Refer to Information B - NSC Accounting - Question 3 - 2023 - Paper 2

1. Cash from debtors
2. Payment to creditors

The Debtors' Collection Schedule for December 2023 will include the following:

• Credit Sales: R682,500
• Collections from Debtors: R636,090
• Total Debtors at the end of the month: R46,410

The discount allowed can be calculated as:

$ext{Discount} = 651,000 imes 40 ext{ ext{ extperthousand}} imes 5 ext{ ext{ extpercent}} = 13,020$

The interest on the savings account in December can be calculated as:

$ext{Interest} = [84,000 imes 4 ext{ ext{ extpercent}} imes 1/12] = 280$

The payments to creditors can be calculated as:

ext{Payments} = 580,000 imes rac{10}{100} = 610,470

The rent expenses for November can be calculated as:

ext{Rent Expenses} = 31,640 imes rac{100}{113} = 28,000

Adam introduced a commission structure for sales staff, reducing the fixed salary. This aims to incentivize sales performance. Salespeople are now compensated based on commissions rather than a fixed salary.

Some salespeople regretted the changes because the new commission structure resulted in less predictable income. Previously, they earned R3,950, which is less than a fixed amount; therefore, they face more financial uncertainty.

Adam noted that total sales were above budget by R325,500, indicating company growth. He attributed this to the incentive of attracting more customers and improving sales performance.

Milly observed that while credit sales increased, it also resulted in additional collection issues. She believed that cash flow might be compromised due to increased bad debts.

The net effect can be calculated by adjusting the cash budget for fixed deposit savings and new expenses:

$ext{Net Effect} = ext{Total Receipts} - ext{Total Payments} = (1,000,000 + 12,500) - (1,500,000 + 250,000 + 7,500) = -17,500$

Adam decided to proceed because acquiring property is a long-term investment for stability, eliminating escalating rent costs and improving fixed asset value.