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2023-Finalised Question Paper TEST 1- assignment due on

27 March 2023
Accouting I (University of Limpopo)

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UNIVERSITY OF LIMPOPO
FACULTY OF MANAGEMENT AND LAW

SCHOOL OF ACCOUNTANCY

DEPARTMENT OF FINANCIAL ACCOUNTING

BACC DEGREE ASSIGNMENT BASED ON TEST 1 DUE ON 27 MARCH: 2023

MODULE: CACN011 PAPER: P1

(FINANCIAL ACCOUNTING IA)

TIME: 17- 26 March 2022

MARKS:100

FIRST INTERNAL EXAMINER: PROF. O. AYAYA PhD, CA(SA)

SECOND INTERNAL EXAMINER: MR. ML NKHONA CA(SA)

THIS PAPER CONSISTS OF 8 PAGES, INCLUDING THE COVER PAGE

INSTRUCTIONS:

1. Students are to answer all the questions.

2. Students are to write neatly and legibly in the answer booklet.
3. Distinguish workings from financial statements.

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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

QUESTION 1 [20 MARKS│ 36 MINUTES]

Instructions: Please select and write the correct answer in the answer booklet

I.Which of the following statements is correct?

1) A business entity is an organisation that uses economic resources for
the primary goal of maximising profit.
2) A company is formed as a separate legal entity apart from its owners
and is therefore known as an unincorporated entity.
3) Considering a private company, shareholders and management are
normally the same group of persons.
4) An entrepreneur forming a new business entity in South Africa can
choose from four forms of business ownership; a sole proprietorship,
a partnership, a company, or a close corporation.
a) 1 and 2 only
b) 1 and 3 only
c) 1, 3, and 4 only
d) 2 and 4 only
e) 1, 2, 3 and 4

[ 2 marks]

II.A business entity organised as a sole proprietorship is:

a) Owned partly by the owner and partly by lenders.
b) A separate accounting and legal entity.
c) A separate legal entity but not a separate accounting entity.
d) A separate accounting entity but not a separate legal entity.
e) Financed only by the owner and never by lenders.
[1 mark]

III.The activities of business entities are of interest to a wide range of users. According to
the Conceptual Framework for Financial Reporting, primary users:
a) Include investors, lenders, other creditors, and government
authorities.
b) Are those with a financial but not an ownership interest in the
business entity.
c) Refer to the management of the business entity.
d) Are those without any direct financial interests in the business entity.
e) Are an entity’s potential and existing investors, lenders, and other
creditors.

[1 mark]

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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

IV.Which of the following statements is correct?

1) Investors are the owners of a business entity.
2) Investors and the business entity are the same accounting entity.
3) Financial information relating to a business entity is produced from the
perspective of the business entity.
4) Management prepares information for the primary users.

a) 1, 2 and 3 only,
b) 2 and 3 only
c) 1, 3 and 4 only
d) 3 and 4 only
e) e. 1, 2, 3 and 4

[1 mark]
V.Which of the following statements are correct?
1)Users of financial statements are assumed to have a reasonable knowledge of
business, economic activities, and accounting and a willingness to study the
information with reasonable diligence.
2) Information has the quality of relevance when it is capable of making a
difference in to the decisions of users.
3)Information has the quality of faithful representation when it is complete, neutral
and free from error.
4)Users must be able he compare the financial statements of an entities over time
to identify trends in its financial position and performance.

a) 1 and 2 only
b) 1 and 3 only
c) 1, 2 and 3 only
d) 2 and 4 only
e) 1, 2, 3 and 4

[2 marks]

VI.According to the conceptual framework, which of the following statements best

describes the objective of general-purpose financial reporting?
a) To prepare the statement of comprehensive income and statement of
financial position for a specific period.
b) To record transactions into a book of original entry referred to as a
journal, from there transfer the details into a list of accounts called a
ledger, and then summarise the ledger balances by preparing a trial
balance.
c) To provide financial information about the reporting entity that is
useful to existing and potential investors, lenders and other creditors
in making decisions about providing resources to the entity.
d) To measure the business entity’s performance by subtracting cash
outflows from cash inflows to arrive at a net cash flow for the period.
e) To select data, a process that data and produce information about a
business entity.
[1 mark]

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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

VII.Which of the following statements are correct?

1) Primary users are those with an ownership interest in the business
entity, including lenders and employees.
2) Equity investors are those users with a financial but not an ownership
interest in the business entity.
3) Primary users exclude government authorities.
4) Equity investors are those users with an ownership interest in the
business entity.
5) Management’s primary relationship with the entity is that of a capital
provider.
a) 1, 2 and 4
b) 1, 3 and 5
c) 3 and 4
d) 5 only
e) 1 and 5
[ 2 marks]

VIII.Which of the following statements are correct in terms of the Conceptual Framework?
1) The two fundamental qualitative characteristics are relevance and
faithful representation.
2) Timeliness and cost/benefit are constraints that need to be satisfied in
order to achieve faithful representation.
3) For information to be capable of making a difference to the decisions
of users it must have confirmatory value or predictive value or both.
4) Enhancing qualitative characteristics include comparability, timeliness,
understandability, and verifiability.
5) Information faithfully represents economic transactions when it is free
from material error, neutral and complete.
a) 1, 3, and 4 are correct
b) 4 and 5 are correct
c) 1, 3, and 5 are correct
d) 1, 3, 4, and 5 are correct
e) 1, 2, and 5 are correct

[ 2 marks]

IX.Dr Vee Tee MBChB is a doctor who has a practice in Mankweng. Information
[extracted from the accounting records] relating to medical supplies for the
three months to 28 February 2023 is provided below.
R
Medical supplies unused as at 1 December 2022 2 900
Accounts payable as at 1 December 2022 3 500
Medical supplies purchased on credit from1 December 2022 to 28 February 2023 27 000
Accounts payable as at 28 February 2023 4 900
Medical supplies unused as at 28 February 2023 6 200
 The accounts payable represent the amounts owing to Johannesburg
Medical Suppliers Incorporated.
 The amounts for medical supplies are material in relation to the practice.

The cash paid to the Johannesburg Medical Suppliers Incorporated supplier

during the three months to 28 February 2023 amounts to:
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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

a) 27 000
b) 25 600
c) 2 900
d) 23 700
e) 4 900
[2 marks]

X.Dr Vee Tee MBChB is a doctor who practices in Mankweng. Information [extracted
from accounting records] relating to medical supplies for the three months to 28
February 2023 is provided below.
R
Medical supplies unused as at 1 December 2022 2 900
Accounts payable as at 1 December 2022 3 500
Medical supplies purchased on credit from1 December 2022 to 28 February 2023 27 000
Accounts payable as at 28 February 2023 4 900
Medical supplies unused as at 28 February 2023 6 200
 The accounts payable represent the amounts owing to Johannesburg
Medical Suppliers Incorporated.
 The amounts for medical supplies are material in relation to the practice.

The medical supplies used during the three months to February 2023 amount
to:

a) R23 700
b) R27 000
c) R 3 300
d) R20 800
e) R24 300
[2 marks]

XI.Benito Company began the year with an equity of R630 000. During the 2019 financial
year, the company recorded revenues of R900 000, expenses of R684 000,
and paid dividends of R72 000. What was Benito’s equity at the end of the
year?
a. R 918 000.
b. R 774 000.
c. R1 458 000.
d. R 846 000.
[1,5 marks]
XII.Marilu(Pty) Limited began the year with an equity of R225 000. During the year, Marilu
issued additional ordinary shares in exchange for cash of R315 000, recorded
expenses of R900 000, and paid dividends of R60 000. If Marilu’s ending equity
was R690,000, what was the company’s revenue for the year?
a. R1 050 000.
b. R1 110 000.
c. R1 365 000.
d. R1 425 000.
[2,5 marks]

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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

QUESTION 2 [24 MARKS│ 44 MINUTES]

Thomas Kutai and Petti Sibanoni worked to promote and register Tom Petti
Enterprises (Pty) Limited to start clearing and forwarding services of solar panels in
the Southern African regions. The company’s financial year end is 31 December.
Transactions for Tom Petti Enterprises (Pty) Limited for January 2023 are presented
below.
January:
5 Issued ordinary shares in exchange for R500 000 cash. The cash was paid
into the company bank account.
7 Purchased land costing R280 000 in cash. The land is a future site for the
construction of warehouses.
8 Purchased equipment costing R200 000 for R30 000 cash and the
remainder on the account. The seller agreed to have the remainder of the
purchase price settled at the end of April 2023. The equipment is
depreciable from the date it becomes available for use by the company
9 Purchased office supplies on account for R8 000.
12 Paid R10 000 for a one-year insurance policy to protect the business against
theft and fire.
15 Received R30 000 cash for clearing and fording services performed for an
importer of solar panels to Bulawayo.
17 Billed R40 000 for cargo clearing and forwarding services for solar panels
imported to Eswatini.
20 Received R15 000 in respect of services previously performed on the
account
26 Paid salaries to employees for R25 000.
30 Declared and paid dividends of R10 000.

YOU ARE REQUIRED TO: MARKS

Prepare journal entries for the transactions provided and identify each [22]
transaction by number. You will need to include journal explanations.

Communication skills: presentation [2]

Note to students: Performance in this question showed a need for more

self-study and the use of a graded questions book to practice. Some
students still account for dividends as an expense. The treatment must
stop because it shows a failure on the part of the student to attend lectures
or listen to recorded sessions on the blackboard. How can someone get 2
marks out of 20 marks in this section?

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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

QUESTION 3 [56 MARKS │100 MINUTES]

Sami Daudi is an engineering graduate whose final year research project examined
the recycling of disposable coffee cups. He started a new business entity on 1
November 2022 called Furaha Tena (Pty) Limited and decided to have a financial year
end of 28 February March of each year.
The summarised transactions of Furaha Tena (Pty) Limited for November 2022 are as
follows:
(i) Sam deposited R100 000 cash in a bank account in the name of his
new business entity, Furaha Tena (Pty) Limited.
(ii) Paid R1 500 for three months’ rent, from 1 November to 31 January
(see also transaction XI)
(iii) Purchased second-hand recycling equipment costing R150 000. Paid
R20 000 in cash with the balance to be paid within three months with
interest calculated at 12 per cent per annum. The equipment is
expected to have a useful life of ten years, after which it will be
worthless (see also transaction X).
(iv) Bought used coffee cups from a national coffee shop chain for R5 000
in cash to use for recycling.
(v) Recycled the used coffee cups and sold them for R40 000 on credit to
schools in the business neighbourhood.
(vi) Paid salaries of R6 000.
(vii) Paid R4 000 for various administrative expenses.
(viii) Distributed R5 000 to Sami for his use.
(ix) Unrecycled coffee cups on hand at the end of November 2022 had a
cost of R1 000.
(x) Recognised the equipment usage (depreciation) for the reporting
period ended 30 November 2022.
(xi) Recognise the rent usage for the reporting period ending 30
November 2022.

(xii) Accrued interest on the note payable for 30 days.

:

[Follow the required and do not create and answer your questions]

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CACN011: FINANCIAL ACCOUNTING IA Test 1 2023

YOU ARE REQUIRED TO: MARKS

a) Show the effects of the above transactions on the accounting [17]
equation. Use the following columns:
Assets: Bank, Accounts receivable, rent prepaid,
Supplies, Equipment; Liabilities: Accounts
payable;
Owner’s equity: Capital, Income, Expenses,
Distributions.
b) Enter the transactions shown above in appropriate general ledger [30]
accounts. Use T-Account format ledgers.
Effective communications- labelling of account columns 4
c) Prepare a statement of profit or loss of Furaha Tena (Pty) Limited [4]
for the month ended 30 November 2022.
Effective communication: layout and structure [1]
d) Prepare the statement of changes in equity of Furaha Tena (Pty) [3]
Limited for the month ended 30 November 2022.
Effective communication: layout and structure [1]
e) Prepare a statement of Furaha Tena (Pty) Limited’s financial [4]
position on 30 November 2022.
Effective communication: layout and structure [1]
f) A general journal is a less useful book of accounts. Accountants [5]
can record transactions directly in the ledger accounts without
preparing journal entries. Argue for or against, with reasons, this
statement.

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