. 109

816

46 032

13

Receipt No. 5140

22 788

23 244

23

Invoice No. 378

7 188

30 432

24

Invoice No. 396

9 810

40 242

25

Interest on overdue account

29

40 271

Additional Information

On comparing the statement received from ML Suppliers with the account in the Creditors’ Ledger the following were noted:

  • Invoice No. 346 on 5 September 2014 was correct according to the statement received from ML Suppliers.

  • ML Suppliers made an error in recording the return of goods on 7 September 2014.

  • Nkomazi Traders qualified for an early settlement discount with the payment on 13 September 2014. ML Suppliers granted only R2 532 as discount. They promised to show this on their statement next month.

  • Invoice No. 135 for R6 929 was recorded incorrectly in the Creditors’ Ledger Account of ML Suppliers. This purchase was made from Mandla Suppliers.

  • A trade discount of 10% was deducted on invoice No. 396. ML Suppliers did not take this into account. ML Suppliers will correct this error next month.

  • Invoice No. 407 did not appear on the statement received from ML Suppliers as this transaction took place after their statement date.

  • ML Suppliers have correctly levied interest of R29 on the account.