1. Chapter 4

2. Objective test 2 Provide jnl entries & show the effect on the acc equation for the following transactions in the records of ABC Entity. 15 Jan 20x3 The entity orders a new vehicle on credit from Toyota for R40 000. The vehicle is delivered to ABC Entity on 17 Jan 20x3. 20 Jan 20x3 ABC entity purchases trade inventory cash, R5 000. 28 Jan 20x3 Sell trade inventory on credit to Debtor A at R3 000. The cost price of the inventory amounted to R2 000. 30 Jan 20x3 Pay the owner’s private telephone account, R420.

3. 15 Jan 20x3 The entity orders a new vehicle on credit from Toyota for R40 000. The vehicle is delivered to ABC Entity on 17 Jan 20x3. 3 DrCr 17 Jan Dr Vehicles (SFP)40 000 Cr Creditor: Toyota (SFP) 40 000 Recognise the purchase of vehicle on credit Assets= Liabiliti es +EquityClassification + 40 000 = + 0

4. 20 Jan 20x3 ABC entity purchases trade inventory cash, R5 000. 4 DrCr 20 Jan Dr Trade inventory (SFP)5 000 Cr Bank (SFP) 5 000 Purchase trade inventory cash Assets= Liabiliti es +EquityClassification + 5 000 - 5 000 =0+ 0

5. 28 Jan 20x3 Sell trade inventory on credit to Debtor A at R3 000. The cost price of the inventory amounted to R2 000. 5 DrCr 28 Jan Dr Debtor A (SFP)3 000 Cr Sales (P&L) 3 000 Recognise the sale of inventory Assets=Liabilities+EquityClassification + 3 000 - 2 000 =0+ +3 000 - 2 000 Income (RE) Expense (RE) DrCr 28 Jan Dr Cost of sales (P&L)2 000 Cr Trade inventory (SFP) 2 000 Recognise the cost of sales on sale

6. 30 Jan 20x3 Pay the owner’s private telephone account, R420. 6 DrCr 30 Jan Dr Drawings (SCE)420 Cr Bank (SFP) 420 Owner draws R420 for private use Assets=Liabilities+EquityClassification - 420=0+ Retained earnings- Drawings

7. 7 Trade inventory Jan 20 Bank 5 000 Jan 28 Cost of sales 2 000.Balance cf 3 000 5 000 Balance bd 3 000

8. The accounting process 8 Transactio n/event Journal (prime entry) General ledger (accounts) Trial balance & adjustments AFS (Annual financial statements) of: -Profit and loss (P&L) -Statement of financial position (SFP) -Statement of changes in Equity (SCE) -Cash flow statement (C/F) -Notes & policies

9. The accounting equation 9 Assets=Equity+Liabilities +--+-+ DRCRDRCRDRCR Income CR Expense s DR

10. The accounting process 10 Transactio n/event Journal (prime entry) General ledger (accounts) Trial balance & adjustments AFS (Annual financial statements) of: -Profit and loss (P&L) -Statement of financial position (SFP) -Statement of changes in Equity (SCE) -Cash flow statement (C/F) -Notes & policies

11. Class Example 11 -Opening balance (list of accounts) -Journal entries -T-accounts -List of accounts -P&L -SCE -SFP

12. Class Example 12 | Feb 20.7 | 1 Feb 28 Feb List List AFS

13. On 1 February 20.7, a deposit to the amount of R20 000 was paid to the local authority for the connection of water and electricity. The deposit is repayable with the disposal of the property. 13

14. 14 20.7 DrCr 1 Feb. Dr Deposit: Water and electr. (SFP) 20 000 Cr Bank (SFP) 20 000 Recognise payment of deposit Assets= Liabiliti es +EquityClassification -20 000 + 20 000 =0+ 0 Bank Receivable

15. On 3 February 20.7, trade inventories to the amount of R145 000 were purchased from Payable M and it was agreed with the payable that the amount due would be paid within 30 days after delivery of the trade inventories. On 5 February 20.7, Payable M delivered the trade inventories to AC Entity’s premises. 15

16. 16 20.7 DrCr 5 Feb. Dr Trade Inventory (SFP)145 000 Cr Payable M (SFP) 145 000 Recognise purchase of trade inventory and the liability Assets= Liabiliti es +EquityClassification + 145 000 = + 0

17. Trade inventories to the amount of R60 000 were purchased on 4 February 20.7 and it was agreed with the supplier that payment would occur with delivery (COD). On 6 February 20.7, the supplier delivered the trade inventories to AC Entity’s premises. 17

18. 18 20.7 DrCr 6 Feb. Dr Trade Inventory (SFP)60 000 Cr Bank (SFP) 60 000 Recognise purchase of trade inventory for cash Assets= Liabiliti es +EquityClassification + 60 000 - 60 000 =0+ 0

19. On 24 February 20.7, trade inventories were sold on credit to Receivable A for R96 000. The trade inventories were delivered to Receivable A on the same day and it was agreed that the amount due must be paid within 30 days after delivery. The cost price of the trade inventories sold is R48 000. 19

20. 20 20.7 DrCr 24 Feb. Dr Receivable A (SFP)96 000 Cr Sales (P/L) 96 000 Recognise income from sale of inventory Assets= Liabiliti es +EquityClassification + 96 000=0+ RE – Income (Sales)

21. 21 20.7 DrCr 24 Feb. Dr Cost of sales (P/L)48 000 Cr Trade Inventory (SFP) 48 000 Recognise cost of inventory sold Assets= Liabiliti es +EquityClassification - 48 000=0+ RE – Expense (Cost of sales)

22. On 24 February 20.7, a payment was made to Payable L for the amount due in respect of trade inventories purchased on credit on 25 January 20.7. 22

23. 23 20.7 DrCr 24 Feb. Dr Payable L (SFP)20 000 Cr Bank (SFP) 20 000 Derecognise Payable L due to settlement Assets= Liabiliti es +EquityClassification - 20 000= + 0

24. On 28 February 20.7, trade inventories were sold for R64 000 cash and delivered on the same day. The cost price of the trade inventories sold is R32 000. 24

25. 25 20.7 DrCr 28 Feb. Dr Bank (SFP)64 000 Cr Sales (P/L) 64 000 Recognise income from cash sale of inventory Assets= Liabiliti es +EquityClassification + 64 000=0+ RE – Income (Sales)

26. 26 20.7 DrCr 28 Feb. Dr Cost of sales (P/L)32 000 Cr Trade Inventory (SFP) 32 000 Recognise cost of inventory sold Assets= Liabiliti es +EquityClassification - 32 000=0+ RE – Expense (Cost of sales)

27. Gross salaries to the amount of R15 000 was paid on 28 February 20.7. 27

28. 28 20.7 DrCr 28 Feb. Dr Salaries and Wages (P/L)15 000 Cr Bank (SFP) 15 000 Recognise payment of salaries for February 20.7 Assets= Liabiliti es +EquityClassification - 15 000=0+ RE – Expense (Salaries)

29. On 28 February 20.7, a cheque to the amount of R12 000 was issued to the owner for personal use. 29

30. 30 20.7 DrCr 28 Feb. Dr Drawings (SCE)12 000 Cr Bank (SFP) 12 000 Recognise distribution to owner Assets= Liabiliti es +EquityClassification - 12 000=0+ RE – Drawings

31. The account for the use of water and electricity during February 20.7 was received electronically on 28 February 20.7. An amount of R8 000 is payable before 24 March 20.7 31

32. 32 20.7 DrCr 28 Feb. Dr Water and electricity (P/L) 8 000 Cr Payable: Local munic. (SFP) 8 000 Recognise water and electricity expense for February 20.7 and liability Assets= Liabiliti es +EquityClassification 0=+ 8 000+ - 8 000 RE – Expense (Water and electr.)

33. On 28 February 20.7, the owner deposited an additional R200 000 in AC Entity’s bank account as an increase in capital. 33

34. 34 20.7 DrCr 28 Feb. Dr Bank (P/L)200 000 Cr Capital (SFP) 200 000 Recognise capital contribution by owner Assets= Liabiliti es +EquityClassification + 200 000 =0+ Capital

35. Homework 35 -Do Example 4.6: Prepare T- accounts for the transactions in this example