1. The following steps form part of the accounting cycle: (a) recording of transactions in journals (b) reporting in financial statements (c) transactions taking place (d) posting to the ledger (e) analysis and interpretation of financial statements (f) decision making by management (g) completion of source documents Which option represents the correct order of the above-mentioned steps in the accounting cycle? 1. (c), (g), (a), (d), (b), (e) and (f) 2. (g), (c), (f), (a), (d), (b) and (e) 3. (a), (c), (b), (d), (f), (e) and (g) 4. (a), (b), (c), (d), (e), (f) and (g) 5. (g), (c), (a), (d), (e), (b) and (f) 2. Which one of the following errors can be revealed by a trial balance? 1. A transaction was completely omitted from the accounting records. 2. Posting of a debit entry from the journal was omitted. 3. Posting to the correct side of an incorrect account. 4. An entry was recorded twice in the correct journals. 5. A transaction was recorded correctly in the journal, but was posted on the incorrect day of the same month, to the correct general ledger accounts. 3. The following statements relate to the nature and function of accounting: (a) All liabilities payable within one year must be recorded as current liabilities. (b) Management accounting deals with the reporting of the financial achievements of an entity as a whole. (c) An accounting entity is an independent existing economic unit, and the financial transactions must be dealt with separately from those of any other unit. (d) Financial information is only used by enterprises intending to maximise profits. Which option reflects the statements that are correct? 1. (a), (b) and (c) 2. (a) and (c) 3. (b) and (c) 4. (b), (c) and (d) 5. (b) and (d) 40 ASSIGNMENT 01, SEMESTER 2 (continued) 4. Which transaction increases and decreases asset accounts? 1. A cheque drawn to pay a creditor for goods purchased as inventory three months ago. 2. A cheque drawn by the proprietor for his or her own use. 3. A cheque drawn to pay for fuel. 4. A cheque drawn to pay the Municipality a deposit for rent. 5. Settlement discount granted to a debtor for settling his or her account early. 5. Which transaction will lead to a change in the equity of an entity that has an favourable bank balance? 1. Office equipment purchased on credit. 2. A cheque issued for payment of a creditor's account. 3. Received a cheque from a debtor in full settlement of his account. 4. A cheque issued for wages. 5. Repayment of a bank loan. 6. The following balances were extracted from the accounting records of Mobility Traders at 31 December 2016. R Equipment ............................................................................................................................ 405 000 Bank (cr) ............................................................................................................................... 100 000 Long term loan ...................................................................................................................... 220 000 Trade payables control .......................................................................................................... 85 000 Inventory ................................................................................................................................ 15 000 Trade receivables control ....................................................................................................... 79 000 The equity amount of Mobility Traders at 31 December 2016 is as follows? 1. R464 000 2. R294 000 3. R90 000 4. R94 000 5. R194 000 7. The following list of balances was obtained from the accounting records of Muhingo Stores at 31 March 2016 (the entitys financial year end): R Land and buildings ................................................................................................................ 550 000 Trade payables control ......................................................................................................... ? Drawings ............................................................................................................................... 15 000 Capital ................................................................................................................................... 300 000 Inventory ................................................................................................................................ 44 000 Non-current liabilities ............................................................................................................. 258 000 Trade receivables control ....................................................................................................... 169 000 What was the creditors control amount of Muhingo Stores at 31 March 2016? 1. R205 000 2. R255 000 3. R202 000 4. R235 000 5. R220 000 FAC1503/101 41 ASSIGNMENT 01, SEMESTER 2 (continued) 8. On 29 January 2016, Nahoon Traders paid the entity's electricity account of R8 672 with a business cheque. Which account will be debited and which account credited in the general ledger of Nahoon Traders, on 29 January 2016? 1. The electricity account will be debited and the bank account will be credited. 2. The drawings account will be debited and the electricity account will be credited. 3. The capital account will be debited and the bank account will be credited. 4. The electricity account will be debited and the drawings account will be credited. 5. The electricity account will be debited and the capital account will be credited. 9. Molefe Traders purchased inventory worth R23 000 on credit from Seaside Wholesalers on 28 December 2016. Molefe Traders are not registered as a VAT vendor and makes use of the perpetual inventory system. Which option represents the effect of the above transaction on the accounting equation of Molefe Traders at 28 December 2016? Assets = Equity + Liabilities R R R 1. 23 000 + 23 000 0 0 2. + 23 000 23 000 0 3. 0 23 000 + 23 000 4. + 23 000 0 + 23 000 5. 23 000 0 23 000 10. The following transactions relate to Mountain Traders for December 2016. Mountain Traders is not registered as a VAT vendor and uses the periodic inventory system. R (a) Bank charges ...................................................................................................................... 2 200 (b) Commission earned ............................................................................................................ 3 000 (c) Drew a business cheque for the motor vehicle licence of the owners privately owned SUV 800 (d) Issued a cheque to C Clubman, a creditor, in partial fulfilment of Mountain Traders account 8 000 Which option reflects the net influence of the above transactions on the accounting equation of Mountain Traders for December 2016? Assets = Equity + Liabilities R R R 1. 0 + 3 000 3 000 2. 5 200 3 000 2 200 3. 8 000 0 8 000 4. 6 000 3 000 3 000 5. + 14 000 14 000 0 42 ASSIGNMENT 01, SEMESTER 2 (continued) 11. Which statement is incorrect? 1. VAT on goods purchased is input VAT. 2. Input VAT is paid to the South African Revenue Service. 3. VAT on goods sold and services rendered, is output VAT. 4. Output VAT is payable to the South African Revenue Service. 5. The balance on the VAT control account indicates the amount that should be paid to or claimed from the South African Revenue Service. 12. On 1 December 2016, M Davids opened a general store, Davids Traders, which is registered as a VAT vendor (the applicable VAT rate is 14%). Davids Traders uses the periodic inventory system and control accounts. Analyse the following transaction and choose the correct option from the options given. The amounts in the transactions are VAT inclusive where applicable. On 6 January 2016, the total cash sales as per cash register roll number 8 were R58 412,66. The amount of R58 412,66 includes credit card payments to the value of R41 200,00. The amount of sales in the sales column of the cash receipts journal will be 1. R36 140,35 2. R87 379,53 3. R58 412,66 4. R51 239,18 5. R41 200,00 13. Busyhubs Traders sold inventory at a price of R22 230,00 (including VAT at 14%). Which option represents the amount to be credited in the VAT output account? 1. R3 112,20 2. R19 117,80 3. R22 230,00 4. R19 500,00 5. R2 730,00 14. The bank reconciliation statement at 31 March 2016 showed a debit balance per bank statement to the amount of R5 515 and a credit balance per bank account to the amount of R4 885. The bank statement showed a favourable balance to the amount of R5 155 on 30 April 2016. The balance per bank statement in the bank reconciliation statement of Bremmers Traders at 30 April 2016 is as follows: 1. a debit balance of R5 155 2. a credit balance of R5 155 3. a debit balance of R5 515 4. a credit balance of R5 515 5. a debit balance of R4 885 15. On comparing the cash journals of Carthy Traders for the month ended 30 April 2016, with the bank statement for the same period, it was noted that a cheque for R1 120, which was received from P Pabloon, a debtor, was dishonoured by the bank due to insufficient funds in the debtors account. FAC1503/101 43 ASSIGNMENT 02, SEMESTER 1 (continued) Question 15 (continued) The correct entry in the accounting records of Carthy Traders should be the following: What will the correct entry in the accounting records of Carthy Traders