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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
The two items that were recorded incorrectly in the Cash Budget are:
- Discount received - This should not be included as it does not represent cash flow.
- Depreciation - As a non-cash expense, depreciation does not belong in the Cash Budget.
Step 2
Identify TWO items in the Cash Budget that would NOT appear in a Projected Income Statement.
Answer
The two items in the Cash Budget that would not appear in a Projected Income Statement are:
- Cash from debtors - This is a cash transaction and not reflected in the income statement.
- Fixed deposit matures - This shows cash flow, not revenue, and thus does not appear in the income statement.
Step 3
Complete the Debtors' Collection Schedule for October 2016.
Answer
The Debtors' Collection Schedule for October 2016 shows collections based on sales and average credit terms. It should include:
- October Credit Sales: 198,720
- Collections for October: Based on previous collection trends, this might involve estimating based on averages.
Step 4
Calculate the missing amounts indicated by (a) to (d) in the Cash Budget.
Answer
(a) Cash sales for September: 288,000 imes 40 ext{%} = R115,200
(b) Payments to creditors for October: 252,000 imes 100 ext{%} imes rac{9}{10} = R134,400
(c) Directors' fees for October: 216,000 imes rac{1}{3} = R194,400
(d) Repayment of loan: This reflects the arrangement of payments due in the month.
Step 5
Explain how this has benefited the salespersons and the business.
Answer
The change in payment method has benefitted the salespersons as follows:
- The reduction in salaries from R40,000 to R12,000 was compensated by a substantial commission totaling R66,150 on actual sales.
- Salespersons now earn more in total (R78,150) as their earnings are linked directly to performance, encouraging higher sales.
For the business:
- Increased sales by R201,600 indicates the business is performing better than expected, due to incentivized sales efforts.
Step 6
Explain why this is so. Quote figures or calculations.
Answer
The directors are unconcerned about overspending on packing material for two key reasons:
- Sales are 70% over budget, thus justifying the increased packing costs, which are just 3.5% of total sales.
- The actual packing material cost was only 20% over budget, indicating that overall expenditures remain within acceptable limits based on revenue increases.