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 201424 000
30 October 201412 760
Outstanding cheques:
No. 71324 October 20147 880
No. 73815 December 201415 400
Credit amount wrongly debited2 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)
DATEDETAILSFOLDEBITCREDITBALANCE
20141Account rendered34 920
Sept
5Invoice No. 34611 80846 728
7Debit note No. 6981645 912
13Cheque No. 20722 78823 124
Discount3 53219 592
14Invoice No. 1356 92926 521
23Invoice No. 3787 18833 709
24Invoice No. 3968 82942 538
30Invoice No. 4074 52647 064
B.Statement of account received from ML Suppliers:
ML SUPPLIERS
20 Main RoadSTATEMENT OF ACCOUNTTel: 013 809 4467
Komati OortFax: 086 789 3567
1234Date: 25 September 2014
ACCOUNT OF: Nkomazi TradersACCOUNT NO: NKZ 689
DATEDETAILSDEBIT (+)CREDIT (-)BALANCE
20141Balance34 920
SEPT
5Invoice No. 34610 29645 216
7Credit Note No. 10981646 032
13Receipt No. 514022 78823 244
23Invoice No. 3787 18830 432
24Invoice No. 3969 81040 242
25Interest on overdue account2940 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.