Aufgabe 0.2: Exercise on Subsidiary Ledgers SITTEN (Pty) Ltd. is a production firm and service provider. The company is birthday cake-on-demand bakery. The company is established as sole trader. The owner HaJo Sitten deposits 20,000.00 EUR in the company s bank account on 2.01.20X5. On 3.04.20X5 SITTEN Ltd. buys from their supplier BAKERY SUPPORT a mixer at 2,000.00 EUR and baking equipment for 1,000.00 EUR. Ignore VAT for this task. The payment is agreed to be due in 6 months. The mixer has got a useful life to be 4 years. The equipment lasts normally 2 years which is considered being the useful life. Depreciate the items of property, plant, and equipment be straight line method and do not consider a residual value. On 1.10.20X5 SITTEN pays the amount due to the supplier BAKERY SUPPORT Ltd. per bank transfer. On 1.07.20X5 SITTEN buys a stove from the supplier OVEN SERVICE Ltd. at 6,500.00 EUR The stove is paid to an extent of 1,500.00 EUR on cash the remaining portion is due in the next accounting period. SITTEN plans to use the stove until 31.12.20Y1. There won t be a residual value obtained by the stove then. Use straight line method for depreciation. The bakery SITTEN orders flour, sugar, eggs, yeast, icing cream, and raising powder from their supplier SWEETS DELIVERY for 8,500.00 EUR on 3.07.20X5. SITTEN is going to pay half of the amount directly per bank transfer the remaining portion in the next accounting period. By baking cakes (on 30.09.20X5) ingredients to the extent of 6,300.00 EUR are finished up. The remaining amount stays on stock. Make a bookkeeping entry in the expense account Materials. On 2.10.20X5 SITTEN sells birthday cakes for 13,400.00 EUR on cash. It is assumed that a lot of peoples birthday party is on that day. Do not make inventory movement bookkeeping entries with regard to finished goods (cakes). Assume all cakes baked are sold. Required: Make entries for the above activities in T-accounts. Make use of a purchase/acquisition ledger and an asset management. Prepare financial statements (balance sheet and income statement) as at 31.12.20X5. Prepare a register of non-current assets also. Assume HaJo Sitten s personal income tax rate amounts to 24 %. Solution: (1) Establishment of the business on 2.01.20X5 DR Cash/Bank... 20,000.00 EUR CR Owner s Equity... 20,000.00 EUR (2) Acquisition of the mixer on 2.04.20X5 DR P; P; E - Mixer... CR A/P BAKERY SUPPORT... 2,000.00 EUR 2,000.00 EUR 1
(3) Acquisition of the bakery equipment on 2.04.20X5 DR P, P, E - Equipment... CR A/P BAKERY SUPPORT... 1,000.00 EUR 1,000.00 EUR (4) Depreciation on the mixer on 31.12.20X5 at (9/12) x 2,000/4 = DR Depreciation... CR Acc. Depr. - Mixer... (5) Depreciation on the equipment on 31.12.20X5 at (9/12) x 1,000/2 = DR Depreciation... CR Acc. Depr. - Equipment... (6) Payment of the amount owed BAKERY SUPPORT Ltd. on 1.10.20X5. The amount due is 2,000 + 1,000 = 3,000.00 EUR. DR A/P BAKERY SUPPORT... CR Cash/Bank... 3,000.00 EUR 3,000.00 EUR (7) Acquisition of the stove on 1.07.20X5 DR P; P; E - Stove... CR Cash/Bank... CR A/P OVEN SERVICE... 6,500.00 EUR 1,500.00 EUR 5,000.00 EUR (8) Depreciation on the stove on 31.12.20X5 at 0.5 x (6,500/6.5) = 500.00 EUR DR Depreciation... 500.00 EUR CR Acc. Depr. - Stove... 500.00 EUR (9) Purchase of cake ingredients on 3.07.20X5 at an amount of 8,500.00 EUR. DR Inventory... 8,500.00 EUR CR Cash/Bank... 4,250.00 EUR CR A/P SWEETS DELIVERY... 4,250.00 EUR (10) Use of cake ingredients from stock on 30.09.20X5 considered by the Material Expenses account. DR Material Expenses... 6,300.00 EUR CR Inventory... 6,300.00 EUR (11) Sales of cakes at 13,400.00 EUR on 2.10.20X5 DR Cash/Bank... 13,400.00 EUR CR Sales... 13,400.00 EUR 2
Observe the accounts and the profit calculation therein. D Cash/Bank C D Owner's equity C (1) 20,000.00 (6) 3,000.00 c/d 20,000.00 (1) 20,000.00 (11) 13,400.00 (7) 1,500.00 b/d 20,000.00 (9) 4,250.00 c/d 24,650.00 33,400.00 33,400.00 b/d 24,650.00 D P, P, E - mixer C D P, P, E - equipment C (2) 2,000.00 c/d 2,000.00 (3) 1,000.00 c/d 1,000.00 b/d 2,000.00 b/d 1,000.00 D A/P BAKERY SUPPORT C D Depreciation C (6) 3,000.00 (2) 2,000.00 (4) 375.00 (3) 1,000.00 (5) 375.00 3,000.00 3,000.00 (8) 500.00 c/d 1,250.00 1,250.00 1,250.00 b/d 1,250.00 P&L 1,250.00 D Accumulated depr on mixer C D Accumulated depr on equipment C c/d 375.00 (4) 375.00 c/d 375.00 (5) 375.00 b/d 375.00 b/d 375.00 D P, P, E - stove C D A/P - OVEN SERVICE C (7) 6,500.00 c/d 6,500.00 c/d 5,000.00 (7) 5,000.00 b/d 6,500.00 b/d 5,000.00 D Accumulated depr on stove C D Inventory C c/d 500.00 (8) 500.00 (9) 8,500.00 (10) 6,300.00 b/d 500.00 c/d 2,200.00 8,500.00 8,500.00 b/d 2,200.00 D A/P - SWEETS DELIVERY C D Material expenses C c/d 4,250.00 (9) 4,250.00 (10) 6,300.00 c/d 6,300.00 b/d 4,250.00 b/d 6,300.00 P&L 6,300.00 Exhibit 1: SITTEN s accounts 3
D Sales C D Profit and Loss C c/d 13,400.00 (11) 13,400.00 Mat exp 6,300.00 Sales 13,400.00 P&L 13,400.00 b/d 13,400.00 Depr 1,250.00 EBT c/d 5,850.00 13,400.00 13,400.00 Tax 1,404.00 b/d 5,850.00 R/E 4,446.00 5,850.00 5,850.00 D Income tax liabilities C D Retained earnings (R/E) C c/d 1,404.00 P&L 1,404.00 c/d 4,446.00 P&L 4,446.00 b/d 1,404.00 b/d 4,446.00 Exhibit 1: SITTEN s accounts (continued) The register of non-current assets is displayed in exhibit 2: Asset Cost of acquisition Acc. depr. Acc. impairm. losses Carrying amount mixer 2,000.00 (375.00) 0.00 1,625.00 equipment 1,000.00 (375.00) 0.00 625.00 stove 6,500.00 (500.00) 0.00 6,000.00 8,250.00 See the financial statements as below: REGISTER of NON-CURRENT ASSETS as at 31.12.20X5 Exhibit 2: SITTEN s register of non-current assets 4
STATEMENT of COMPREHENSIVE INCOME for the year ended 31.12.20X5 [EUR] Revenue 13,400.00 Other income 0.00 13,400.00 Materials 6,300.00 Labour 0.00 Depreciation 1,250.00 Other expenses 0.00 Earnings before int and taxes (EBIT) 5,850.00 Interest 0.00 Earnings before taxes (EBT) 5,850.00 Income tax expenses 1,404.00 Deferred taxes Earnings after taxes (EAT) 4,446.00 Exhibit 3: SITTEN s statement of comprehensive income STATEMENT of FINANCIAL POSITION as at 31.12.20X5 A Non-current assets [EUR] Owners' capital [EUR] P, P, E 8,250.00 Share capital 20,000.00 Intangibles Reserves Financial assets R/E 4,446.00 C, L Current assets Liabilities Inventory 2,200.00 Interest bear liab A/R A/P 9,250.00 Prepaid expenses Provisions Cash/Bank 24,650.00 Tax liabilities 1,404.00 35,100.00 35,100.00 Exhibit 4: SITTEN s statement of financial position 5