1.1 Choose the correct word from those given in brackets - NSC Accounting - Question 1 - 2021 - Paper 1
Question 1
1.1 Choose the correct word from those given in brackets. Write only the word next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK.
1.1.1 The concept o... show full transcript
Worked Solution & Example Answer:1.1 Choose the correct word from those given in brackets - NSC Accounting - Question 1 - 2021 - Paper 1
Step 1
1.1.1 The concept of (limited/unlimited) liability ensures that shareholders are not responsible for the debts of the business in the event of bankruptcy.
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Answer
The correct word is limited. Limited liability means shareholders are only liable for the amount they invested in the company and are not personally liable for the company's debts.
Step 2
1.1.2 When preparing financial statements, creditors will be reflected as trade and other (receivables/payables/equity).
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The correct term is payables. In financial statements, creditors are recorded as liabilities under 'trade payables', representing amounts owed to suppliers.
Step 3
1.1.3 The separate disclosing of significant items, such as interest expenses, is an application of the (prudence/materiality) GAAP principle.
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Answer
The appropriate word is materiality. The materiality principle ensures that all significant financial information is disclosed to provide an accurate representation of the company’s financial situation.
Step 4
1.2.1 Electronic funds transfers (EFT) totaling R136 000 were made to shareholders, being the amount owing to them at the end of the financial year.
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Answer
Account Debited: Bank
Account Credited: Shareholders for dividends
Amount: R136 000
Effect: + on Bank (asset) and - on Shareholders for dividends (liability).
Step 5
1.2.2 The company received R450 000 for the issue of new shares.
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Account Debited: Bank
Account Credited: Ordinary share capital
Amount: R450 000
Effect: + on Bank (asset) and + on Ordinary share capital (equity).
Step 6
1.2.3 The income tax assessment for the year was received. The income tax amount, R338 200, exceeded the provisional tax payments.
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Account Debited: Income tax / taxation
Account Credited: SARS
Amount: R338 200
Effect: - on Income tax (liability) and + on SARS (liability).
