REQUIRED Show the effect of the following transactions of Cheshire Stores on the Accounting equation.Use + to denote an increase, to denote a decrease and 0 to denote no change tothe elements of the equation. Copy the table in your answer book and follow the example given. Assume that the bank balance is favourable at all times.

Example: Paid the telephone account by cheque, R800

No.	Assets	=	Equity	+	Liabilities
e.g.	R800		R800		0
2.1.1
2.1.2
2.1.3
2.1.4
2.1.5

TRANSACTIONS

1. 2.1.1 Purchased stationery by cheque, R300.

2. 2.1.2 Bought a computer on credit, R8 000.

3. 2.1.3 The proprietor cashed a business cheque for personal use, R500.

4. 2.1.4 Issued a cheque to a creditor to settle an account, R1 800.

5. 2.1.5 Received interest on investment, R400.

2.2 REQUIRED Use the information provided below to answer the following questions:

1. 2.2.1 Calculate the amount payable to the tax authority (e.g. SARS) by Ritz Traders for VAT for the year. (5)

2. 2.2.2 Calculate the selling price of a bag of washing powder including VAT, if Ritz Traders purchased the washing powder at R36 a bag excluding VAT. The washing powder is priced at cost plus 25%. (3)

m

(10)

4

2.2.3 Explain what you understand by the term Output tax" (Output VAT). (2)

INFORMATION

• Ritz Traders is a registered VAT vendor. VAT is levied at a rate of 14%.

• The total sales of Ritz Traders according to the cash register slips for the year amounted to

  R201 000 (including VAT). This amount included zero-rated items that were sold for R30 000.

• The total purchases for the year excluding VAT amounted to R150 000. This amount included

  R24 000 paid for zero-rated items purchased.