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The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end - NSC Accounting - Question 1 - 2016 - Paper 1
Question 1
The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end. The bookkeeper is Jimmy Brown. REQUIRED: 1.1.1 Calculate the balance as p... show full transcript
Worked Solution & Example Answer:The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end - NSC Accounting - Question 1 - 2016 - Paper 1
Step 1
Calculate the balance as per the Bank Account in the General Ledger
Answer
To calculate the balance as per the Bank Account in the General Ledger:
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Start with the favourable bank statement balance: R9 410.
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Add the deposits not recorded by the bank:
- 12 May 2016: R5 000
- 27 May 2016: R15 300
Thus, the total deposits are R20 300.
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Deduct the outstanding cheques:
- Cheque No. 882: R2 400
- Cheque No. 996: R540
The total outstanding cheques equal R2 940.
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Account for the incorrect debit entry:
- The incorrect debit amount (R7 600) should be subtracted.
Now calculate:
Favourable balance = 9 410 + 20 300 - (2 400 + 540 + 7 600)
Favourable balance = 9 410 + 20 300 - 10 540 = R19 170.
This balance is favourable.
Step 2
Provide a reason why Cheque No. 882 should not appear as an outstanding cheque
Answer
Cheque No. 882 should not appear as an outstanding cheque because it has been cleared by the bank prior to the financial year-end or was incorrectly marked as outstanding. To correct this transaction, it should be removed from the outstanding cheques list and reflected as a paid transaction in the general ledger.
Step 3
How must Cheque No. 1234 be treated at the end of the financial year?
Answer
Cheque No. 1234 is post-dated; therefore, it should not be recorded as an outstanding cheque at the end of the financial year. Instead, it should be treated as a commitment that will be recognized in the next financial period.
Step 4
List the accounting entries that must be made to take this transaction into account
Answer
For the stolen deposit of R5,000, the following accounting entry must be made:
- Debit 'Cash' account: R5,000 (to remove the asset that no longer exists)
- Credit 'Loss on Theft' account: R5,000 (to recognize the loss in financial records).
The control measure that can be implemented is:
- Regular audits of cash and bank transactions to ensure no discrepancies are present.