Week 6

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Directorate: Curriculum FET

GRADE 10 ACCOUNTING TERM 3: WEEK 6

TOPIC: FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS


In previous lessons you have learnt about the ...
Year-end adjustments | Statement of Comprehensive Income | Statement of Financial Position | Notes to the Financial
Statements
This lesson will enable you to ...
apply and strengthen your knowledge & skills in preparing the Financial Statements and the Notes to these statements

Please refer to your TEXTBOOK for more information about Financial Statements and the Notes to the
Financial Statements. KNOW the FORMATS (layout) of each statement and note very well.

ALTERNATIVE digital resources (all data-friendly):


Study& Master Gr 10 PPT Lucem Gr 10 Teacher Guide
Chapter 16 (Financial Statements) (textbook and answers in one)
https://wcedeportal.co.za/eresource/132746 https://wcedeportal.co.za/eresource/117641
(FS Notes: Pg 152 -155)

2018 Telematics on Financial Statements


https://wcedeportal.co.za/eresource/126231
Zip folder with activities, workbook and answers (with 3 video links)
Topics: Statement of Comprehensive Income; Statement of Financial Position with NOTES

ACTIVITY 1 Statement of Comprehensive Income (Income Statement)

The information below relates to RMR Stationery Dealers for the financial year ended
29 February 2020.
Prepare the Statement of Comprehensive Income for the year ended 29 February 2020.

RMR STATIONERY DEALERS


PRE-ADJUSTMENT TRIAL BALANCE AT 29 FEBRUARY 2020
Balance Sheet Accounts Section Debit Credit
Capital 2 289 860
Drawings 170 740
Mortgage loan: Overstrand Bank 950 000
Land and Buildings 1 867 000
Vehicles (at cost) 857 000
Accumulated depreciation on vehicles 193 800
Equipment 480 000
Accumulated depreciation on equipment 144 000
Fixed deposit: Overberg Bank 450 000
Savings account:Overberg Bank 83 200
Trading Stock 522 800
Debtors Control 212 000
Bank 35 400
Petty cash 1 500
Cash float 1 750
Creditors control 183 000

Gr 10 Accounting Term 3, 2020 1


Nominal accounts section Debit Credit
Sales 2 889 950
Cost of sales 1 418 500
Debtors allowances 92 000
Salaries and wages 470 000
Advertising 51 500
Rent income 414 225
Discount received 12 480
Discount allowed 15 000
Repairs 94 040
Bad debts 10 200
Interest on investments 45 000
Interest on current account 5 075
Stationery 24 600
Interest on loan 90 360
Insurance 86 800
Telephone 70 540
Bank Charges 22 460
R7 127 390 R7 127 390

ADJUSTMENTS:
1. Stationery was taken from the stock on the shop shelves for use in the office at cost, R7500.
2. According to the physical count, the following were on hand at year end:
Trading stock, R505 050; Stationery, R3 600
3. Advertising includes an amount of R27 000 paid for six advertisements in the Hermanus Times
newspaper. By 29 February 2020 only four of these advertisements had appeared in the newspaper.
4. Bad debts of R2180 must be written off.
5. Telephone account for February 2020 has not yet been paid, R7 350.
6. In terms of the loan agreement an instalment of R54 000 will be paid to Overberg Bank on 30 November
each year. The amount due was duly paid on 30 November 2019 and recorded in the firm’s books.
Provide for the outstanding interest on the loan. The interest rate on the loan is 12% p.a.
7. Rent income includes the rent for March 2020. Take into account that rent was increased by R1 575 per
month on 1 January 2020.
8. Received R525 from L. Deelman, whose account had previously been written off as irrecoverable on
20 February 2020. The amount was entered in the Debtors’ Control column in the Cash Journal. Correct
the error.
9. Insurance included an amount of R10 800 that was paid for the period 1 August 2019 to 31 July 2020.
10. The bank returned A. Lekay’s cheque of R3 100 marked “R/D”. This cheque was received earlier the
month from A. Lekay in settlement of his account of R3 250.
11. Replaced a broken window in the owner's private home, R1 590. This was accidentally debited against
the Repairs account. Correct the error.
12. Provide for depreciation as follows:
• Equipment: 10% p.a. on cost.
• Vehicles 15% p.a. on the carrying value. Take into account that a new vehicle, R410 000 was
purchased on 1 November 2019. It was correctly entered.

Gr 10 Accounting Term 3, 2020 2


ACTIVITY 1: ANSWER SHEET

RMR STATIONERY DEALERS


STATEMENT OF COMPREHENSIVE INCOME (INCOME STATEMENT) FOR THE YEAR
ENDED 29 FEBRUARY 2020
Sales
Cost of sales
Gross profit
Operating income

Gross operating income


Operating expense

Operating income

Net profit for the year

Gr 10 Accounting Term 3, 2020 3


ACTIVITY 2 Statement of Financial Position Notes & Internal control
2.1 CONCEPTS
Choose the correct term to complete each of the following statements. Write only the term next to the
question number (2.1.1–2.1.4) in the ANSWER SHEET.

cash and cash equivalents; current asset; non-current asset; income; net working capital;
expense; current liability; non-current liability
2.1.1 Interest on a bank overdraft is a(n) ...
2.1.2 Consumable stores on hand are a(n) ...
2.1.3 The portion of a loan to be paid during the next financial year is regarded as a(n) … in the
Statement of Financial Position.
2.1.4 The difference between current assets and current liabilities is known as …
2.2 NOTES TO FINACIAL STATEMENTS
The information below was taken from the books of Badela Traders, whose financial year ends
29 February 2020.
REQUIRED:
Prepare on 29 February 2020:
Notes to the Financial Statements:
2.2.1 Fixed assets (calculate amounts denoted by A-E)
2.2.2 Inventory
2.2.3 Trade and other receivables
2.2.4 Cash and Cash Equivalents
2.2.5 Capital
2.2.6 Complete the Equity and Liabilities section of the Statement of Financial Position.
NOTE: Show calculations between brackets where Notes are not required.
2.3 After extensions were made to the buildings, the land and buildings were valued at R2 000 000.
2.3.1 Indicate the amount for Land and Buildings in the financial statement on 29 February 2020.
2.3.2 Name the GAAP principle applied in Question 2.3.1
2.4 After the financial statements were prepared, it was found that fuel expenditure increased by 80 % from
the previous year. The driver who does deliveries, takes the vehicle home after work. Name TWO
internal control measures that the owner can introduce to prevent reduce the misuse of the vehicle by the
driver.

INFORMATION:
A. TRIAL BALANCE OF BADELA TRADERS – FEBRUARY 2020
Balance Sheet accounts section Debit Credit
Capital (1/3/2019) 954 000
Drawings 235 132
Land and Buildings 1 300 000
Equipment (cost price) 104 000
Vehicles (cost price) 950 000
Accumulated depreciation on equipment (1/3/2019) ?
Accumulated depreciation on vehicles( 1/3/2019) 244 400
Fixed Deposit : ABC Bank ?
Loan: DBD Bank 120 000

Gr 10 Accounting Term 3, 2020 4


Trading inventory 47 655
Debtors control 24 400
Creditors control 47 047
Bank 65 460
Petty cash 500
Cash float 300
Consumable stores on hand 2 000
Prepaid expenses 1 500
Accrued expenses 5 700
Income received in advance (Deferred income) 3 700
Accrued income 2 500

B. EXTRACT FROM THE TANGIBLE/FIXED ASSETS NOTE


Land &
Vehicles Equipment
buildings
Carrying value at beginning of year 1 000 000 705 600
Cost 1 000 000 950 000 104 000
Accumulated depreciation 0 (244 400) (E)

Additions at cost (A) 60 000 10 000


Depreciation 0 (B) (9 600)
Carrying value at end of year 1 300 000
Cost 1 300 000 (C) 114 000
Accumulated depreciation 0 (D) (74 600)

Additional information:
• During the year the building was extended. This transaction was recorded properly.
• During the year the owner increased his capital contribution with an additional R100 000. This has been
properly recorded.
• A new vehicle was bought on 1 September 2019 for R60 000. This transaction was recorded properly.
Depreciation on vehicles is calculated at 15% p.a. on the diminishing method.
• Badela Traders bought extra equipment on 27 February 2020 for R10 000 cash. This transaction was not
recorded.
• R25 000 of the Loan will be repaid during the next financial year.
• The net profit for the year amounted to R752 000.

ACTIVITY 2: ANSWER SHEET


2.1 Correct term
2.1.1
2.1.2
2.1.3
2.1.4

Gr 10 Accounting Term 3, 2020 5


BADELA TRADERS

2.2 Notes to the Statement of Financial Position (Balance Sheet)


2.2.1 FIXED ASSETS ANSWER
A

2.2.2 Inventory

2.2.3 Trade and other receivables

2.2.4 Cash and Cash Equivalents

Gr 10 Accounting Term 3, 2020 6


2.2.5 Capital

2.2.6 Statement of Financial Position (Equity & Liabilites section only)


(Show calculations between brackets where notes are not required)
EQUITY AND LIABILITIES
OWNER’S EQUITY

Capital
NON-CURRENT LIABILITIES

CURRENT LIABILITIES

TOTAL EQUITY AND LIABILITIES

2.3.1 Indicate the amount for Land and Buildings in the financial statement on 29 February 2020.

2.3.2 Name the GAAP principle applied in Question 2.3.1

2.4 Name TWO internal control measures that the owner can put in place to reduce the misuse of the
vehicle by the driver.

Lesson Solutions:
https://wcedeportal.co.za/eresource/136266

Gr 10 Accounting Term 3, 2020 7

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