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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
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 bank statement balance and adjust for deposits not recorded by the bank and outstanding cheques:
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Favourable bank statement balance: R9 410
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Add deposits not recorded by the bank:
- 12 May 2016: R5 000
- 27 May 2016: R15 300
- Total deposits: R5 000 + R15 300 = R20 300
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Outstanding cheques:
- No. 882: R2 400
- No. 996: R15 300
- Total outstanding cheques: R2 400 + R15 300 = R17 700
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Correct debit entry on the statement: R7 600
Now, calculate the balance:
This balance is favourable as it is positive.
Step 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 issued on 30 October 2015, and it has exceeded the normal time frame for outstanding cheques. A transaction that hasn't cleared after such a long time should be investigated further, as it likely indicates it was either lost or misappropriated. To correct this transaction, the cheque should be considered void, and the relevant entries should be reversed in the accounting records.
Step 3
Cheque No. 1234 is post-dated. How must this cheque be treated at the end of the financial year?
Answer
Cheque No. 1234 is post-dated and should not be recorded as an outstanding cheque at the end of the financial year. Instead, it should be treated as a future liability. Until the date on the cheque passes, no impact on the current cash flow should be reflected in the financial statements. Once the specified date is reached, the cheque can then be recorded as an outstanding cheque.
Step 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 journal entries should be made:
- Debit Cash/Bank: R5 000 (removing the amount that would have been received)
- Credit Suspense Account or Cash Shortage Account: R5 000 (to reflect the loss)
This transaction removes the amount from the cash balance and recognizes it as a loss.
Step 5
Provide ONE control measure to prevent such incidents in future
Answer
One effective control measure to prevent such incidents in future is to implement regular reconciliations of cash receipts. By routinely checking the cash available in the till against the cash receipts recorded, discrepancies can be identified quickly. Additionally, having different individuals responsible for cash handling and reporting can help mitigate risk.