DEPARTMENT OF FINANCIAL ACCOUNTING

DEPARTMENT OF FINANCE & INFORMATION MANAGEMENT

Financial Literacy (FNLT101/FINL101)

Year-End Adjustments and Annual Financial

Statements

2024

References

• Presentation of financial statements (IAS 1/): International financial reporting standards

(IFRS) revised 2011 : published by the IASB.
• Unlocking the Accounting Process Concepts and Practice DL Kolitz
In Accounting a financial year is calculated over 12 months, similar to that of a calendar
year. Transactions take place at various times over that 12-month period.
Transactions are recorded in the relevant Subsidiary Journals, posted to the General Ledger
and a Trial balance is prepared. Sometimes the timing of transactions interferes with the
preparation of financial statements.

YEAR-END ADJUSTMENTS

After the Pre-adjustment Trial Balance has been drawn up from the General Ledger
balances it may be necessary to make some year-end adjustments. We use the Accrual
principle in accounting which means that we record income and expenses when they occur
which is not necessarily when cash is exchanged. Income and expenses must always relate
to a specific financial year. We must make sure that we only include income and expenses
that relate to the current year whether they have been received/paid or not.

Examples of accrual adjustments – there are 4 types

1) Prepaid Expenses
We may have paid an expense already but it relates to the following financial year.
A business has an insurance policy on which they pay a monthly premium of R 500. The
insurance policy was taken out on 01 January 2022. The financial year of this business ends
on 31 December 2022. At year end it is noticed that the Pre-adjustment Trial Balance
includes Insurance expense of R 6 500.
What adjustment will be necessary?
What is the double entry required?
What will the Post-adjustment Trial Balance look like?
What will the Financial Statements look like?
Will a reversal be necessary in the next financial year?

2) Accrued Expenses
We may reach the end of the current financial year and there is an expense which belongs
to the current year but has not yet been paid. A business has a monthly newspaper
subscription amounting to R 200. This subscription was taken out on 01 January 2022. At
year-end, 31 December 2022 the December subscription has not yet been paid.
What adjustment will be necessary?
What is the double entry required?
What will the Post-adjustment Trial Balance look like?
What will the Financial Statements look like?
Will a reversal be necessary in the next financial year?

3) Income received in advance

We may reach the end of the current financial year and there is income we have already
received but it belongs to the next financial year.
A business rents out a property to a tenant for R 1 500 per month. The lease agreement has
been in existence for the full financial year and the rent has remained constant for the year.
The Pre-adjustment Trial Balance includes Rent Income of R 19 500 at year end.
What adjustment will be necessary?
What is the double entry required?
What will the Post-adjustment Trial Balance look like?
What will the Financial Statements look like?
Will a reversal be necessary in the next financial year?

4) Accrued Income
At financial year end we may have income which we should have received but we have not
yet received it. A business has a R 10 000 Fixed Deposit which earns interest at 10% pa.
This investment was made on 01 January 2022. Interest is received twice a year on 30 June
and 31 December. At year end 31 December 2022 the Pre-adjustment Trial Balance
includes an amount of R 500 for Interest Received.
What adjustment will be necessary?
What is the double entry required?
What will the Post-adjustment Trial Balance look like?
What will the Financial Statements look like?
Will a reversal be necessary in the next financial year?
Year-end Adjustments (Part 2)
We have already seen how adjustments for the following may be necessary at financial year
end:-
• Prepaid expenses
• Accrued expenses
• Income received in advance
• Accrued income
Are there any other possible year-end adjustments?

Depreciation
At financial year end it may be found that the value of non-current assets eg, Furniture,
Equipment, Machinery, Vehicles, may have decreased. This is because these assets don’t
last forever. The Financial Statements must be accurate and reliable and the value of these
assets must reflect this. For this reason the assets must be depreciated at year end.
What double entry must be made to record depreciation?

Debit Depreciation
Credit Accumulated Depreciation on …… (Equipment, Furniture, Vehicles etc)

Depreciation is an expense and so will be found on the Statement of Profit or Loss along
with all the other expenses. The accumulated depreciation must be viewed together with the
asset account. The asset account and the accumulated depreciation account must be
looked at together to see the value of the asset. They are separate General Ledger accounts
however on the Statement of Financial Position the Accumulated Depreciation account is
subtracted from the Asset account.
Example
Vehicles asset account has a R 100 000 debit balance. Accumulated depreciation on
Vehicles account has a R 25 000 credit balance. These are two separate accounts in the
general ledger but view them together and the carrying value (book value) of Vehicles is R
75 000. This carrying value of R 75 000 would be the figure shown for Vehicles on the
Statement of Financial Position.
How do you calculate depreciation?

Two main calculation methods:-

• Straight line method
Vehicles have a cost price of R 120 000.
A residual value of R 20 000
A useful life of 4 years
Calculate the depreciation.

• Diminishing balance method (reducing balance method)

Use the same figures as above but calculate the depreciation using the diminishing balance
method with a depreciation rate of 25 % pa.
Note: - When the diminishing balance method is used the residual value is ignored.

Credit Losses
When customers are granted accounts (i.e. the business sells on credit to debtors) there is
always the possibility that a debtor will not be able to pay their account. In this case the
amount owed by the debtor must be written off as a credit loss.

Debit Credit Losses

Credit Debtors

Credit Losses is an expense to the business.

The above describes the situation where there is a confirmed credit loss. Eg, A letter has
been received from a lawyer declaring the debtor insolvent and there is no hope of receiving
what is owed to the business. In addition to this kind of situation, what if based on past
experience, the business knows that a certain percentage of debtors will be unable to pay.
No formal notification has been received but historically not all debtors manage to pay. This
means that the asset debtors is possibly over-stated and in order for the financial statements
to be reliable needs to be adjusted.
Example
Debtors account has a balance of R 35 000 in the financial statements. A letter is received
from a lawyer stating that one of our debtors has been declared insolvent. This debtor owes
the business R 5 000 and so must be written off as a credit loss. What double entry must be
made?
Debit Credit Losses R 5 000
Credit Debtors R 5 000
Where would credit losses be found in the financial statements? What is the new debtors
balance?

Allowance for Credit Losses

In addition to the above, when the pattern of debtor payments and credit losses is reviewed
from the past it seems that 5% of outstanding debtors are not able to pay their accounts.
We do not know exactly who will not be able to pay in the future but we know there will be
somebody.

Create an Allowance for credit losses.

Debit Credit Losses R 1 500
Credit Allowance for Credit Losses R 1 500
(R 35 000 – R 5 000) x 5%

What if there was an existing Allowance for Credit Losses? Can this be adjusted each year?

Increasing the Allowance for Credit Losses

Assume an existing Allowance for Credit Losses account with a balance of R 800? What
adjustment needs to be made?

Decreasing the Allowance for Credit Losses

Assume an existing Allowance for Credit Losses account with a balance of R 1 600? What
adjustment needs to be made? It has already been mentioned that Credit Losses is an
expense. Therefore, it would appear with the other expenses on the Statement of Profit or
Loss. What about the Allowance for Credit Losses? In a similar way that Accumulated
Depreciation on Vehicles is subtracted from the Vehicles asset account, the Allowance for
Credit Losses must be viewed together with the Debtors account. The Allowance for Credit
Losses accounts is offset (subtracted) from Debtors on the Statement of Financial Position.
Consumable Stores on Hand
In order to run a business, it is often necessary to buy consumable stores, stationery or
packing materials. Consider the following example:
During the year R 2 000 worth of consumable stores were purchased for use in the business.
The consumable stores purchased were entered as an asset. At year end a stock take
revealed that there was R 400 worth of consumable stores on hand. What adjustment is
necessary?

Consumable Stores used

Debit Consumable Stores used (expense) R 1 600
Credit Consumable Stores on hand (asset) R 1 600

What asset balance remains R 2 000 – R 1 600 = R 400. That is the value of the consumable
stores on hand.

What if the purchase of the consumable stores had been treated as an expense? Using the
same information, the required adjustment is: -
Consumable Stores on hand
Debit Consumable Stores on hand (asset) R 400
Credit Consumable stores used (expense) R 400

How would this appear in the financial statements?

Statement of Profit or Loss:-
Consumable stores used R 1 600
Statement of Financial Position:-
Current Assets - Inventory of Consumable stores on hand R 400
IE Information appears the same in the Financial Statements under both circumstances.
Errors
At financial year end it is possible that it is realised that during the year an error was made
in the accounting records.
E.G. The owner of the business draws R 5 000 cash from the business.
The following General Journal entry was made: -
Debit Salaries R 5 000
Credit Bank R 5 000
What correction would be necessary?

The Credit to Bank is correct. The wrong account has been debited. Cancel the incorrect
debit by crediting and then debit the correct account.
Debit Drawings R 5 000
Credit Salaries R 5 000

Once all adjustments relating to a particular period of time have been made, a new post-
adjusted Trial balance is prepared.

Closing Transfers
Once the adjustments have been entered in the General Journal and then posted to the
General Ledger accounts the Income and Expense accounts need to be closed off. The
Assets, Liabilities and the Capital accounts must not be closed off as these continue into the
next financial year.
The Income accounts all have credit balances: debit to close them off.

The Expense accounts all have debit balances: credit to close them off. The Income and
Expense account are closed off to an account called the Profit & Loss account.
Profit & Loss
All the Expenses All the Incomes
Capital (Profit for the year)
The Profit & Loss account is closed off (ie. no Balance b/d) and the balancing figure is the
Income less Expenses = Profit. The Profit & Loss account is the General Ledger format of
the Statement of Profit or Loss. The profit is then transferred to the Capital/Retained
Earnings account because it belongs to the owner of the business.

Capital
Drawings Balance b/d (opening)
Balance c/d (closing) Profit and Loss

Balance b/d (opening)

The Capital account is the General Ledger format of the Statement of Changes in Equity.

From there the financial statements of an entity can be prepared. Each component of a set
of financial statement should be identified separately. The following information should be
prominently displayed on each component of the financial statement:

1. The name of the reporting enterprise and any other form of identification and
any change to the name since the previous reporting period,
2. The reporting date or period covered by the report, whichever is applicable to
the components of the financial statement,
3. The title of each component of the financial statements,
4. The presentation currency, for example Rands,
5. The level of precision/rounding used in presenting amounts in the financial
statements, for example R’000.

A full set of financial statements for a business entity consist of:

• Statement of profit or loss and other comprehensive income

• Statement of changes in equity
• Statement of financial position
• Statement of cash flows
• Notes to the financial statements
These statements are a structured representation of the financial performance and
financial position of an entity.
Statement of profit or loss and other comprehensive income
Measures the performance of an entity for a specific period of time, by calculating the profit
or loss for that period of time.

Statement of changes in equity

This statement shows the increases or decreases in the net assets or wealth of an entity
for a specific period of time.

Statement of financial position

This statement shows the assets, liabilities, and equity of an entity on a specific day/date.

EXAMPLES OF FORMATS/LAYOUTS

Thompson Traders
Statement of profit or loss and other comprehensive income for the year ended 30
September 2022 R

Revenue from sales

Cost of Sales
Gross Profit
Other expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Thompson Traders
Statement of Changes in Equity for the year ended 30 September 2022 R
Details Ordinary Retained Asset Total
share earnings Replacement
capital Reserve
Balance at 1 October 2021
Total comprehensive income
Issue of ordinary shares
Dividends
Transfer to asset replacement
Balance at 30 September 2022

Thompson Traders
Statement of Financial Position as at 30 September 2022 R
ASSETS
Non-current assets
Property, plant and equipment
Current assets
Inventory
Other financial assets
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
EQUITY & LIABILITIES
Equity
Ordinary share capital
Retained earnings
Asset replacement reserve
Non-current liabilities
Long-term borrowings
Current liabilities
Trade and other payables
Taxation payable
TOTAL EQUITY & LIABILITIES
MODEL EXAMPLE 1 – Busy-Bee Enterprises

The following transactions took place at Busy-Bee Enterprises for the year ended 31
December 2022:-

1. Stationery on hand at 01/01/2022 amounted R 4 005. During the current year, Busy-
Bee Enterprises purchased additional stationery to the value of R 10 575. Stationery
on hand at 31/12/2022 is valued at R 4 275.
2. During the month of December 2022, services rendered on credit to clients amounted
to R 18 000. This is still to be recorded.
3. Busy-Bee Enterprises has not paid the interest on loan, since it was acquired from
HB: Bank. The interest has accumulated to R 33 750 as at 31 December 2022.
4. The balance on the advertising account amounts to R 5 400. The advertising expense
is fixed at R 225 per month.
5. On 1/09/2022, Busy-Bee Enterprises entered into a contractual agreement with P
Mkhwanazi, to let the portion of the building to him for R 9 300 for SIX months. P
Mkhwanazi settled this amount before 31 December 2022.
6. Busy-Bee Enterprises took an insurance policy for the premises, premium being R
675 per month. This policy cover became active as from 1/07/2022 and Busy-Bee
Enterprises has paid R 8 100 to date.
7. Depreciation on equipment amounted to R 15 750 for the current year.
8. A debtor, E Ntuli died before settling amount owing on his account of
R 1 000. The Credit department decided to write the amount as
irrecoverable.

REQUIRED
Prepare General Journal entries for all the above listed transactions for Busy-Bee
Enterprises at 31 December 2022.
MODEL EXAMPLE 1 SOLUTION – Busy-Bee Enterprises
Busy-Bee Enterprises
General Journal - December 2022 R
No. Details Debit Credit
1 Stationery used 10 305
Stationery on hand 10 305

2 Trade and other receivables 18 000

Fee Income 18 000

3 Interest paid on loan 33 750

Accrued Interest paid 33 750

4 Prepaid advertising 2 700

Advertising paid 2 700

5 Rent received 3 100

Rent received in advance 3 100

6 Insurance prepaid 4 050

Insurance paid 4 050

7 Depreciation 15 750
Accumulated depreciation: Equipment 15 750

8 Credit losses 1 000

Trade and other receivables 1 000
MODEL EXAMPLE 2 - Phumlani’s Traders

The following trial balance has been prepared by the accountant of Phumlani’s Traders
Trial Balance as at 31 December 2022
Debit Credit
R R
Capital 566 500
Drawings 202 200
22 % Loan from AB Bank 147 400
Land and buildings at cost (Land R 30 000) 200 000
Plant and machinery at cost 160 000
Accumulated depreciation – Plant and Machinery 70 000
Inventory of consumables 13 400
Debtors 152 000
Provision for credit losses 7 600
Advertising paid in advance 20 000
Bank 585 600
Petty cash 600
Creditors 774 600
Rent received in advance 9 000
Sales 1 025 600
Cost of Sales 604 000
Insurance paid 6 000
Rates and taxes expense 9 200
Water and lights paid 14 000
Salaries and wages expense 107 600
Interest expense 29 000
Discount allowed 10 000
Commission expense 16 500
Stationery expense 10 000
Sanitation expense 3 600
Interest earned 13 400
Commission earned 29 600
Inventory 500 000
2 643 700 2 643 700
Additional information:
1. Advertising covers the ten-month period ending 31 March 2023.
2. Included in insurance is an amount of R 4 800 in respect of an insurance contract
covering the period 1 March 2022 to 28 February 2023.
3. Rent was received in cash on 30 June 2022, covering the next 15 months.
4. Accrue any outstanding interest on the loan from AB Bank.
5. Write off R 6 000 of debtors as irrecoverable and adjust the allowance for credit
losses to 10 % of the remaining debtors.
6. Training expenses owing at year-end, R 17 770.
7. Depreciation must still be provided for as follows:
7.1. 2 % per annum on straight line for buildings.
7.2. 15 % per annum on reducing balance on plant and machinery.
8. Commission income includes an amount of R 4 300 which relates to the 12 months
ending 30 June 2023.

Required
a) Prepare the Statement of profit or loss and other comprehensive income of
Phumlani’s Traders for the year ended 31 December 2022.
b) Prepare the Statement of Financial Position of Phumlani’s Traders as at 31
December 2022.
 MODEL EXAMPLE 2 SOLUTION - Phumlani’s Traders
PHUMLANI’S TRADERS
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
2022 R
Revenue from sales 1 025 600
Cost of sales (604 000)
Gross profit 421 600
Other income 44 452
Expenses (237 770)
Finance costs (32 428)
Profit for the year 195 854

(1) Advertising – 1 June 2022 to 31 March 2023 = R 2 000 pm; 1 June 2022 – 31 Dec
2022 = 7 months= add Advertising paid, subtract Advertising prepaid.
(2) Insurance – 1 March 2022 to 28 Feb 2023 = R 400 pm; 1 March 2022 – 31 Dec 2022 – 10
months = Add Insurance prepaid, subtract Insurance paid
(3) Rent received – 1 July 2022 to 30 Sep 2023 = R 600 pm; 1 July 2022 – 31 Dec 2022 = 6
months; Add rent received, subtract Rent received in advance
(4) Interest expense – 22% x R 147 400 x 12/12 = R 32 428 = R 29 000 – R 32 428 = R 3 428;
add Interest expense, Add interest owing
(5) (a) subtract Debtors, subtract Allowances for credit losses (no credit loss account)
(b) old Allowance = R 7 600 – R 6 000 = R 1 600; new Allowance = 10 % of (152 000 – 6
000) = R 14 600; R 14 600 – R 1 600 = R 13 000; add credit losses, add allowance for
credit losses
(6) Add training expense, add Training expense owing R 17 770
(7) (a) Add depreciation; add Acc depr: Building (2 % x R 170 000 x 12/12/) = R 3 400
(b) Add depreciation; add Acc dep: P & M (R 160 000 – R 70 000) x 15 % x 12/12) = R 13
500
(8) Commission earned = 1 July 2022 to 30 June 2023 = R 358 pm = 1 July 2022 – 31 Dec
2022 = 6 months = R 2 148; add Commission earned in advance, subtract Commission
earned.

Commission earned (29 600 – 2 148) 27452

Interest earned 13 400
Rent earned (9 000 – 5 400) 3 600

Insurance paid (6 000 – 800) 5 200

Rates and taxes paid 9 200
Water and Lights paid 14 000
Salaries and wages expense 107 600
Discount allowed 10 000
Commission expense 16 500
Stationery expense 10 000
Sanitation expense 3 600
Advertising paid (20 000 – 6 000) 14 000
Credit losses 13 000
Training expense 17 770
Depreciation (3 400 + 13 500) 16 900

Interest paid (29 000 + 3 428) (32 428)

PHUMLANI’S TRADERS
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2022 R
Non-current assets 273 100
Property, plant and equipment 273 100
Current assets 1 237 800
Inventories 513 400
Trade and other receivables 138 200
Cash and cash equivalents 586 200
1 510 900

Equity 560 154

Capital 560 154
Non-current liabilities 147 400
Long term borrowings 147 400
Current liabilities 803 346
Trade and other payables 803 346
1 510 900

Land and buildings (200 000 – 3 400) 196 600

Plant and machinery (160 000 – 83 500) 76 500

Inventory 500 000

Inventory of consumables 13 400

Debtors (152 000 – 6 000) 146 000

Allowances for credit losses (7 600 – 6 000 + 13 000) (14 600)
Advertising prepaid (20 000 – 14 000) 6 000
Insurance prepaid 800

Bank 585 600

Petty cash 600

Capital 566 500

Profit for the year 195 854
Drawings (202 200)

Loan from AB Bank 147 400

Creditors 774 600

Rent received in advance (9 000 – 3 600) 5 400
Interest owing 3 428
Training expense owing 17 770
Commission earned in advance 2 148
EXERCISE 1
The following trial balance has been extracted from the General Ledger of Major
Steelworks Ltd:
Major Steelworks Ltd
Trial Balance as at 31 December 2022
Debit Credit
R R
Capital : W. Steele 148 500
Drawings: W Steele 12 200
Long term loan – 10 % per annum from B Bread 66 000
Plant and machinery at cost 75 000
Accumulated depreciation – plant and machinery 15 000
Motor vehicles at cost 40 000
Furniture & fittings at cost 12 000
Inventory of Merchandise 125 000
Inventory of petrol & oil 4 000
Debtors 62 000
Provision for credit losses 2 000
Insurance paid in advance 1 800
Petty cash 100
Bank 227 100
Creditors 297 000
Rent received in advance 3 500
Sales 315 700
Cost of sales 207 700
Wages and salaries 55 500
Water and lights 2 100
Stationery expense 4 600
Rent expense 5 000
Interest on loan 6 600
Commission expense 16 900
Interest income 9 900
857 600 857 600
Additional information:
1. Insurance has been paid for the 18 months ended 31 December 2023.
2. Stationery on hand at 31 December 2022 amounts to R 776.
3. Rent was received in cash on 1 April 2022 for the year ended 31 March 2023.
4. R 400 must be written off debtors as irrecoverable and an allowance for credit
losses equivalent to 6 % of debtors must be present in the books at the end of the
year.
5. Rent expense in the trial balance is for ten months only.

6. Training expenses must be accrued at 31 December 2022, R 7 750.

7. No depreciation has been recorded as yet. The rates and methods of depreciation
for the various categories of non-current assets are as follows:
7.1 Plant and machinery at 15 % per annum on diminishing balance.
7.2 Furniture and fittings at 5 % per annum on cost. All the furniture and
fittings were purchased on 1 August 2022.
7.3 Motor vehicles at 10 % per annum on cost. All the motor vehicles were
bought on 30 June 2022.

Required
a) Prepare the adjustments for the financial year ended 31 December 2022 in the
General Journal.
b) Prepare a post-adjustment trial balance of Major Steelworks Ltd as at 31 December
2022.
EXERCISE 2

The pre-adjustment Trial Balance of All & Asundry Services as at 30 June 2022 appears as
follows:
Details Debit Credit
R R
Land and buildings 75 000
Equipment 5 000
Accumulated depreciation: equipment 2 000
Debtors 560
Insurance paid in advance 900
Cash in bank 1 310
Capital: B Baldwin (31 May 2022) 35 760
Drawings: B Baldwin 36 000
Bond over property 24 000
Creditors 650
Salaries 60 140
Advertising 5 030
Stock used 1 740
Telephone 380
Interest 3 600
Municipal costs 3 020
Fees earned 130 270
192 680 192 680

Additional information:
1. Depreciation on equipment for the year ended 30 June 2022 amounted to
R 1 000.
2. On 30 June 2022 salaries amounting to R 4 000 were still owing to staff.
3. Stock on hand at the end of the year amounted to R 400.
4. Interest owing on the bond amounted to R 2 400.
5. The insurance paid in advance amounting to R 900 was paid on 1 June 2022 and
covered the 3 months ending 31 August 2022.
6. Fees received in advance amounting to R 270 were included in Fees earned.
Required
From the information provided above:
a) Prepare the Statement of Profit or Loss and Other Comprehensive Income of All &
Asundry Services for the year ended 30 June 2022, so as to comply with the
requirements of International Accounting Standard 1.
b) Prepare the Statement of Changes in Equity of All & Asundry Services for the year
ended 30 June 2022 so as to comply with the requirements of International
Accounting Standard 1.
c) Prepare the Statement of Financial Position of All & Asundry Services as at 30 June
2022, so as to comply with the requirements of International Accounting Standard 1.
EXERCISE 3

The Pre-Adjustment Trial Balance of Just Jamming Traders was presented to you:-

Just Jamming Traders

Pre-adjustment Trial Balance at 30 September 2022
Details Debit Credit
R R
Capital 40 360
Drawings 25 000
Long Term loan: Yes Banking (18% p.a.) 20 000
Land and buildings (cost) 50 000
Vehicles (cost) 90 000
Accumulated depreciation : Vehicles 27 000
Equipment (cost) 22 500
Accumulated depreciation: Equipment 8 100
Debtors’ control 15 400
Creditors’ control 8 056
Trading inventory (1 October 2021) 25 430
VAT control 3 647
Bank (unfavourable) 8 640
Sales 338 245
Purchases 157 810
Sales returns 2 100
Purchases returns 150
Credit losses 3 700
Rent income 15 000
Interest on loan 3 000
Salaries and wages 6 000
Water & Electricity 8 535
Advertising 6 720
Stationery 11 962
Sundry expenses 33 387
465 191 465 551
Additional Information

1 On 29 October 2022, the external auditors discovered an error in the sales journal. A
credit invoice for R 2 590 issued during September 2022, was entered in the sales
journal as R 2 950. The correct amount is R 2 590.
2 Depreciation expense for the year of R 21 410 must still be recorded.
3 A physical stock take on 30 September 2022, identified the following on hand:
3.1 Stationery R 3 900
3.2 Inventory R 4 700
4 On 30 September 2022, Mr Chelsea, who was renting part of the building from Just
Jamming Traders, still owed 2 months’ rent. The rent was increased by 10% with
effect from 1 August 2022.
5 Advertising of R 6 720 was paid on 1 March 2022 for a monthly advertising campaign
ending on 28 February 2023.
6 Viscol Trucks, who have handled all Just Jamming’s Traders’ deliveries to customers
since 1 March 2022, must still be paid for deliveries done until year-end date. An
invoice for R 1 900 was received but not yet recorded.
7 R 180 was received from Mr Moon, a debtor who had been declared insolvent. The
amount represented 30c in the Rand of his outstanding debt and was recorded
correctly. The balance of his debt must be written off as irrecoverable.
8 An allowance for credit losses should be created at 5% of outstanding debt.
9 During September 2022, the owner took R 400 cash for private use. The bookkeeper
entered the cash taken out as salaries and wages in the cash payments journal. The
cheque for the bookkeeper’s salary of R 5 000 for September 2022 has not been
issued nor recorded.
10 The loan from Yes Banking was obtained on 1 June 2021. The loan is for a period of
5 years with annual instalments of R 5 000. On 31 May 2022,
R 5 000 was repaid on the loan as well as a further R3 000 which represented part
of the current year’s interest on the loan. The payments were recorded in the books.

REQUIRED
Prepare the Statement of Comprehensive Income of Just Jamming Traders for the year
ended 30 September 2022. Show workings by means of brackets.