Cycle Test 1: Term 1 Grade 11 Accounting February 2014 BANK RECONCILIATIONS, CREDITORS RECONCILIATIONS, ETHICS AND CONTROLS

Transcription

1 Cycle Test 1: Term 1 Grade 11 Accounting February 2014 BANK RECONCILIATIONS, CREDITORS RECONCILIATIONS, ETHICS AND CONTROLS Examiner: J Cansfield Marks: 100 Time: 1 hour Instructions: 1. Answer on this answer book provided 2. Read the questions carefully and pay careful attention to the information given. 3. An INFORMATION SHEET has been attached to the back refer to it for the questions. You may detach the Information Sheet from the back of the answer book. 4. Remember to write neatly. 5. You may use pencil 6. No Tip-ex is allowed. NAME: CLASS: Question Minutes Possible Marks One Two Three TOTAL Actual Mark Achieved %

2 QUESTION 1 RECONCILIATIONS AND INTERNAL CONTROL (24 marks; 15 minutes) You are provided with three examples of reconciliations done by employees in the accounting department of Soweto Stationers. REQUIRED: Study the information provided on the information sheet, and then answer the questions that follow. 1.1 Briefly explain: What you understand by the term internal control (2) Why it important to apply internal control in a business (2) Why preparing reconciliations is important for internal control. (2) 1.2 According to the Bank Statement, does this business have a favourable bank balance or a bank overdraft? Give a reason for your choice. (2) 1.3 Calculate the bank balance in the Ledger of Soweto Stationers on 29 February State whether this is a favourable or unfavourable balance. (3) 1.4 List FOUR steps you would follow when preparing a Bank Reconciliation Statement. (4)

3 1.5 When preparing the financial statements of Soweto Stationers at the end of February 2008, what amount would you reflect under Cash and Cash Equivalents on the Balance Sheet? (2) 1.6 Calculate the correct amount owed to Ace Wholesalers by Soweto Stationers. (4) 1.7 Briefly explain what action should be taken over the difference of R1 900 reflected in Example C. (3)

4 QUESTION 2 BANK RECONCILIATIONS (45 marks; 30 minutes) REQUIRED: From the given information (provided on the Information Sheet): (i) Prepare and balance the bank account of Motala Dealers on 30 November (Please note: you are required to enter the transactions directly into the bank account) (28) (ii) Prepare the Bank Reconciliation Statement on 30 November (14) (iii) Answer the question that follows: (3) BANK BANK RECONCILIATION STATEMENT ON Debit Credit At the end of a financial year, how should a post-dated cheque issued be handled in the Financial Statements?

5 QUESTION 3 CREDITORS RECONCILIATIONS (11 marks; 15 minutes) REQUIRED: Using the information provided on the information sheet, prepare the Creditors Reconciliation Statement of Lada Music Suppliers on 31 March CREDITORS RECONCILIATION STATEMENT R Rough Work

6 INFORMATION SHEET QUESTION 1 RECONCILIATIONS AND INTERNAL CONTROL (24 marks; 15 minutes) You are provided with three examples of reconciliations done by employees in the accounting department of Soweto Stationers. REQUIRED: Study the information provided and then answer the questions that follow. INFORMATION:

7 QUESTION 2 BANK RECONCILIATIONS (45 marks; 30 minutes) Information: 1. Bank Reconciliation Statement on 30 October Credit Balance according to Bank Statement 1351 Credit outstanding deposit 3240 Debit cheques not yet presented for payment: No No No Debit balance as per bank account Some totals from the Cash Journals on 30 November 2006: Cash Receipts Journal Bank R Sundry Accounts R Cash Payments Journal Bank R Debtor s Control R 230 Sundry Accounts R Additional Information: The Bank Statement showed a favourable balance of R3 200 on 30 November Cheque no. 090 was issued in favour of Meister Homes Committee on 30 May 2006 as a donation. It was decided to cancel this cheque and replace it with a new cheque (No. 220). No entries have been made. 3.3 Of the cheques outstanding during October, only cheque No. 199 was presented for payment. 4. When the Cash Journals and the Bank Reconciliation Statement were compared with the November Bank Statement, the following differences were noted. 4.1 The following items appeared only on the bank statement: Service fees, R48; levy, R7; cash deposit fee, R8; interest on credit balance, R25; commission on credit card sales, R Deposit of R A stop order for R1 000 representing the part payment on the mortgage loan to Ledzinski Investments. 4.4 Cheque no. 195 in favour of Costello Wholesalers was correctly made out for R789. However on the counterfoil it was shown as R879 and recorded in the Cash Payments Journal as such. The amount on the bank statement is correct. 4.5 A stop order in favour of Kelly Motors, being an instalment on a motor vehicle, R An unpaid cheque for R250 previously received from T Pfaff in settlement of her account of R265. The cheque was marked R/D- insufficient funds. 4.7 A deposit by a debtor, L Belgrove, for R2250. On investigation it was found that L Belgrove s account has been previously written off as irrecoverable. 4.8 An unpaid cheque for R390 previously received from T Law, a debtor, on 24 November in payment of his account. The cheque was returned by the bank on 30 November marked post-dated. 5. The following items did not appear on the Bank Statement: 5.1 Deposit on 30 November, R Cheque no. 210, R1766 Cheque no. 215, R1834

8 QUESTION 3 CREDITORS RECONCILIATIONS (11 marks; 15 minutes) EXTRACT FROM THE CREDITORS LEDGER Creditors Ledger of Green House LADA MUSIC SUPPLIERS Date Details FOL Debit Credit Balance 2013 Mar14 Invoice CJ Cheque 2007 CPJ Invoice CJ Interest on overdue account GJ You received the following statement from Lada Music Suppliers LADA MUSIC SUPPLIERS Account for: GREEN HOUSE 31 March 2013 Date Description R 14 March 2013 Invoice March 2013 Invoice March 2013 Interest Charged March 2013 Credit note C758 (170) Total Due Additional Information: 1. The payment made was only received after the month end. 2. The credit note was issued for goods returned. The business only received the credit note after month end and it was recorded in the April 2013 journal. 3. Invoice was correctly captured in the Creditors Journal 4. The correct interest was charged by Lada Music Suppliers due to late payment in the previous month. 5. Upon investigation it was found that the balance on the statement was calculated incorrectly.

9 MEMORANDUM QUESTION 1 RECONCILIATIONS AND INTERNAL CONTROL (24 marks; 15 minutes) 1.1 Briefly explain: What you understand by the term internal control. The procedures and divisions of duties in place in an accounting department to ensure that all assets are safeguarded Why it is important to apply this in a business. Essential to achieve profit objectives of the owners and to safeguard their investment Why preparing reconciliations is important for internal control. Comparisons are made to documents received from outside organisations, or to figures in other aspects of the books. If differences can be explained, then errors, omissions or fraud is minimised. (6) 1.2 According to the bank statement, does this business have a favourable bank balance or a bank overdraft? Provide a reason for your choice. Favourable in the bank s books it is a credit balance (i.e. the bank owes money to the business) (2) 1.3 Calculate the Bank balance in the ledger of Soweto Stationers on 29 February R5 500 State whether this a favourable or unfavourable balance. Unfavourable (3) 1.4 List FOUR steps you would follow when preparing a bank reconciliation statement. Tick off items that appear in the cash journals & bank statement Correct errors in cash journals Items which do not appear in the bank statement to be noted in the reconciliation Balance the bank account in the ledger after posting from updated journals Compare balance on ledger account to that of bank statement outstanding items are the difference Any four valid points mentioned (4) 1.5 When preparing the financial statements of Soweto Stationers at the end of February 2008, what amount would you reflect under cash & cash equivalents? R4 500 i.e. R better than answer to 1.3 (2) 1.6 Calculate the correct amount owed to Ace Wholesalers by Soweto Stationers. R = R (4) 1.7 Briefly explain what action should be taken over the difference of R1 900 in Example C. The accountant must search for an error in the general ledger or the creditors ledger and process the appropriate correction. All entries between the two should correspond. (3)

10 QUESTION 2 BANK RECONCILIATIONS (45 marks; 30 minutes) QUESTION 3 CREDITORS RECONCILIATIONS (11 marks; 15 minutes) CREDITORS RECONCILIATION STATEMENT FOR LADA MUSIC SUPPLIERS AS AT 31 MARH 2013 R Balance as per Creditor statement on 31 March Payment made on 20 March (7000) Invoice Balance as per Creditors Ledger on 31 March