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business
fundamental accounting

Questions and Answers of Fundamental Accounting

Explain the difference between a purchases account and a cost of sales account.
Complete this table by filling in the missing amounts: No. 1 2 3 4 5 Cost R100 ? R300 R240 ? Gross profit 50% mark-up 25% mark-up ? mark-up 20% profit margin 40% profit margin Selling
Which accounts are used to calculate the cost of sales under the periodic system of accounting for inventory ?
Provide reasons for including transport and packaging expenses in the inventory account whenusing the perpetual inventory system. What concepts or principles of accounting require this?
Explain the difference between a mark-up on cost and profit margin.
A vendor bought inventory for R1 430. Expenditure of R270 was incurred to bring the inventory to the required condition for sale. The inventory was sold for R2 380.You are required to:1. Calculate
Wheelies (located in Bellville) bought aluminium wheelbases from Cridel Ltd (located in Johannesburg).• Wheelies bought 300 aluminium wheelbases.• The price of each wheelbase is R200.• The
Wonder Wholesalers buys fertiliser in bulk, packages it and supplies major nursery outlets with 10-kg bags of Wonder Lawn and Wonder Flower fertilisers.Wonder Wholesalers had these accounts, amongst
Here is the trial balance before of Leisure Gardens (garden furniture retailers):Additional information:1. Bought inventory that cost R4 825, before taking into account a trade discount of 20% on
On 1 May 20x7, the assets and liabilities of Snappy Sheets, owned by John Dlomo, were:Transactions for May:3 Purchased sheets for resale and paid R1 700.6 Sold inventory for cash, R2 300.13 Purchased
Koo Traders uses the periodic inventory system to account for inventory. Opening inventory at the beginning of June 20x6 was R3 600.Transactions for June:1 Bought inventory from D. Smith
These transactions are for Sekwele Tractors, a business that sells tractors to farmers in the Eastern Cape, for the period June to August 20x9:1 On 1 June, Sekwele Tractors bought 12 tractors and
Ebrahim Patel is a wholesaler who uses the periodic inventory system to account for inventory.Transactions for February:1 Bought inventory from Rich Traders for R5 000 on credit.2 Sold inventory to
Here are some of the balances from the books of Link Stores on 1 February 20x6.Additional information:• The pricing policy is to mark inventory up by 40% on cost, which has been done consistently
Melvyn Jones uses the perpetual inventory system to record purchases and sales of inventory in his retail business, ABC Traders. He marks his inventory at cost plus 20%.Here is the abridged statement
Khumalo Retailers buys and sells two inventory items: Rio and Lima.• Inventory movements are recorded on a computerised perpetual system on a first-infirst- out (FIFO) method, at the lower of cost
Brenda Folser’s accounts, for some years past, show that the percentage of gross profit to turnover is constant.On 23 February 20x6, Brenda’s shop was burnt down, and all the inventory was
P&R Traders uses the periodic inventory system to account for inventory. These balances appeared in the trial balance as at 1 January 20x7:Additional information:1 On 30 June, a fire destroyed
Axel Houston imports and sells replicas of nineteenth century Swiss clocks.• Although payment for inventory imported is made with the order from NL Clocks Ltd, ownership only passes on delivery.•
Goods or services may be subject to VAT. Explain the purpose of VAT.
Explain the role that a retailer plays in the collection of VAT.
1. Provide a brief explanation of why VAT is referred to as an indirect tax.2. Name the two components that make up VAT, and provide a brief explanation of them.3. Name and explain the two components
Fraser Stores Ltd marks its goods up by 20% on cost. If the company received R2 280 for certain goods sold, calculate the:1. VAT output amount.2. Cost of the goods sold.
On 31 January 20x7, Vee Retail Stores had these balances and totals in its trial balance:Additional information:• Vee Retail Stores uses the perpetual system to account for inventory movements.•
In each case, calculate the answer if VAT is payable on all items at 14%.1. A cash slip for R171 is issued and the mark-up is 25%. Find the cost price.2. Goods cost R296.40. Transport of R11.40 and
This trial balance and additional information were taken from the books of Ulandi Traders as at 28 February 20x1:Transactions for March (assume VAT is 14%):1 Received and deposited B. Cilliers’
Lumber Enterprises had these balances on 1 April 20x7:Transactions for April (VAT at 14%):5 Bought goods on credit from Hardware Suppliers for R6 840.7 Cash sales, R9 348.10 Bought goods on credit
Wheelies of Bellville bought aluminium wheelbases from Cridel Ltd in Johannesburg.• The price of each wheelbase, of which 300 were bought, is R228.• The aluminium wheelbases were railed to
Laser Stores uses the perpetual inventory system to account for goods.• They mark their goods up by 25% on cost.• VAT is charged at 14%.• Laser Stores sold goods to the value of R3 078.You are
Barry Blender, a renowned chef, stumbled across an eight-in-one blender while on holiday.Upon his return, he decided to quit his current job at the Cape International Hotel to start a trading
These balances appeared in the books of Bogey Stores as at 1 April 20x3:Ignore VAT.The amount owing by receivables was made up as follows:Transactions for April 20x3:1 Cash sales, R1 200.5 Received
The transactions below appeared in the books of Fidel Fertiliser Company.Fidel set up the business to sell the latest grass fertiliser that ensures that grass stays green all year round. Fidel
You have recently been appointed as the accountant of CHIPPIE – CHIP, a registered VAT vendor that sells potato chips to various entities across the Western Cape.The business was started 11 months
Explain the advantages of a cash receipts journal over the use of a general journal for recording cash received.In what ways does the use of columns in a cash receipts journal help in the recording
Why is VAT on cash sales recorded separately in the cash receipts journal?
Oaks Retail Stores uses the perpetual inventory system. Goods are marked up at 20% on cost and the VAT rate is 14%.These balances appeared in the general ledger on 1 March 20x7:Transactions for March
What purpose does the sundries column serve in the cash receipts journal and cash payments journal?
Bafana Sales and Service received these amounts during July 20x4:1 From receivable, A. French, R1 080.3 From receivable, L. Gandhi, R2 190.4 Cash for services rendered, R1 881.7 From receivable, S.
On comparing the month-end bank account overdraft of R3 460 with the bank statement, the bookkeeper of Clan Enterprises noted that:1 Cheques totalling R2 876 have not yet been presented to the bank
After comparing the cash journals for June 20x2, and bank reconciliation statement as at 31May 20x2 of Pintorico Traders with their bank statement as at 30 June 20x2, these differences were found:•
Here are some of the balances from Luminary Traders on 1 February 20x3.• All inventory is marked up by 50% on cost.• The perpetual inventory system is used.Transactions for February 20x3:4 Sold
Dullah Cash Stores uses the periodic inventory system for inventory and trades for cash only.Transactions for December 20x6:1 Bought goods from Lusitania Fish Products for R6 000 and paid by cheque.2
This bank reconciliation statement was drawn up on 31 March 20x3 from the books of Lush Services.Here is a summary of the cash receipts journal and cash payments journal for April
Mr and Mrs Seymour were married on 1 December 20x6. The happy couple returned from their honeymoon two weeks later. Their joint bank statement arrived in the post the next day.Mrs Seymour was
This information appears in the accounting records of Tech Traders:1 Bank account:Debit balance on 1 June 20x9 is R1 800.23.4 Bank statement of Tech Traders:Note• The unpaid cheque (UN) was
Here are some of the balances that appeared in the books of Det Stores as at 1 March 20x9:Transactions for March: (Ignore VAT)1 Paid the local council for the rates and taxes, R956.80 and water,
Tiger Stores has these balances, among others, in its books on 1 July 20x7:These petty cash disbursements were made during July.2 String and glue (voucher 263), R3.46.9 Carriage on purchases, R19.10
1. Why is it necessary for a business to keep personal accounts of accounts receivable and accounts payable in subsidiary ledgers?2. Why do entries in personal accounts not form part of the
What advantages do accounts payable journals and accounts receivable journals have over a general journal?
Narend Singh is a wholesaler trading as Singh’s Wholesalers. The business uses the periodic inventory system to account for its inventory. All transactions were on credit.Transactions for
These balances appeared, among others, in the records of Nazira Fashions on 1 July 20x3:Transactions for July 20x3:2 M. Tsoai paid R810 and C. Clarke paid R1 620 in full settlement of their
At the end of September 20x1, the closing balance on the account of P. Mason, a receivable, exceeded the opening balance by R1 986. During the month he returned goods that cost him R2 815 and paid
On 1 January 20x7, Yebong Traders had accounts receivable that totalled R8 000 in the general ledger.• The accounts receivable account was made up as follows:• The amounts owing by P. Msinga and
1. What are the three types of discounts encountered in the accounting process?2. Explain the difference between these discounts.3. How would you record each type of discount in the accounting
These balances appeared in the books of Swart Traders on 31 July 20x7:The lists of balances in the subsidiary ledgers, extracted on 31 July 20x7 were:Transactions for August (ignore VAT):1 Bought
These balances appeared, among others, in the accounting records of Fuchs Stores on 1 December 20x1: (Ignore VAT)Transactions for December 20x1:1 Purchased merchandise on account from Bakkers and
What is the effect of the introduction of individual personal accounts on the general ledger of a business?
The abridged special purpose journals for September 20x0, the first month of trading of Hotspot Traders Ltd, are given below:You are required to:1. Open the necessary accounts and post the above
L. Baadjies had these receivables on her books on 1 December 20x8: (Ignore VAT.)The allowance for bad debts account on 1 January 20x8 = R900.Transactions for December:3 J. Crause could not be traced.
You are the accounts payable clerk of Must Balance Ltd and you receive the following statement from All Right (Pty) Ltd.The account of All Right (Pty) Ltd in your books is shown as:You are able to
On 30 September 20x5, at the end of its financial year, these balances, among others, appeared in the books of Zabeth Ltd:Additional information:• The allowances for bad debts are adjusted at the
Zeta Ltd is a business that conducts the majority of its sales on a credit basis. The business’s policy with regard to the accounting treatment of irrecoverable accounts is:1 Write off all bad
Explain why:1. A business would sell on credit.2. A credit policy is necessary and what such a policy entails.3. An allowance for bad debts must be created.
Define the terms employer and employee.
Discuss the difference between salaries and wages and give an example of each.
With which institutions should an employer register?
You receive this information from a client for employees who work at an hourly rate:Overtime is paid at one-and-a-half times the hourly rate, and on Sundays overtime is twice the normal rate.
What employee information should an employer keep?
A. Butcher opened a butchery and employs five people on these terms:• UIF contributions are calculated at 1% per employer and employee.• Union fees are R50 per month for all employees.• Only Mr
Use the information in Question 13.7 and record the:1. Weekly wages for work done for four weeks, on same basis.2. Monthly wages.3. Employer’s contribution.4. Monthly payments.Data from Question
Mr Hill opened a coffee shop and employs:• A supervisor for a monthly salary of R16 795.• A baker at R11 700 per month.• Two waiters at R1 490 per week.• Retirement fund contributions equal
You have recently been called on to start a set of accounting records for a small business engaged in cartage contracting. The previous set was destroyed by fire.You established that the business,

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