QUESTION $3$

$(19$ marks$)$

Urban Style Interiors $($referred to as USI$)$ is a high$-$end interior design firm with a

financial year end of $31$ December. They regularly purchase high$-$quality furniture

items from Fancy Furniture Ltd $($FF Ltd$).$

On $1$ December $2023,$ USI received their statement of account from FF Ltd$.$ The

statement showed an outstanding balance of R$144000$ as at $30$ November $2023.$

However, the payables account in USI's records currently shows a balance payable

to FF Ltd of R$116875$ as at $30$ November $2023.$

The accountant of USI looked into the differences and identified the following

discrepancies in the records for November $2023$ that must still be

corrected$/$accounted for:

Incorrect invoice amount

FF Ltd$\text{'}$s invoice $($INV$001)$ for R$10,000$ was erroneously captured as R$1,000$ in USI's

accounts payable ledger. Duplicate invoice

In November $2023,$ FF Ltd mistakenly issued two separate invoices $($INV$002$ and

INV$003)$ for the same item purchased by USI, each amounting to R$5,000.$ This led to

an overstatement by R$5,000$ in USI's trade payable ledger balance. To rectify this, FF

Ltd issued a credit note $($CNO$03)$ on $30$ November $2023$; however, this correction

hasn't yet appeared on the statement received from FF Ltd$.$

Incorrect payment allocation

USI made a payment of R$8000$ to FF Ltd$,$ but FF Ltd mistakenly allocated the payment

received to the account of Urban Style Properties.

Goods returned $/$ rejected

USI returned faulty goods to the value of R$3500$ to FF Ltd on $29$ November $2023.$ FF

Ltd$,$ issued credit note CN$004$ on $30$ November $2023.$ The credit note was not reflected

on the November $2023$ statement. Unrecorded credit note

FF Ltd issued a credit note $($CNO$05)$ of R$2000$ for a pricing discrepancy, but it was not

recorded in the accounts payable ledger.

Goods received

USI received goods from FF Ltd worth R$6500$ on $28$ November $2023.$ The invoice

$($INV$011)$ was only issued and received on $2$ December $2023.$

Timing differences

An invoice $($INV$007)$ from FF Ltd for R$4000$ was recorded in the supplier statement

for November $2023$ but was not recorded in the accounts payable ledger of USI until

December $2023,$ causing a timing discrepancy.

Discount $/$ rebate

FF Ltd provided a $5\%$ discount on an invoice $($INV$008)$ of R$7500,$ but this discount

was not initially recorded in the general ledger. The discount needs to be applied to

adjust the payable balance accurately. REQUIRED:

$3\mathrm{.}1$ Prepare the accounts payable reconciliation statement between Urban Style

Interiors and their supplier Fancy Furniture Ltd for the month of November

$(11$ marks$)$

$3\mathrm{.}2$ List and briefly explain two reasons for the differences between a trade

payables' general ledger account and a trade payables' statement balances.

$(4$ marks$)$

$3\mathrm{.}3$ List and briefly describe two purposes$/$benefits of preparing a trade payables

reconciliation statement.