QUESTION 2 (27 marks)

Urban Style Interiors (referred to as USI) is a high-end interior design firm with a financial year end of 31 December. They regularly purchase high-quality furniture items from Fancy Furniture Ltd (FF Ltd).

On 1 December 2023, USI received their statement of account from FF Ltd, indicating a balance outstanding of R144 000 as at 30 November 2023. However, the payables account in USIs records currently shows a balance payable to FF Ltd of R116 875 as at 30 November 2023.

The accountant of USI investigated what the possible difference can be and picked up the following discrepancies that must still be corrected/accounted for during November 2023: 1. Incorrect invoice amount Invoice (INV001) from FF Ltd for R10 000 was incorrectly recorded in the accounts payable ledger as R1 000, resulting in a discrepancy of R9 000.

2. Duplicate invoice FF Ltd issued two invoices during November 2023 (INV002 and INV003) for R5 000 each, causing an overstatement of R5 000 in the trade payable ledger balance of USI. A credit note (CN003) dated 30 November 2023 was issued by FF but it did not reflect on the statement.

3. Incorrect payment allocation USI made a payment of R8 000 to FF Ltd, but FF Ltd mistakenly allocated the payment received to the account of Urban Style Properties.

4. Goods returned / rejected USI returned faulty goods to the value of R3 500 to FF Ltd on 29 November 2023. FF Ltd, issued credit note CN004 on 15 December 2023. The credit note was not reflected on the November 2023 statement. 5. Unrecorded credit note FF Ltd issued a credit note (CN005) of R2 000 for a pricing discrepancy, but it was not recorded in the accounts payable ledger, causing an understatement of R2 000 in the payable balance.

6. Goods received USI received goods from FF Ltd worth R6 500, but the invoice has not been received or accounted for yet in the payables balance. The invoice was issued and received on 1 December 2023.

7. Timing differences An invoice (INV007) from FF Ltd for R4 000 was recorded in the supplier statement for November 2023 but was not recorded in the accounts payable ledger until December 2023, causing a timing discrepancy.

8. Discount / rebate FF Ltd provided a 5% discount on an invoice (INV008) of R7 500, but this discount was not initially recorded in the general ledger. A discount of R375 needs to be applied to adjust the payable balance accurately.

REQUIRED:

2.1 Prepare the general ledger account (T account) for Accounts Payable of Urban Style Interiors to account for any/all adjustments and corrections for the month of November 2023. Begin with the current balance of R116 875 as your starting point. Your account must be carried forward after all adjustments are made. (15 marks)

2.2 Prepare the Accounts Payable reconciliation statement between Urban Style Interiors and their supplier Fancy Furniture Ltd for the month of November 2023. (8 marks)