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FAC1 Notes

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15 views12 pages

FAC1 Notes

Uploaded by

shamielpe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Financial Accounting 1 - Notes

1.1 Income Statement for the year ended 28 February 2023:

Revenue:
Rent income 61,900
Commission income 12,000
Other income 84,000
Interest income 75,500
Total Revenue 233,400

Cost of Sales:
Trading stock (beginning) 231,700
Less: Trading stock (ending) (207,500)
_______
Gross Profit 24,200

Expenses:
Sundry expenses (fuel) 7,200 (600 liters * R12)
Salary expenses 605,500
Audit fees 43,500 (29,000 + 14,500)
_______
Total Expenses 656,200

Net Profit before Tax (632,000)


Income tax expense (28%) 176,960
_______
Net Profit after Tax (808,960)

1.2 Equity and Liabilities section of the Statement of Financial Position:

Equity:
Ordinary share capital:
- Issued at 1 March 2022: 2,040,000
- Issued on 31 March 2022: 756,000 (Unissued shares)
- Repurchased on 27 February 2023: (500,000) (250,000 shares * R2)
- (For the share buyback cost:) (237,500) (250,000 shares * R0.95)
_______
Total Ordinary Share Capital: 2,058,500

Retained income (1 March 2022): (674,500)


Net Profit after Tax: (808,960)
Ordinary share dividends (interim): (420,000)
Final dividend: (300,000) (1,200,000 shares * R0.25)
_______
Total Equity: 83,540

Liabilities:
Loan: Anca Bank 433,500
SARS: Income tax 360,000
Provision for bad debts (Adjustment) 41,200 (19,600 + 21,600)
Creditors' control 395,200
_______
Total Liabilities: 1,230,900

Total Equity and Liabilities: 1,314,440

Note: All calculations are provided in brackets.


Income Statement for the year ended 28 February 2023

Revenue
Rent income R61.900
Commission income R12.000
Other income R84.000
Interest income R75.500
Total Revenue R233.400

Cost of sales
Trading stock (1 Mar 2022) R231.700
Less: Trading stock (28 Feb -R207.500
Gross Profit R24.200
Expenses:
Sundry expenses (fuel) R7.200
Salary expenses R605.500
Audit fees R43.500
Total Expenses R656.200
Provision for bad debts R41.200

Net Profit before Tax -R706.900


Income tax expense R197.692
Net Profit after Tax -R909.592

Equity and Liabilities section of the Statement of Financial Position

Equity
Ordinary share capital R2,040,000
Retained income (R1,584,100)
Total Equity R455.900

Liabilities
Loan: Anca Bank R433.500
Income tax payable R197.692
Total Liabilities R631.192

Total Equity and Liabilities R1,087,092

Notes:

The net profit before tax is calculated as the total revenue minus total expenses.
Income tax expense is calculated at 28% of the net profit before tax.
Net profit after tax is the net profit before tax minus income tax expense.
The equity section includes ordinary share capital and retained income. Retained income is the difference between
The liabilities section includes the loan from Anca Bank and income tax payable.
The income statement and equity and liabilities section follow the format prescribed by International Accounting St
ome is the difference between the net profit after tax and dividends paid.

by International Accounting Standard 1 Presentation of Financial Statements.


Question 2

2.1

2.2
To calculate B Buck's ownership in the company before and after the buy-back:
Before the buy-back:
B Buck owned 400,000 shares out of the 1,200,000 shares issued.
Therefore, her ownership percentage before the buy-back was (400,000 / 1,200,000) * 100% = 33.33%.
After B Buck bought an additional 80,000 shares:
B Buck's total shares became 400,000 + 80,000 = 480,000.
The total issued shares remained the same at 1,200,000.
Her ownership percentage after the purchase became (480,000 / 1,200,000) * 100% = 40%.
After the buy-back of 250,000 shares:
The total issued shares reduced to 1,200,000 - 250,000 = 950,000 shares.
B Buck's shares remain at 480,000.
Her ownership percentage after the buy-back became (480,000 / 950,000) * 100% = 50.53%.

Therefore, B Buck's ownership in the company increased from 33.33% before the buy-back to 50.53% after the b

This behavior suggests possible misuse of power and influence, which should worry other shareholders. By B Bu
her influence on the Board of Directors and shareholders, facilitated the buy-back of shares, effectively incre
ownership stake in the company. This can result in an unequal distribution of authority and decision-maki
business, as B Buck's larger ownership allows her more “say” over business choices while possibly diminishing
and influence of other shareholders.
It also calls into question the company's corporate governance policies, transparency, and fairness. Other sha
may fear that their interests are not being adequately protected and that their rights as shareholders a
undermined. In the end, this conduct can foster mistrust among shareholders and potential investors and can
company's reputation and long-term viability.
Question 3

Starting balance: R42,555


Add:
Outstanding deposit (11 June 2023): R37,800
Interest earned: R285
Deposit made on 31 July 2023: R27,180
Cheque No. 401 (18 July 2023): R18,600

Subtract:
Outstanding cheques:
No. 186 (22 January 2023): R450
No. 305 (30 August 2023): R8,400
Bank charges: R950
Unidentified debit order: R1,950
Corrected balance = (42,555 + 37,800 + 285 + 27,180 + 18,600) - (450 + 8,400 + 950 + 1,950) = R115,
The correct balance of the bank account in the general ledger on 31 July 2023 is R115,570.

This balance is favorable because it represents a positive amount, indicating that there are more funds
0 + 950 + 1,950) = R115,570
is R115,570.

hat there are more funds available in the bank account than previously thought based on the provisional calculation.
ional calculation.
2023 2022
R R
Shareholders for
656 595
dividends
SARS (Income tax) Debit 28,500 Credit 41,750
Debtors' control 527 816.2
Creditors' control 580 374
Bank Debit 174,500 Credit 348,450
Petty cash 5 3
Trading stock 451.6 372 ,000

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