Photo AI
Zig Zag Traders sells ladies clothing on credit - NSC Accounting - Question 1 - 2021 - Paper 2
Question 1
Zig Zag Traders sells ladies clothing on credit. Debtors are allowed a credit term of 30 days to settle their accounts. 1.1 Provide TWO documents that Zig Zag Trade... show full transcript
Worked Solution & Example Answer:Zig Zag Traders sells ladies clothing on credit - NSC Accounting - Question 1 - 2021 - Paper 2
Step 1
1.1 Provide TWO documents that Zig Zag Traders will need from potential debtors before they will be allowed to open accounts.
Answer
Zig Zag Traders will require the following documents from potential debtors:
- Identity document (ID) - This is essential for verifying the debtor's identity.
- Proof of residence - This can be a utility bill or bank statement showing the potential debtor's residential address.
Step 2
1.2 Refer to Information A and B. The correct closing balance of the Debtors' Control Account on 30 September 2021.
Answer
To find the correct closing balance of the Debtors' Control Account, start with the initial balance provided:
- Initial balance: R228,000
Assuming that there are no transactions affecting this balance, the closing balance remains R228,000.
Next, for calculating the amounts owed by the listed debtors:
- A Barnes: R13,500
- C Davis: R25,000
- E Foley: R18,300
Step 3
1.3 Explain THREE different problems highlighted by the debtors' age analysis.
Answer
-
Not adhering to credit terms:
- Debtor: O. Mach; amount: R4,000; overdue by 90 days.
-
Exceeding credit limits:
- Debtor: Z Phi; current credit limit exceeded by R7,000; original limit was R220,000.
-
Poor/inadequate internal controls over debtors:
- Debtor: O. Mach; current purchase of R2,000 while having credit over 90 days with remaining balance of R4,000.
Step 4
1.4 Provide TWO points to support the internal auditor's concern that Susan's job description could lead to potential fraud.
Answer
-
Too many related functions performed by one person:
- This reduces checks and balances, leading to potential mismanagement or fraudulent activity.
-
Lack of supervision could lead to negligence:
- If Susan is not closely monitored, there is a risk of unauthorized transactions or financial misreporting.