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QUESTION ONE $[25]$

$1\mathrm{.}1$

There are ten $(10)$ accounts listed on the following table. Complete the table by identifying and recording the element to which each account will be allocated and state whether the account will be shown in the statement of financial position $($SOFP$),$ the statement of changes in equity $($SOCE$)$ or the statement of profit or loss and other comprehensive income $($SOCI$).$ You may use the abbreviated form of the relevant statement as shown in the example below:

No

Account

element

Component of financial statement.

Example

Bank

Asset

SOFP

$1\mathrm{.}1\mathrm{.}1$

Equipment

$?$

$?$

$1\mathrm{.}1\mathrm{.}2$

Electricity

$?$

$?$

$1\mathrm{.}1\mathrm{.}3$

Services rendered

$?$

$?$

$1\mathrm{.}1\mathrm{.}4$

Investment in shares

$?$

$?$

$1\mathrm{.}1\mathrm{.}5$

Dividends received

$?$

$?$

$1\mathrm{.}1\mathrm{.}6$

Trade receivable

$?$

$?$

$1\mathrm{.}1\mathrm{.}7$

Long term borrowings

$?$

$?$

$1\mathrm{.}1\mathrm{.}8$

Interest on borrowings

$?$

$?$

$1\mathrm{.}1\mathrm{.}9$

Drawings

$?$

$?$

$1\mathrm{.}1\mathrm{.}10$

Capital

$?$

$?$

Required: Use the table above to formulate your solution. Consider each of the accounts listed on the table and allocate to an element and show in which of the components of the financial statements the account will be shown. $(10)$

$2$

$1\mathrm{.}2$

Provide the definition of a liability and briefly describe the three criteria for showing a liability in the financial statements. $(6)$

$1\mathrm{.}3$

Financial statements are prepared and presented under the assumption that the entity is going to continue into the foreseeable future. What is this assumption commonly known as and what is its significance? $(3)$

$1\mathrm{.}4$

Briefly describe the two fundamental qualitative characteristics as identified in the conceptual framework. Also list two qualities that enhance the two fundamental characteristics. $(6)$

QUESTION TWO $[20]$

Ringo Smart opened a business, Smart electrical appliance repairs, on $1$ November $2018.$ He decided that for his business the financial year ending will be $28$ February each year. Ringo presented the following balances at $28$ February $2019$;

Balances at $28$ February $2019$

R

Equipment

Inventory $$ spare parts

Bank

Trade payables

Long term borrowing

Capital $$ R Smart

$73000$

$58000$

$97500$

$22000$

$50000$

$?$

The following is a summary of the transactions that took place during the financial year ended $2020$;

Number

Transactions for the year ended $28$ February $2020$

$1$

Equipment to the value of R$39000$ was brought into the business by Ringo whose son was using the equipment but no longer needed the equipment because he got a job with an international company $.$

$2$

During the year, services rendered totalled R$638000,$ of which R$368000$ was for cash and the balance was on credit.

$3$

Ringo purchased R$310000$ worth of spare parts during the financial year, of

$3$

which $70\%$ was bought on credit and $30\%$ was bought for cash.

$4$

On $28$ February $2020$ stock was taken of spare parts which was valued at R$75000.$

$5.$

Wages of R$144000$ was paid during the year.

$6.$

Trade payables were paid R$210000$ for the year.

$7.$

Interest at $9\%$ per year on long term borrowings was paid on $28$ February $2020.$ The borrowings were not increased nor paid during the year.

Required:

$2\mathrm{.}1$ Calculate the balance of the Capital account at $1$ March $2019.(2)$

$2\mathrm{.}2$ Record the above transactions in a table that is formatted as follows:

No

Assets

$=$

Equity

$+$

Liabilities

Non$-$current

Current

Capital

Income $+$ expenses

Non$-$

current

Current

$01\mathrm{.}03.$

$2019$

$?$

$?$

$?$

$?$

$?$

$?$

$1.$

$2.$

Begin the table with the balances at $1$ March $2019.$ Clearly indicate increases and decreases with $+$ and $()$ or $$ respectively. $(18)$

QUESTION THREE $[25]$

Benji Walker developed keep fit programmes which he also conducted to select groups of people. The following details appeared in the pre$-$adjustment trial balance of Keep$-$fit Services as at $31$ December $2019,$ the end of the financial year.

List of accounts

Debit $-$ R

Credit $-$ R

Equipment at cost

Accumulated depreciation: Equipment

Vehicles at cost

Accumulated depreciation: Vehicles

$490000$

$140000$

$100000$

$20000$

$4$

Inventory: consumables

Trade receivables

Allowances for credit losses

Bank

Capital: B Walker

Drawings

Long term borrowings

Trade payables

Service fees

Rent income

Salaries and wages

Rent expense

Telephone

Interest on borrowings

Electricity and water

Consumable material

$53000$

$130600$

$128000$

$131000$

$234500$

$80600$

$6720$

$3000$

$42280$

$128000$

$3400$

$370000$

$60000$

$130000$

$858800$

$25500$

$1567700$

$1567700$

Additional information:

$1.$

Physical stock$-$taking revealed that there was consumable material on hand at $31$ December $2019$ valued at R$70000.$

$2.$

Repairs to the vehicle costing R$10000$ was erroneously charged to the vehicle at cost account. A correction has not been recorded as yet.

$3.$

Equipment and Vehicles have to be depreciated as follows:

a$)$

Equipment must be depreciated at $10\%$ per year on the reducing balance method. No equipment was bought or sold during the current year.

b$)$

Vehicles must be depreciated on the straight line method over a $4$ year period. The residual value of the vehicle