QUESTION FOUR [30]

PART A

The following are extracts from the financial records of ABC Ltd for the year ended 31 August 2021.

ABC Ltd

Extract from the Statement of financial statement as at 31 August 2021

	31 August 2021 - R	31 August 2020 - R
Bank	50 000	20 000
Inventories trade goods	22 000	30 000
Trade receivables	77 000	69 000
Trade payables	44 000	46 000
Prepaid expenses:	1 800	1 200
Accrued expenses: interest	1 000	2 400
Accrued expenses; other	5 700	4 400
SARS income tax payable	8 000	3 000
Dividends payable	1 500	2 700

ABC Ltd

Extract from the Statement of profit or loss and other comprehensive income for the year ended 31 August 2021

R

Sales Cost of sales	592 000 (301 000)
Gross profit	291 000
Profit on sale of Equipment	9 000
Depreciation	41 000
Interest expense	2 600
Income tax expense	15 200
Profit for the year	110 300

Additional information:

1. The dividends declared for the current year is R2 400.

Required:

Prepare only the Cash flows from operating activities section of the statement of cash flows for ABC Ltd for the year ended 31 August 2021. Use the indirect method.

Show all workings. Where applicable, round off calculations to the nearest Rand.

(14)

PART B

A trial balance is a list of all accounts in the general ledger and their balances at a specified point in time or at a given date. All the debit balances are added together to arrive at an amount for Total debits and all the credit balances are added together to arrive at the Total credits. If the value of Total Debits is equal to the value of Total credits then this is commonly referred to as the trial balance balances or the trial balance is in equilibrium.

This would mean that the method of the double entry system has been implemented accurately. However, it would be incorrect to believe that because the trial balance is in equilibrium there are no errors or omissions in that accounting system. There are errors and omissions that will not be identified by a trial balance that is in equilibrium.

Required:

Identify at least four types of errors and /or omissions that would NOT be identified by a trial balance that is in equilibrium. Provide a brief description of each one or present examples of transactions being recorded in a way that will still allow the trial balance to balance.