On 28 February 2022, D de Kok sent a statement of account to Heathrow Dealers as it appeared in his debtors ledger. Debtor: Heathrow Dealers Date Details Debit Credit 31 Jan 2022 Account supplied 750.00 3 Feb 2022 Goods: Invoice I23 1 076.40 8 Feb 2022 Goods: Invoices I37 225.00 12 Feb 2022 Bank receipt R83 100.00 18 Feb 2022 Goods: Invoice I63 2 890.95 22 Feb 2022 Credit note no. CN23 28.10 27 Feb 2022 Bank: Receipt R223 223.00 28 Feb 2022 Amount owing 4 591.25 4 942.35 4 942.35 By comparing the above statement with D de Koks account in Heathrow Dealers creditors ledger the following was discovered: During January 2022 D de Kok charged VAT at 15% on a zero-rated supply. The VAT inclusive amount shown on the invoice was R2 758.80. The goods purchased on 8 February, according to invoice I37, were incorrectly recorded by Heathrow Dealers and D de Kok. The purchase was subject to a trade discount of 25% but only 10% was allowed. Merchandise was purchased on 9 February for R113.30 as per invoice I46. The invoice was not recorded on the monthly statement. The bookkeeper of Heathrow Dealers erroneously recorded receipt no. R83 at R10.00. D de Kok failed to allow the advertised trade discount of 10% on invoice I63. Heathrow Dealers returned goods on 22 February and received credit note no. CN23 for R28.00. Heathrow Dealers had, however, recorded purchases returned for R48.10 in D de Koks account. Heathrow Dealers purchased merchandise worth R200 from D de Kok on 24 February but credited the entry to D de Koks account. On 28 February, Heathrow Dealers paid R500 to D de Kok. D de Kok did not record the amount on the monthly statement. Note: The balance of D de Koks individual account in the creditors ledger of Heathrow Dealers was R3 825.61, before taking the above-mentioned adjustments into account. ASSIGNMENT 2023 SECOND SEMESTER ACN100 ACCOUNTING FOR MANAGERS I Page 5 of Assignment Required: Draft the remittance advice that Heathrow Dealers would have sent to D de Kok on 28 February 2022. Test the correctness of the remittance advice by referring to the balance of and movements on the creditors account in the creditors ledger of Heathrow Dealers. (Show all calculations correct to TWO decimals.) Question 2 [31] The following information relates to Merlot Traders. The business makes use of a manual accounting system: Balances on 30 April 2021 Trade receivables R 11 000 Trade payables R 16 120 Totals of lists on 30 April 2021 Debtors ledger R 4 950 Creditors ledger R 18 429 After all the ledgers of Merlot Traders had been prepared, the following differences and errors were depicted: 1. The total of the sales return column in the debtors allowances journal (R1 200) was posted to the debit side of the trade receivables account. 2. A credit note issued for R100 had not been recorded at all. 3. A settlement discount granted to a debtor was erroneously credited to a creditors account in the general journal and posted as such. The VAT inclusive amount of this discount was R228. 4. The trade receivables column in the cash receipts journal was overcast by R350. 5. A credit note received for R700 (including VAT) was erroneously journalised and posted as an original invoice. 6. A debtors individual balance of R2 000 was transferred to their account in the creditors ledger. The entry was correctly made in the subsidiary journals and ledgers, but in the general ledger the trade receivables account was debited while the trade payables account was credited with R2 000. 7. The total of R512 on an original invoice was posted to the creditors individual account in the creditors ledger as R521. 8. A duplicate credit invoice displaying a VAT amount of R420 (only standard rated goods were sold), was erroneously entered into the creditors journal instead of the debtors journal and posted as such. 9. An original credit note totalling R1 000 was correctly entered into the creditors allowances journal, but when posting the entry to the creditors individual account, the bookkeeper entered an incorrect amount of R100. ASSIGNMENT 2023 SECOND SEMESTER ACN100 ACCOUNTING FOR MANAGERS I Page 6 of Assignment 10. An EFT confirmation slip issued to a creditor shows the correct amount of R6 000. The amount was correctly entered into the cash payments journal, but only R600 was entered into the creditors individual account. Required: Complete the following table. Show how the balances of the control accounts compare with the totals of the lists. A standard VAT rate of 15% applies. No. Trade receivables a/c Debtors list Trade payables a/c Creditors list Debit Credit Debit Credit Debit Credit Debit Credit Question 3 [7] 3.1 For each of the following independent scenarios, indicate whether or not the item will be included in the cost of inventory for the vendor selling the goods in question. Yes No The costs of transporting merchandise purchased for eventual resale purposes from our supplier to our premises Wages of workers who assemble the parts of a vehicle at a vehicle manufacturer The fuel for the motorcycle which a pizza delivery man uses to deliver our pizzas to customers Salaries of sales staff Salaries of office staff The costs of storing our product before it gets sold Import tariffs paid on the imported raw materials used in the manufacture of our products Question 4 [14] Answer the following questions: 4.1 Although offering credit facilities to customers can benefit a business, it comes with a risk. Describe one risk associated with offering a credit facility to customers and explain two ways businesses can mitigate the credit risks. (3) 4.2 When a VAT vendor issues a credit invoice to a customer, output VAT becomes payable to SARS. What would be a fair practice for SARS to follow with regard to the payment of VAT, should the debtors debt become irrecoverable? (2) 4.3 What are the prerequisites for a VAT vendor to be granted VAT relief in the event of a credit loss occurring? (3) 4.4 If a business sells on credit, then the amount owed will be an asset for the business. Should the debtors debt then become irrecoverable, the business will have to write the debt off. Demonstrate by means of T-accounts how a VAT vendor would record a credit sale and then how the vendor would record a credit loss. ASSIGNMENT 2023 SECOND SEMESTER ACN100 ACCOUNTING FOR MANAGERS I Page 7 of Assignment Base your answers on the following examples: Assume the goods were sold for R1 150 including VAT (Credit sale). Assume the debtor owes us R570 and the whole amount is to be written off as irrecoverable (Credit loss). (6) Question 5 [10] A credit card slip does not fall into any of the following categories of source documents: Credit tax invoice Credit Note Cash invoice Cash slip Cash receipt EFT Petty cash voucher Journal voucher Required: Discuss the role and purpose of the speed point slip in recording purchases made on a business credit card. ASSIGNMENT 2023 SECOND SEMESTER ACN100 ACCOUNTING FOR MANAGERS I Page 8 of Assignment Question 6 [11] Complete the following table by ticking the correct block for each consideration listed. Assume that a business acquires the following considerations. Where applicable, assume that all parties dealt with are registered VAT vendors and that the VAT Act has been adhered to in all instances: Consideration Standardrated supply Zero-rated supply Exempt supply Non-allowable item e.g. Life Insurance x White bread purchased by a restaurant with the purpose of making burgers for resale Diesel for use in delivery vehicle Telephone bill Doctors subscription to the Medical Council Stationery A kettle for the office kitchen (for use by staff) Short-term Insurance premiums Sale of a business as a going concern A delivery vehicle that does not fit the description of a passenger vehicle Rates, portion of rates & taxes bill Interest on bank overdraft ASSIGNMENT 2023 SECOND SEMESTER ACN100 ACCOUNTING FOR MANAGERS I Page 9 of Assignment Question 7 [12] Titan Traders trades in clothing. The business only started trading on 1 September 2022 and by 1 October 2022 only the following balances appeared in its books: Debit balances Bank R425 000 Credit balances Capital R325 000 Bank Loan R100 000 The financial position on 1 October 2022 could thus be shown as follows under the accounting equation: Assets (R) = Owners equity (R) + Liability (R) 425 000 = 325 000 + 100 000 Titan traders entered into the following transactions during October 2022: Note: Ignore VAT 1 The owner, M Titan increased his capital contribution by making an EFT of R100 000 from his personal bank account to the bank account of the business. He further contributed a vehicle to the value of R300 000. 7 Repaid R5 000 on the bank loan. 8 Paid the bookkeepers salary by EFT, R9 000. 10 Purchased trading goods on credit for R25 000. 13 Sold merchandise with a cost price of R2 000 on credit for R4 500. 25 Rendered services to a client for R10 000. The client paid R4 000 upfront and will repay the balance in six equal monthly instalments, starting on 1 November 2022. 31 The owner took two pairs of shoes with a cost price of R340 per pair from inventory for personal use. Required: Calculate M Titans equity in his business on 31 October 2022, by showing the effect of each individual transaction on the accounting equation.