Index A Accounts balancing... 61 incomplete records... 369 Accounting balancing an account... 61 basic accounting equation... 27 cycle... 130 definition... 4, 13 developments... 5 domains... 14 function... 6 history... 5 6 process... 13 study of... 5 tax liabilities... 97 Accrued expenses... 123 Accrued income... 119 Adjustments consumables... 116 credit losses... 118 purpose of... 112 recording... 114 Allowances... 144, 209 Assembling costs... 144 Asset accounts... 55 Assets... 11 affect of transactions... 53 classification... 253 costs incurred after acquisition... 256 257 current... 24 definition... 24, 285 in financial statements... 11, 277 intangible... 253, 285 internal control... 274 measurement... 288 natural resources... 255 nature of... 252 non-current... 24 sale of... 268 Assets (continued) scrapping or disposal... 265 trading-in... 271 Auditing Profession Act 26 of 2005... 6 B Balancing an account... 61 trial balance... 65 Bank accounts... 169 172 balances... 174, 180 credit memos... 173 debit memos... 173 interest... 180 opening of... 169 Bank charges... 179 Bank reconciliations... 181 185 Bank statements... 172 173 Basic accounting equation... 27, 47 effect of transactions on... 47 Borrowings... 314 C Cash and cash equivalents... 163 definition... 166 internal control... 167 169 measurement and disclosure... 194 Cash equivalents... 12 Cash flows... 12 Cash payments journal... 82 Cash receipts journal... 75 Cheques... 172 damaged... 187 lost... 187 outdated... 187 petty cash... 191 referred to drawer (dishonoured)... 186 Closing entries... 130, 137 Closing inventory... 145 Closing-off procedures service entity... 130 385
386 About Financial Accounting: Volume 1 Closing-off procedures (continued) trading entity... 137 Column headings... 76 Comparability financial information... 16 Consumable inventory on hand... 116 Costs assembling... 144 current... 18 historical... 18 mark-up... 139 transport... 144 Cost of sales... 137 Credit cards... 223 debtors... 222 terms... 200 transactions... 200 Credit journals... 87 Credit losses allowance for... 208 measurement of debtors... 207 recording of... 209 recovery of... 219 tax liability... 220 writing off... 215 Creditors, internal control... 306 Creditors control account... 300 Current bank accounts... 169 Current liabilities accrued expenses... 305 disclosure... 300 long-term borrowings... 305 measurement... 299 recognition... 299 VAT payable... 305 D Debentures... 319 Debit orders... 180 Debtors control account... 224 credit balance... 222 disclosure in financial statements... 222 internal control of... 223 measurement of... 207 Deposits... 170 171, 181 Depreciation... 114 calculation of... 260 Depreciation (continued) definitions... 257 income tax... 274 land and buildings... 265 methods... 273 necessity of... 258 recording of... 260 Discounts... 144 settlement... 200, 205, 304 tax liability... 201 terms... 200 Dishonoured cheques... 186 Double-entry system... 27, 384 E Electronic data transfer... 172 Entities definition... 7, 130 Equity... 11 affect of transactions... 54 definition... 26 influence of loss... 37 influence of profit... 37 statement of changes... 135, 331 Equity accounts... 55 Equity statements... 11 Errors not revealed by trial balance... 66 revealed by trial balance... 66 tracing errors... 67 Estimated profit or loss... 371 Expense accounts... 56 Expenses accrued... 123, 305 definition... 36 prepaid... 123 F Financial accounting... 14 Financial assets categories... 287 definitions... 288 measurement... 288 recording and disclosure of... 288 Financial information... 4, 8, 14 comparability... 16 relevance... 326 users of... 9
Index 387 Financial instruments categories... 287 definitions... 286 equity instrument... 286 financial liability... 287 investments... 289 Financial performance... 10, 35 43 Financial period... 24 Financial position... 11, 28 32, 136 Financial statements assets... 11, 277 cash... 194 characteristics... 15 17 disclosure of debtors... 222 elements of... 17 19, 24, 328 financial position... 11, 29, 136, 328, 355 information in... 16, 326 objectives... 10, 15, 24 quality of... 15 16 relevance of... 15, 326 timeliness... 17, 327 trading entity, of... 148 Financial statements of sole proprietors notes... 331 purpose and composition... 326 statement of changes in equity... 331 statement of financial position... 328 statement of profit or loss... 330 First in first out... 240 Folio columns... 78 G General journal... 93 General ledger... 54, 74 Going concern assumption... 14, 326 Gross profit... 147 I Import duties... 144 Imprest system... 191 Income accounts... 56 accrued... 119, 344 definition... 36 received in advance... 119, 121 statement of profit or loss... 330 Incomplete records... 371 Input tax... 96 Intangible assets... 253, 256 Interest... 180, 181 International Accounting Standards Board... 4 Inventory cost of... 238, 240 disclosure... 241 first in first out... 239 measurement of... 237 nature of... 236 systems... 88, 138, 141 valuing... 239, 245 investments... 289, 291 L Land... 253 depreciation... 265 Ledger accounts... 54 Legal ownership... 252 Liabilities... 25 affect of transactions... 53, 54 Liability accounts... 55 Liquidity... 166 Loss accounts... 131 Losses definition... 36 estimated loss... 371 measurement of debtors... 207 statement of... 38 M Management accounting... 14 Mark-up... 139, 147 Membership non-profit entities... 344 Mortgages... 314 N Natural resources... 255 Net realisable value... 241 Nominal accounts... 131 Non-cash transactions... 77 Non-current assets... 253, 254, 283 depreciation... 258 internal control... 274 purchase of... 253 Non-current liabilities... 26, 311 Non-expendable funds... 352
388 About Financial Accounting: Volume 1 Non-profit entities characteristics... 342 financial reporting... 354 income, sources of... 344, 347, 348 membership... 344 O Output tax... 97 Ownership legal... 252 P Periodic inventory system... 88, 141, 145 Perpetual inventory system... 88, 138, 145 Petty cash... 191 cheques... 191 imprest system... 191 Petty cash journal... 191 192 Posting... 74 Prepaid expenses... 123 Profit accounts... 131 definition... 10 determination... 137 estimated profit... 371 gross... 147 influence on equities... 37 statement of... 10, 36 40 Property, plant and equipment See also assets... 249 251 Provisions... 306 Purchases account... 141 Purchases journal... 87, 300 design of... 88 objective... 87 Purchases returns journal... 89, 144, 301 R Recognition of current liabilities... 299 Reconciliation procedure... 175 statements... 174 Recovery of credit losses... 219 Residual value... 259 Revenue examples of... 36 S Sales cost of... 137 Sales (continued) of assets... 268, 270 Sales journal design of... 91 objective of... 91 Sales returns journal... 91 Scrapping of assets... 265 Service entity closing procedure... 130 profit or loss account... 131 statement of changes in equity... 135 statement of financial position... 136 statement of profit or loss and other comprehensive income... 134 Services Settlement discounts... 89, 144, 304 Shares... 291 adjustments... 292 Source documents... 54, 74 South African Institute of Chartered Accountants... 4 Statement of assets and liabilities... 373 Statement of cash flows... 13 Statement of changes in equity.. 11, 135, 355 Statement of financial position... 11, 135 Statement of income and expenditure... 355 Statement of profit or loss... 10, 38 40 Stop orders... 180 Subsidiary journals design and use of... 74 purpose of... 74 Supply T Tax liabilities... 96, 201, 220, 305 accounting procedures... 97 depreciation... 274 Taxable supplies Temporary accounts... 131 Timeliness... 17 Trade discounts... 88 Trading entity closing procedure... 137 cost of sales... 137 financial statements... 148 gross profit percentage... 147
Index 389 Trading entity (continued) statement of changes in equity... 135 statement of financial position... 136 Transport costs... 144 Trial balance... 65 errors... 66 67 Trial balance (continued) post-adjustment... 126 Transactions asset accounts... 53 effect on basic accounting equation... 47 ledger accounts... 54 recording of... 47 61 V Value... 18 Value-Added Tax Act 89 of 1991... 94 VAT... 94, 201, 220, 221, 305 Vendor W Writing off credit losses... 118, 215 recovery of losses... 219