You are the newly appointed financial analyst at Durban Electronics, a company specialising in the retail of various electronic goods. The company$$s current financial year ends on $31$ December $2024.$ You are required to perform a detailed examination of the trade payables account as part of the year$-$end procedures. You've encountered several transactions and occurrences that have affected the trade payables account during the year.

The following information was made available from the company records and financial statements:

$$

The subsidiary ledger account of AdvancedElectronix $($AE$)$ has a balance of R$255000$ on $31$ December $2024.$

$$

The creditor's statement of account, received from AdvancedElectronix $($AE$),$ shows a balance of R$264500$ outstanding on $31$ December $2024.$

Upon detailed investigation of the $2024$ financial records, you noted the following:

$1.$

An invoice $($INV$001)$ of R$10000$ for inventory received from AdvancedElectronix $($AE$)$ was recorded twice in the subsidiary ledger account due to an administrative error.

$2.$

Inventory worth R$5000$ was returned to AdvancedElectonix, but the credit note $($CN$002)$ has not been accounted for yet.

$3.$

AdvancedElectronix $($AE$)$ awarded Durban Electronics a R$3000$ discount for early payment received in November $2024.$ The discounts were earned but were not recorded in the accounting system.

$4.$

Goods received directly into the warehouse $($R$12000)$ from AdvancedElectronix $($AE$)$ on $24$ December $2023$ were not recorded as the related purchase invoice $($INV$003)$ was only received in the next accounting period, on $8$ January $2025.$

$5.$

A payment of R$4000($EFT$004)$ made to AdvancedElectronix $($AE$)$ is not yet reflected on their creditor's statement. Durban Electronics made the payment at year end and did not update the subsidiary ledger account of AdvancedElectronix $($AE$)$ yet.

$6.$

Durban Electronics identified an overstatement of R$1000$ in its accounts payable due to a transposition error. Invoice $($INV$005)$ received from AdvancedElectronix

ANNEXURE F: FORMATIVE ASSESSMENT $1$

$64$ HFAC$132-1-$Jan$-$Jun$2024-$FA$1-$LVN$-$V$3-20240119$

$($AE$)$ that should have been recorded as R$2345$ was mistakenly entered as R$3$

$245.$

$7.$

The company acquired goods valued at R$50,000$ from AdvancedElectronix $($AE$).$ However, the associated transport costs of R$7,000$ were not recorded in the subsidiary ledger for AE but were instead found in Durban Electronics' suspense account. These costs represent the transport and handling charges for the imported goods from AE and are due for payment to AE along with the cost of goods. Proper allocation to the AE subsidiary ledger is required to reflect the full transaction accurately.

$8.$

An amount of R$2500$ was incorrectly credited to AdvancedElectronix $($AE$)$ subsidiary ledger account due to an erroneous entry.

$9.$

The company discovered unrecorded interest of R$1000$ on overdue INV$000$ which was payable to AdvancedElectronix $($AE$)$ in October $2023.$

$10.$

A purchase from AdvancedElectronix $($INV$006)$ valued at R$15,000$ was mistakenly charged as an expense, impacting the profit and loss account instead of being correctly recorded as inventory in the subsidiary ledger. This entry was incorrectly accounted for as a debit to an expense account and a credit to AdvancedElectronix, instead of the correct entry, a debit to inventory and a credit to AdvancedElectronix. The subsidiary ledger for AdvancedElectronix should be updated to reflect the purchase as part of the inventory, not as an expense.

ANNEXURE F: FORMATIVE ASSESSMENT $1$

$65$ HFAC$132-1-$Jan$-$Jun$2024-$FA$1-$LVN$-$V$3-20240119$

REQUIRED:

$3\mathrm{.}1$ Prepare the trade payables reconciliation for Durban Electronics$$ AdvancesElectronix $($AE$)$ trade payable as at $31$ December $2024$ to identify the discrepancies between the subsidiary ledger and the creditor's statement of account.

$(15$ marks$)$

$3\mathrm{.}2$ Describe the impact of incorrect treatment of trade payables, such as overstatements or understatements, on the financial statements of Durban Electronics.

$(2$ marks$)$

$3\mathrm{.}3$ Explain how the adjustments for early payment discounts, returned goods, and unrecorded interest affect the Trade Payables account and the overall financial position of Durban Electronics.

$(2$ marks$)$

$3\mathrm{.}4$ Discuss the importance of timely and accurate recording of transactions related to trade payables in compliance with IFRS, using examples from the scenario of Durban Electronics and AdvancedElectronix $($AE$).$

$(2$ marks$)$