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The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end - NSC Accounting - Question 1 - 2016 - Paper 1
Question 1
The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end. The bookkeeper is Jimmy Brown. REQUIRED: 1.1.1 Calculate the balance as p... show full transcript
Worked Solution & Example Answer:The information below relates to Woodroffe Stores on 31 May 2016, the financial year-end - NSC Accounting - Question 1 - 2016 - Paper 1
Step 1
1.1.1 Calculate the balance as per the Bank Account in the General Ledger
Answer
To calculate the balance as per the Bank Account in the General Ledger, we start with the favourable bank statement balance and adjust it for any outstanding deposits and outstanding cheques.
Calculation Steps:
-
Start with the favourable bank statement balance: R9,410
-
Add deposits not recorded by the bank:
- R5,000 (12 May 2016)
- R2,400 (27 May 2016)
Total Deposits: R5,000 + R2,400 = R7,400
Adjusted Balance: R9,410 + R7,400 = R16,810
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Subtract outstanding cheques:
- R2,000 (Cheque No. 882)
- R15,300 (Cheque No. 996)
Total Outstanding Cheques: R2,000 + R15,300 = R17,300
Adjusted Balance: R16,810 - R17,300 = -R490
Conclusion:
The balance as per the Bank Account in the General Ledger is -R490, which is an unfavourable balance.
Step 2
1.1.2 Provide a reason why Cheque No. 882 should not appear as an outstanding cheque
Answer
Cheque No. 882 should not appear as an outstanding cheque because it was not issued correctly. It may have been a mistake or already accounted in a previous financial period.
Correction Steps:
- The status of Cheque No. 882 should be investigated to understand why it remains listed as outstanding.
- If confirmed it was never issued, entries should be passed to remove it from the outstanding list, ensuring that the cheque entry in the General Ledger reflects its true status.
Step 3
1.1.3 How must Cheque No. 1234 be treated at the end of the financial year?
Answer
Cheque No. 1234, being post-dated, should be treated as follows:
Treatment of Post-Dated Cheque:
- Cheques that are post-dated should not be recognized as outstanding until the date on the cheque arrives. Therefore, it should not affect the balance sheet for the current financial year.
- It should be disclosed as a note in the financial statements to ensure transparency about future payments.
Step 4
1.1.4 List the accounting entries that must be made to take this transaction into account
Answer
To account for the stolen deposit of R5,000, the following accounting entries need to be made:
Journal Entries:
- Debit the loss account or an appropriate expense account with R5,000.
- Credit the bank account with R5,000.
Control Measures:
One control measure to prevent such incidents in the future is:
- Implement segregation of duties, ensuring that no single individual has control over all aspects of the cash handling process.