QUESTION 1

Ambrose Traders is a general trading store. Ambrose Traders tracks their inventory according to the periodic inventory system and is a VAT Vendor. All amounts include VAT of 15%, where applicable, unless otherwise stated. Ambrose Traders entered into the following transactions: Transactions for the month:

a) Purchased merchandise on credit, R 24 700 (excluding VAT).

b) Paid shortterm insurance premium by debit order, R 4 200 (VAT inclusive)

c) Returned merchandise to the seller and received a credit note, R 3 200 (excluding VAT) (Refer to question (a) above)

d) Purchased a kettle and a toaster (Equipment) on credit, R 2 200. The kettle and the toaster will be used by staff only.

e) The owner withdrew inventory for his own use, cost price R 2 520 (including VAT).

f) Paid for delivery costs (via SA couriers) for trading inventory from petty cash, R 152 (VAT Inclusive).

g) Purchased an office computer with cash from Computer Inc Ltd R 16 500. (VAT Inclusive).

i) Received interest from the bank on a favourable bank balance R 87.65.

Analyse each of the transactions listed above and complete the table provided in your answerbook.

Show the doubleentry (debit and credit general ledger account names), as well as the effect on the accounting equation, for each transaction, in the columns provided. Ensure that you use the + and - signs to show the effect on the equation as marks will be allocated for these.

Example: Paid R 4 560, by cheque for Stationery.

________________________________________________________________________________________________________________________________

NO. | ACCOUNT | ACCOUNT | ASSETS | OWNER'S | LIABILITIES

| DEBITED | CREDITED | | EQUITY |

______________________________________________________________________________________________________________________________________

e.g. | Stationery | Bank | 4 560 | 3 965.22 |

| VAT input | | +594.78 | |

_________________________________________________________________________________________________________________________________________

Hint: Ensure that after each transaction your accounting equation A = OE+L is true.