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Refer to Information G - NSC Accounting - Question 6 - 2016 - Paper 1
Question 6
Refer to Information G. 6.1.1 Identify TWO items that the bookkeeper recorded incorrectly in the Cash Budget. 6.1.2 Identify TWO items in the Cash Budget that woul... show full transcript
Worked Solution & Example Answer:Refer to Information G - NSC Accounting - Question 6 - 2016 - Paper 1
Step 1
Identify TWO items that the bookkeeper recorded incorrectly in the Cash Budget.
Answer
The two items recorded incorrectly in the Cash Budget are:
- Discount received - This is not a cash transaction and would not be recorded in the cash budget.
- Depreciation - This is a non-cash expense and should not be included in cash budget calculations.
Step 2
Identify TWO items in the Cash Budget that would NOT appear in a Projected Income Statement.
Answer
The two items that would NOT appear in a Projected Income Statement are:
- Cash from debtors - This is not an income item but rather a cash flow.
- Payments to creditors - Similar to the previous item, this reflects cash expenditure and does not impact the income statement.
Step 3
Complete the Debtors' Collection Schedule for October 2016.
Answer
To complete the Debtors' Collection Schedule, calculate the collection based on given credit sales and percentages. For October:
- Credit Sales = R198,720
- 50% of Credit Sales collected in the month = R99,360
- Collection from previous month (September) = R85,200 Total cash collection for October = R99,360 + R85,200 = R184,560.
Step 4
Calculate the missing amounts indicated by (a) to (d) in the Cash Budget.
Answer
The calculations are as follows: a) Cash sales for September:
- $288,000 imes 40% = R115,200 b) Payments to creditors for October:
- $252,000 imes 100/100 imes 9/10 = R134,400 c) Directors' fees for October:
- $216,000 imes 1/3 = R72,000 + R194,400 (net amount) d) Loan repayment for October:
- Use the formula for the loan repayment calculation. Total = R6,325.
Step 5
Explain how this has benefited the salespersons and the business. Quote figures.
Answer
The change in method of payment has positively impacted salespersons as:
- Salaries were decreased from R40,000 to R12,000, but they now receive a commission of R66,150, raising their total compensation to R78,150 (an increase depending on sales).
- This encourages higher sales performance, benefiting the business as well. Actual sales increased by R201,600 compared to budgeted sales.
Step 6
Explain why this is so. Quote figures or calculations.
Answer
The directors are not concerned about overspending on packing materials due to the following reasons:
- Sales are over 70% higher than budgeted, while packing materials are only 20% over their budget.
- Current costs are manageable, with packing materials at R17,200 against a budget of R14,400, accounting for just 3.5% excess.