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1.1 CONCEPTS REQUIRED: Indicate whether the following statements are TRUE or FALSE - NSC Accounting - Question 1 - 2019 - Paper 1

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1.1 CONCEPTS REQUIRED: Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (1.1.1 to 1.1.4) in th... show full transcript

Worked Solution & Example Answer:1.1 CONCEPTS REQUIRED: Indicate whether the following statements are TRUE or FALSE - NSC Accounting - Question 1 - 2019 - Paper 1

Step 1

1.1.1 Output VAT is collected by a business when goods are sold.

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Answer

True. Output VAT is indeed collected when goods are sold, as businesses charge VAT to their customers on their sales.

Step 2

1.1.2 The calculation of salaries does not take VAT into account.

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Answer

True. Salaries are considered a non-VAT transaction, meaning their calculation does not involve VAT.

Step 3

1.1.3 A credit balance on the Bank Statement indicates an unfavourable balance.

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Answer

False. A credit balance typically indicates a favourable position, as it shows available funds.

Step 4

1.1.4 Recording bank charges separately from interest on an overdraft is an application of the materiality concept.

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Answer

True. This separation provides clearer financial information and ensures that significant costs are properly accounted for.

Step 5

1.2 Calculate the amount receivable from or payable to SARS for VAT on 30 April 2019.

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Answer

To calculate the VAT amount:

  1. Start with the amount owed to SARS on 1 April 2019: R15,890.
  2. Add the Output VAT calculated as follows:
    • Total sales = R396,750
    • Total sales excluding VAT = R396,750 / 1.15 = R345,000
    • VAT collected = R396,750 - R345,000 = R51,750.
  3. Subtract input VAT:
    • Total Purchases = R224,000
    • Total Purchases excluding VAT = R224,000 / 1.15 = R195,652.17
    • VAT on purchases = R224,000 - R195,652.17 = R28,347.83.
  4. Calculate VAT control:
    • VAT payable = R51,750 (output) - R28,347.83 (input) = R23,402.17.
  5. The total amount receivable from SARS = R15,890 + R23,402.17 = R39,292.17, indicating that the amount is receivable.

Step 6

1.3.1 Calculate the correct Bank Account balance on 31 May 2019. Indicate whether this is favourable or unfavourable.

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Answer

To calculate the correct bank account balance:

  1. Start with the provisional balance of R19,400.
  2. Adjust for outstanding items:
    • Cheque 654 = -R2,350.
    • Theft of cash = -R1,060.
    • Bank charges = -R1,060.
    • Interest income = +R313.
    • Correction from EFT = -R5,678.
  3. Calculate total adjustments: -R2,350 - R1,060 - R1,060 + R313 - R5,678 = -R9,835.
  4. Correct bank balance = Provisional balance - total adjustments = R19,400 - R9,835 = R9,565.
  5. This balance is unfavourable as it indicates the account has limited funds.

Step 7

1.3.2 Prepare the Bank Reconciliation Statement on 31 May 2019.

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Answer

Bank Reconciliation Statement:

DetailsDebit (R)Credit (R)
Balance as per Bank StatementR9,657
Outstanding depositR21,343
Outstanding cheques
Cheque 705 (dated 30 June 2019)R9,450
Cheque 654 (dated 23 November 2018)R2,350
EFT payment erroneously creditedR5,678
Correct balance
Total

Step 8

1.3.3 State TWO internal control measures that the business can use to ensure that this will not happen in the future.

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Answer

  1. Encourage depositors to use EFTs: This reduces the risk of cash theft and ensures a paper trail.

  2. Implement regular audits: Regular reviews and checks of transactions can prevent discrepancies from occurring.

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