Online Lecture Questions 11 - Aug

Question 1 - BASIC ACCOUNTING EQUATION & DOUBLE ENTRY SYSTEM
Toto Electrical is a service business. The business is not registered for VAT. Toto
Electrical uses the perpetual inventory system. The following transactions were entered
into by Toto Electrical during September 2015:
September
4 Electrical repair service rendered on credit to L Logo – R1 200.

10 Advertising fee paid by cheque no 009 – R350.
15 Electrical tools and equipment bought from Top Electrical for cash – R8 500.
20 A cheque received from L Logo – R700.
22. Electrical repair service rendered for cash – R4 050.
23. The owner took electric wires from the inventory of the business for own use – R450.
28 Bought electric wires on credit from Wires Inc – R3 000.
30 Wages paid cash – R5 000.
REQUIRED:
For each of the transactions listed above, indicate the effect of the transaction on the
accounting equation. Use a “+” sign to indicate an increase and a “–” sign to indicate
a decrease in the elements of the accounting equation. Also indicate the General Ledger
Accounts affected.
Where applicable assume that the bank balance is positive.
Example: Owner deposited R25 000 into the business.

General Ledger Accounts
Date Assets = Equity + Liabilities
Dr Cr
Example + 25 000 0 Bank Capital
+ 25 000
Question 2 - VALUE ADDED TAX
ABC Carpenter’s (Pty) Ltd bought planks of wood from Heavy Forests CC costing R5 750. ABC
Carpenter’s (Pty) Ltd converted the planks into a dining room suit and sold it to XYZ Furniture’s
at a mark up of R6 000 excluding VAT. XYZ furniture’s sold the dining room suit to Mr G
Gubevu at a mark up of R7 500. Both ABC Carpenters (Pty) Ltd and XYZ Furniture’s are VAT
vendors.
Question 3 – ACCOUNTING CYCLE & DOUBLE ENTRY SYSTEM
On 01 March 20.4 Mike Mkhize started a hardware business called Mike Dealers. Mike Dealers
is registered as a VAT vendor and uses periodic inventory system. (Transactions below,
includes VAT at 15% where applicable)
1 Mike Mkhize, the owner of the business, transferred R76 000 via EFT into the business
bank account of Mike Dealers.
2 Bought a delivery van on a long-term credit from VV Dealers for business use. The cost
of the delivery van is R149 500. A delivery van taxable item.
3 Bought inventory on account for R96 025 from Reliable Tools Ltd.
4 The following credit sales were made to:
- E Elephant R7 245
- D Ngwenya R1 587
On the same day Mike Dealers purchased inventory on credit to the value of R17 480
from Strong Tools (Pty) Ltd.
5 Cash sales, R15 640.
- Purchased inventory on credit from T Jones for R2 300.
6 Received a direct payment from D Ngwenya for R1 472 in full settlement of his account.
- Transferred R37 900 via EFT to Reliable Tools (Pty) Ltd.
7 Received an invoice for R690 from Stationers Ltd for the printing of pamphlets.
8 Bought a second-hand laptop for cash for business use from Good Seconds CC for
R2 990.
- Cash sales R6 900
12 A direct payment of R1 150 was made to C Cheetah for carriage on goods purchased.
16 Received a payment of R6 900 from E Elephant in full settlement of his account.
19 Issued a debit note of R1 610 to Reliable Tools Ltd for defective goods returned to them.
24 Sold inventory on credit to D Ngwenya for R3 680.
26 Made a transfer to T Jones for an amount of R2 001 in full settlement of the account.
27 Purchased inventory to the value of R12 075 from Best Tools CC and paid by cheque.
- Issued a credit note of R69 to D Ngwenya which was for goods returned for the invoice
issued on 24 March.
30 Made direct payment of a total of R12 000 for salaries of the only two employees of the
business.
- Rent paid amounted to R 5 750 to JJ Properties.
REQUIRED:
(1) Record the above transactions in the following subsidiary journals, properly totaled,
of Mike Dealers for March 20.4:
(a) Cash receipts journal (analysis columns for bank, sales, VAT output, trade
receivables, VAT input (Dr), settlement discount granted and sundries)
(b) Cash payments journal (analysis columns for bank, purchases, trade payables,
settlement discount received, VAT input, VAT output (Cr) and sundries)
(c) Sales journal (analysis columns for VAT output, sales and trade receivables)
(d) Purchases journal (analysis columns for VAT input, purchases and trade
payables)
(e) Sales returns journal (analysis columns for VAT output, sales returns and trade
receivables)
(f) Purchases returns journal (analysis columns for VAT input, purchases returns and
trade payables)
(g) General journal
(2) Post the entries recorded above to all relevant Ledger accounts of Mike Dealer’s
3) Prepare the Trial Balance of Mike Dealer’s.
FAC1502/1

Online Lecture Questions 11 - Aug

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Online Lecture Questions 11 - Aug

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Question 1 - BASIC ACCOUNTING EQUATION & DOUBLE ENTRY SYSTEM

4 Electrical repair service rendered on credit to L Logo – R1 200.

Where applicable assume that the bank balance is positive.

Example: Owner deposited R25 000 into the business.

Question 2 - VALUE ADDED TAX

- Rent paid amounted to R 5 750 to JJ Properties.

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