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Refer to Information G - NSC Accounting - Question 6 - 2016 - Paper 1
Question 6
Refer to Information G. 6.1.1 Identify TWO items that the bookkeeper recorded incorrectly in the Cash Budget. 6.1.2 Identify TWO items in the Cash Budget that woul... show full transcript
Worked Solution & Example Answer:Refer to Information G - NSC Accounting - Question 6 - 2016 - Paper 1
Step 1
Identify TWO items that the bookkeeper recorded incorrectly in the Cash Budget.
Answer
- Discount received: The amount of discount received is often miscalculated or not recorded accurately.
- Depreciation: This is typically not included in cash budgets, leading to errors in reporting cash flows.
Step 2
Identify TWO items in the Cash Budget that would NOT appear in a Projected Income Statement.
Answer
- Cash from debtors: This indicates cash inflows from debtor payments, which do not appear as revenue in the income statement.
- Repayment of loan: Loan repayments are cash outflows that are not reported as expenses in the income statement.
Step 3
Step 4
Calculate the missing amounts indicated by (a) to (d) in the Cash Budget.
Answer
a) Cash sales for September: Calculated as 288,000 imes 40 rac{ ext{%}}{100} = R115,200.
b) Payments to creditors for October: Calculated as .
c) Directors' fees for October: Calculated as 216,000 imes rac{1}{3} = R72,000.
For amount (d), the loan repayment can be calculated using a formula based on the figures provided.
Step 5
The directors changed the method of payment to the salespersons. Explain how this has benefitted the salespersons.
Answer
The change in payment method has benefitted salespersons as follows:
- Though the salaries decreased from R40,000 to R12,000, they now receive a commission totalling R66,150. This better aligns their earnings with sales performance, incentivizing higher sales.
- This new structure allows them to potentially earn more than their previous fixed salary arrangement.
Step 6
The directors are not concerned about the overspending on packing material. Explain why this is so.
Answer
The directors' lack of concern can be explained by the performance metrics:
- Although packing materials were 20% over budget, total sales exceeded budgeted figures by 3.5%.
- A direct comparison of these two items indicates that the increase in sales more than offsets the overspend on packing material.