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

This statement is TRUE. Salaries are not subject to VAT; therefore, when calculating salaries, VAT considerations are not applicable.

This statement is FALSE. A credit balance typically indicates that there are funds available in the account, hence a favourable balance.

This statement is TRUE. The materiality concept involves distinguishing significant transactions to provide accurate financial reporting.

To calculate the VAT amount:

1. Start with the amount owed to SARS on 1 April 2019: R15 890.

2. According to the VAT transactions:

   • Returns by debtors: R1 470
   • Drawings by owner: R3 075
   • Debtors' accounts written off: R8 700
   • Purchases: R224 000, VAT at 15% is calculated as: $ext{VAT} = R224000 imes 0.15 = R33 600$
   • Total sales including VAT: R396 750, VAT calculated: $ext{VAT} = R396750 imes 0.15 = R59 513$

3. Adding everything:

   • Output VAT: R33 600 (Total Purchases)
   • Less Returns: R1 470 and Drawings: R3 075 and written off: R8 700.
   • Calculate the net VAT: $R15 890 - R1 470 - R3 075 - R8 700 + R33 600 = R34 340$

The amount is receivable from SARS, which totals R34 340.

The provisional bank balance on 31 May 2019 starts at R19 400. Adjustments are made for:

• Cheque 654 (R2,350)
• Theft of cash: R31,560
• Bank charges: R1,060
• Interest income: R313
• Correction for EFT: -R6,578.78.

Substituting these values: $ext{Correct Bank Balance} = R19,400 - R2,350 - R31,560 - R1,060 + R313 - R6,578.78$ This results in a final balance of R9,657, which is unfavourable.

The Bank Reconciliation Statement includes:

• Balance as per Bank Statement and Outstanding Deposits: R21,343.
• Cheques that are outstanding.
• The adjusted balance after accounting for errors. Overall, the reconciliation indicates acceptable practices and matches the final balance calculated.

1. Implementing proper segregation of duties, ensuring that no single individual has control over all aspects of any significant financial transaction.
2. Regularly reconciling accounts and investments to catch discrepancies early and follow up rigorously for any discrepancies reported.