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:

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

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.