Sidestep is a retail shop that specialises in the sale of rugby boots. The business, which is owned by Kwayd Coopa is in its second year of trading and has a year-end of 31 August. You have been provided with the trial balance for the 11 months ended 31 July 2013 as well as transactions for the month of August.

Trial balance of Sidestep for the 11 months ended 31 July 2013:

	DR	CR
Capital		300 000
Accumulated profit (1/9/2012)		85 000
Drawings	40 000
Vehicle	282 150
Trade receivables	25 000
Bank	160 687
Inventory	62 000
Stationery asset	1 250
Loan: NSW Bank (15% p.a.)		75 000
Trade payables		68 000
Sales income		258 000
Cost of sales expense	143 000
Interest expense	10 313
Salaries & wages expense	40 000
Rent expense	17 600
	786 000	786 000

The following transactions took place during the month of August 2013:

On 1 August, Kwayd contributed a vehicle that he had won as man of the match during his time as a rugby player. The vehicle has been reliably valued at R100 000.

The business had taken out a loan on the 1 September 2010. The agreement stated that the business pays back the loan in 5 equal, annual instalments beginning on the 1 August 2011. The business paid the instalment for the year ended 31 August 2013 year on 1August.

On 4 August, Sidestep sold 15 pairs of rugby boots to William Genear. 10 pairs were sold on credit and 5 pairs were sold for cash. The boots had a total cost of R2 250 and a selling price of R300 each.

On 9 August, Sidestep paid Wollabee Traders R3 750. A portion of the payment was for 20 new rugby boots purchased on 9 August and the remainder was to settle a portion of their account outstanding with Wollabee Traders for boots previously purchased on credit. All of these boots had a cost of R150 each.

On 12 August, William Genear returned one of the pairs of rugby boots, purchased on credit on the 4 August, as the pair was damaged. Williams account was credited with the full amount.

One of Sidesteps customers, Adam Cupa, had not yet paid Sidestep for inventory bought on credit during March 2013, and as a result Sidestep charged him interest of R50 on the amount owing. Adam has indicated that he will pay the amount owing with interest at the beginning of September 2013.

On 19 August, Sidestep purchased stationery amounting to R900 from Rob. E. Deans stationers and paid by cheque.

On 21 August, Israyel Falow paid Sidestep R650 for rugby boots that he had bought on credit during July 2013.

Kwayd had been asked to participate in a charity touch rugby tournament and on 23 August he took 2 pairs of boots home to personally use for this tournament. Each pair had a cost of R150 and a selling price of R300.

On 26 August, Sidestep paid R3 200 for Augusts rent.

Salaries for the month amounted to R6 500. R5 600 was paid during August, and the remainder will be paid in September 2013.

Interest is payable on the last day of every month at a rate of 15% per annum. Due to cash flow problems, Sidestep negotiated with the bank that they would pay both Augusts and Septembers interest when Septembers interest was due.

On 31 August, Sidestep had stationery on hand amounting to R950.

After having reviewed the books of Sidestep, you were happy with all the journal entries processed, except for the two journal entries below, processed by the bookkeeper:

Transaction 10:

Dr Rent expense (P/L) 3 200

Cr Trade payables (L)3 200

Transaction 11:

Dr Salaries expense (P/L) 6 500

Cr Bank (A)6 500

You are required to:

Show how transactions 2 and 7 effect the financial position of the business as represented by A = E + L. You need to clearly indicate whether the element has increased or decreased and provide the relevant amount and the name of the account that would be affected.

Prepare the general journal entry/ies that would have been processed by Sidestep to record the following transactions. Ignore dates and narrations.

Transaction 4

Transaction 9

Transaction 12

Kwayd is worried that taking boots for his personal use will have a negative effect on his profit. Advise Kwayd on his concern and indicate whether you think he is justified or not in worrying.

Prepare the following accounts in the general ledger of Sidestep for the month ended 31 August 2013. Show dates and close off or balance the accounts where appropriate.

Trade receivables

Stationery asset

With regard to the two transactions you believed were incorrectly processed by the bookkeeper (transaction 10 and 11), prepare the correcting general journal entries to correctly reflect each transaction.

Prepare the statement of comprehensive income of Sidstep for the year ended 31 August 2013.You are required to clearly show the gross profit, operating profit and profit for the period.

Prepare the accumulated profit column only of the statement of changes in equity of Sidestepfor the year ended 31 August 2013.