QUESTION $1(34$ Marks$)$

Karoo Ltd is a retailer of furniture and fittings that allows customers to buy on credit. Thefollowing information pertains to Karoo$$s for the year ended $31$ March $2024$:

Extract from the pre$-$adjusted trial balance of Karoo as at $31$ March $2024$

Trade receivables R$2208960$

Allowance for doubtful debts R$220896$

The following are the policies of Karoo Ltd:

$$ Karoo Ltd has a policy to provide an allowance for bad debts of $10\%$ of their trade

receivable balance.

$$ It is Karoo Ltd$.$s policy to reinstate debtors who were previously written off if they

repay their debts thereafter.

The following additional information relates to the trade receivable cycle that were not

taken into account in the accounting records for the $2024$ financial year:

$1.$ A debtor, Mr X$.$ Rian, who had a debt of R$9478,$ was untraceable. It was thus

decided to write off his debt as irrecoverable.

$2.$ A credit note of R$3540$ for goods returned had been incorrectly entered in the

records on $15$ March $2024$ as if it were an invoice.

$3.$ A credit sale to the debtor, Mr Deliveries amounting to R$1062,$ was recorded

incorrectly to the debtor, Mr P$.$ Simba, in the Debtors$$ Ledger on $18$ March $2024.$

$4.$ The March $2024$ bank statement reflected a dishonoured $($R$/$D$)$ cheque for an

amount of R $50126.$ This cheque was received on $3$ March $2024$ from debtor Mrs

N$.$ Phele and was deposited in the bank account on the same day and correctly

recorded in the cash receipts journal on that day.

$5.$ A settlement discount of R$2549$ had been completely omitted from the records.

$6.$ On $25$ March $2024,$ an amount of R $9478$ was received from Mr X$.$ Rian. Mr X$.$

Rian explained that he was visiting his remote hometown in China and had com$-$

pletely forgotten about his debt owed and remembered only once returned.

$7.$ The debtor, Mrs$.$ A$.$ Vushe, was declared insolvent in $2024.$ The total debt owed

by her on $31$ March $2024$ was R$46320.$ Mrs$.$ A$.$ Vushe$$s lawyer confirmed that

Karoo Ltd would receive $15$c for each Rand owed. On $31$ March $2024,$ a payment

$4$ HFAC$130-1-$Jan$-$Jun$2024-$FA$2-$GC$-$V$2-07022024$

was received from Mrs A$.$ Vushe$$s lawyer. The remainder of Mr A$.$ Vushe$$s debt

was written off as irrecoverable.

$8.$ A credit sale transaction of R$52200$ and a sales return transaction of R $9480$

that occurred on $31$ March $2024$ were omitted from the respective journals.

Required:

a$)$ Prepare the Trade Receivables account in the General Ledger. Show all

workings. Ignore VAT. $(31$ Marks$)$

b$)$ There are risks to investing in working capital. State what the consequences are

to the risks mentioned below:

$$ Where criteria for deciding whether to allow customers to purchase on

credit are too strict.

$$ Where levels of inventory are too high.

$$ Where cash levels are too high.

$(3$ x $1=3$ Marks$)$QUESTION $1$

Karoo Ltd is a retailer of furniture and fittings that allows customers to buy on credit. The

following information pertains to Karoo's for the year ended $31$ March $2024$:

The following are the policies of Karoo Ltd:

Karoo Ltd has a policy to provide an allowance for bad debts of $10\%$ of their trade

receivable balance.

It is Karoo Ltd$.\text{'}$s policy to reinstate debtors who were previously written off if they

repay their debts thereafter.

The following additional information relates to the trade receivable cycle that were not

taken into account in the accounting records for the $2024$ financial year:

A debtor, Mr X$.$ Rian, who had a debt of $R9478,$ was untraceable. It was thus

decided to write off his debt as irrecoverable.

A credit note of $R3540$ for goods returned had been incorrectly entered in the

records on $15$ March $2024$ as if it were an invoice.

A credit sale to the debtor, Mr Deliveries amounting to $R1062,$ was recorded

incorrectly to the debtor, Mr P$.$ Simba, in the Debtors' Ledger on $18$ March $2024.$

The March $2024$ bank statement reflected a dishonoured $($R$/$D$)$ cheque for an

amount of R $50126.$ This cheque was received on $3$ March $2024$ from debtor Mrs

N$.$ Phele and was deposited in the bank account on the same day and correctly

recorded in the cash receipts journal on that day.

A settlement discount of R$2549$ had been completely omitted from the records.

On $25$ March $2024,$ an amount of R $9478$ was received from Mr X$.$ Rian. Mr X$.$

Rian explained that he was visiting his remote hometown in China and had com$-$

pletely forgotten about his debt owed and remembered only once returned.

The debtor, Mrs$.$ A$.$ Vushe, was declared insolvent in $2024.$ The total debt owed

by her on $31$ March $2024$ was R$46320.$ Mrs$.$ A$.$ Vushe's lawyer confirmed that

Karoo Ltd would receive $15$c for each Rand owed. On $31$ March $2024,$ a paymentKaroo Ltd is a retailer of furniture and fittings that allows customers to buy on credit. The

following information pertains to Karoo's for the year ended $31$ March $2024$:

The following are the policies of Karoo Ltd:

Karoo Ltd has a policy to provide an allowance for bad debts of $10\%$