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FNST-ICB Assignment 3-QP-2023 v1

Financial Statements (Institute of Certified Bookkeepers)

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Financial
Statements
(FNST)

ICB ASSIGNMENT 3

QUESTION PAPER

APR 2023 TO MAR 2024

THIS PAPER CONSISTS 1 ASSIGNMENT

ASSIGNMENT 3: 5 QUESTIONS

INSTRUCTIONS:

1. ICB Assignments form part of the formative mark and are to be completed in an open book environment.
2. This Question Paper Book contains all the questions for Assignment 3.
3. All questions are to be completed in the Assignment Answer Book.
4. Check that you have the correct number of pages.
5. Please be neat, as illegible handwriting cannot be marked. You must write in blue or black ink. In practice it is
unacceptable for Bookkeepers to use correcting fluid (Tipp-ex). Marks will be deducted for the use of correction fluid.
6. All questions must be completed.
7. This question paper must NOT be returned to the ICB. You must retain this Assignment Question Paper Book.
8. Upon completion of this Assignment, remember to submit (upload) this Assignment Answer Book into MACCI.

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

ASSIGNMENT 3

QUESTION 1 YEAR-END ACCOUNTING FOR A SOLE PROPRIETORSHIP

The following pre-adjustment trial balance appeared in the books of Aura Lighting at the end of their financial
year. Ignore VAT.

Pre adjustment trial balance of Aura Lighting on 30 June 2020

Debit (R) Credit (R)
Balance sheet section
Capital - 1 July 2019 950 000.00
Drawings 4 750.00
Land & buildings 1 282 500.00
Equipment 427 500.00
Computer equipment 85 500.00
Accumulated depreciation: Equipment - 1 July 2019 64 125.00
Accumulated depreciation: Computer equipment - 1 July 2019 8 550.00
Allan Gray Unit Trusts 114 000.00
Bank 24 700.00
Debtors control 42 750.00
Allowance for credit losses - 1 July 2019 2 137.50
Allowance for settlement discounts granted - 1 July 2019 513.00
Petty cash 5 225.00
Trading inventory 26 125.00
Bank loan 475 000.00
Creditors control 50 350.00
Cash float 12 825.00
Rent deposit 53 960.00
Credit card account 136 325.00
SARS (UIF/SDL/PAYE) 15 675.00
Nominal accounts section
Sales 1 752 845.00
Sales returns 77 235.00
Purchases 1 100 992.05
Purchases returns 81 320.00
Commission income 106 875.00
Interest on Unit trusts 11 400.00
Service income 71 848.50
Interest on debtors’ accounts 6 175.00
Credit losses recovered 7 125.00
Rates & services 24 510.00
Credit losses 11 590.00
Staff training 20 330.00
Stationary consumables 2 375.00
Packing materials 14 250.00
Carriage inwards 12 996.00
Insurance 19 000.00
Travel & accommodation 12 825.00
Interest on creditors accounts 8 265.00
Internet expenditure 2 375.00
Fuel expense 255 075.00
Rent expenditure 53 979.95
Wages & salaries 44 631.00
3 740 264.00 3 740 264.00

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

Additional information and adjustments as at 30 June 2020:

i. Provide for depreciation as follows:

• On Equipment: 15.00% per annum on cost. Note that new equipment costing R162 450.00 was
bought on 1 April 2020. This has been properly recorded.
• On Computer equipment: 10.00% per annum on the reducing balance method.
ii. A debtor, L Stewart, who owed R1 923.75 has been declared insolvent. The business received 69 cents in
the rand from the insolvent estate. This transaction must still be recorded. Write the rest of the debt off as
irrecoverable.
iii. An allowance for credit losses of 5.00% of trade receivables should be maintained. Adjust the allowance for
settlement discounts granted to 3.00% of good book debtors.
iv. R605.15 has been recovered in cash from a debtor whose account had previously been written off as
irrecoverable. No entry has been made as yet.
v. The Rates & services expenditure for June 2020 has not yet been paid, R2 228.18.
vi. Insurance expense for July 2020 has been prepaid, R1 461.54.
vii. Commission income has not been received for June 2020, R9 715.91.
viii. The Service income for July 2020 has been received already, R5 526.81.
ix. An invoice for R6 875.00 has been received from Rosebud Hotel for Travel & accommodation. This
transaction has not yet been recorded.
x. An amount of R8 765.89 was paid to Atlantic Rail for delivery (by rail) of trading inventory to the business.
This was debited to the Staff training account in error which has not yet been corrected. The trading
inventory to which the railage relates has not yet been sold.
xi. The owner took trading inventory for personal use. The selling price was R6 381.24 (VAT is not applicable).
The mark up is 65.00% on cost price. The transaction must still be processed.
xii. The stock take revealed the following items on hand:
• Trading inventory - R27 610.89
• Stationary consumables - R1 235.00
• Packing materials - R7 837.50
xiii. Provide for the interest on the Bank loan. Interest is calculated at 7.00% per annum. The liability was
increased by R142 500.00 on 1 June 2020. There were no other additional loans or repayments during the
financial year, but twelve end-of month instalments of R4 354.17 each are due to be repaid on the loan,
starting at the end of July 2020.

Note: The owner made no further capital contributions during the year in question.

Required:

1.1. Journalise the adjustments. The subsidiary journals have been closed off already, so all additional
transactions are recorded in the general journal. No journal narrations or folio numbers are required.
1.2. Prepare the income statement for the year ended 30 June 2020.
1.3. Draft the statement of financial position as at 30 June 2020.
1.4. Prepare the notes to the financial statements.

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

QUESTION 2 STATEMENT OF CASH FLOWS

The following is an extract from the financial statements of AquaLand Gear (Pty) Ltd for the year ended 30
September 2020:

Statements of financial position of AquaLand Gear (Pty) Ltd on 30 September

2020 (R) 2019 (R)
Assets
Non-current assets
Property 6 187 500.00 4 125 000.00
Office equipment 804 478.13 945 037.50
Cost 1 112 512.50 1 196 250.00
Less: Accumulated depreciation on Office equipment 308 034.37 251 212.50
Available-for-sale financial assets: SA Unit Trusts 382 387.50 371 250.00
7 374 365.63 5 441 287.50

Current assets 2 886 286.48 2 433 750.00

Inventories 668 250.00 742 500.00
Trade and other receivables 705 375.00 783 750.00
Cash and cash equivalents 1 512 661.48 907 500.00

Total assets 10 260 652.11 7 875 037.50

Equity and liabilities

Capital and reserves 8 692 074.54 6 187 173.53
Ordinary shares of R4.70 each 4 991 250.00 4 537 500.00
Share premium 393 525.00 371 250.00
Replacement reserve 515 625.00 515 625.00
Retained earnings 2 791 674.54 762 798.53
Non-current liabilities
Bank loan (7.00% p.a.) 606 375.00 618 750.00
Current liabilities 962 202.57 1 069 113.97
Trade creditors 779 625.00 866 250.00
Taxation payable 169 624.43 188 471.59
Shareholders for dividends 12 953.14 14 392.38

Total equity and liabilities 10 260 652.11 7 875 037.50

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

Calculation of retained earnings for the year ended 30 September 2020

Line item Amount (R)

Sales 9 075 000.00

Cost of sales 2 904 000.00
Dividends Income on Unit Trusts 136 125.00
Depreciation (on all Office equipment) 119 625.00
Interest paid 61 875.00
Profit on sale of Office equipment 4 725.19
Net profit before tax 2 954 100.19
Taxation expense 856 689.06
Dividends expense 68 535.12
Retained income for the year 2 028 876.01

Additional information:

i. During the year Office equipment with a cost of R299 062.50 and Accumulated depreciation to the date of
sale of R62 803.13 was sold for R240 984.56. There were no other disposals of non-current assets.
ii. Cash and cash equivalents on 30 September 2020 comprised: Current account of R1 285 762.26, 30-day
Money Market account of R90 759.69 and Petty cash of R136 139.53. Cash and cash equivalents on 30
September 2019 comprised: Current account of R789 525.00, 30-day Money Market account of R72 600.00
and Petty cash of R45 375.00.
iii. There were no accruals or prepayments for the financial year-end.

Required:

Follow the six steps outlined in your answer book to prepare the Statement of cash flows with applicable notes of
AquaLand Gear (Pty) Ltd for the year ended 30 September 2020. Note: Ignore VAT.

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

QUESTION 3 DEPARTMENTAL ACCOUNTS

You are provided with the list of accounts of Ntsiki International for the year ended 30 July 2020.

List of accounts of Ntsiki International for the year ended 30 July 2020
Account Fol. Debit (R) Credit (R)
Balance sheet section
Capital B1 825 447.82
Drawings B2 41 995.00
Property B3 315 596.00
Motor Vehicles B4 356 318.00
Trading inventory (1 August 2019) :Marketing & advertising B5 129 801.00
:Customer services B6 71 264.00
Nominal accounts section
Sales :Marketing & advertising N1 837 155.00
:Customer services N2 397 421.00
Purchases :Marketing & advertising N3 363 189.00
:Customer services N4 189 485.00
Carriage on Purchases :Marketing & advertising N5 38 177.00
:Customer services N6 22 143.00
Import duties :Marketing & advertising N7 5 727.00
:Customer services N8 3 436.00
Wages & salaries N9 59 810.00
Security N10 366 498.00
Insurance N11 16 607.00
Bank charges N12 4 759.00
Credit losses N13 23 606.00
Office consumables N14 5 421.00
Water & electricity N15 9 544.00
Settlement discount received N16 891.00
Settlement discount granted N17 509.00
Depreciation N18 35 950.00
Interest expense N19 1 079.82
2 060 914.82 2 060 914.82

Additional information:

According to a physical stock-taking on 30 July 2020, the following stock was on hand:

Marketing & advertising: R141 000.00

Customer services: R244 459.00

Required:

Prepare the departmental trading statement for Ntsiki International for the year ended 30 July

2020.

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

QUESTION 4 CLUB ACCOUNTS

The following information relates to Sporting Chance for the year ended 30 September 2020:

Details Amount

Capital fund R685 000.00

Land and buildings R585 630.21
Computer equipment R77 062.50
Accumulated depreciation: Computer equipment R51 375.00
Savings account R38 803.24
Current accounts (credit balance) R11 834.07
Stationery on hand R1 623.62
Accrued expenses (Insurance expense) R1 233.00
Prepaid expenses (Fuel expense) R3 356.50

Balances in the books of Sporting Chance as at 1 October 2019:

• Accrued income (Membership fees) R52 080.00

• Income received in advance (Membership fees) R9 114.00

Stipulations of the club’s constitution:

i. Each new member to the club has to pay an entrance fee of R558.00. 61.00% of this amount is to be treated
as current income and the other 39.00% must be capitalised.
ii. The club’s membership fees are R434.00 per annum. The amount is payable on or before the 15 November
of the following year. If by this time, the membership fees have not been paid, then the amount is to be
written off and the members name removed from the register of members.

Summary of transactions for the year ended 30 September 2020:

i. 34 new members joined the club. They all paid their entrance fees and membership fees in full.
ii. Membership fees:
• 14 members whose fees were due on the 1 October 2019 paid the amount.
• 73 members paid their fees for the current year (this amount includes the new members).
• 12 members paid their fees for the following year.
• 8 members did not pay their fees for the current year.

Required:

Prepare the membership fees account of Sporting Chance for the year ending 30 September 2020. Also show
the necessary reversals to be made in the account on 1 October 2020.

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FINANCIAL STATEMENTS (FNST)

ICB ASSIGNMENT 3 QUESTION PAPER - APR 2023 TO MAR 2024

QUESTION 5 INCOMPLETE RECORDS

The owner of Surfs Up requested you to calculate the net profit for the year ended 30 November 2020 on the
basis of the following data:

• His assets and liabilities at the beginning of the period were as follows:

Equipment (carrying value) R65 080

Vehicles (carrying value) 104 220
Trading inventory 165 410
Cash in bank 42 750
Debtors 39 740
Creditors 7 460
Loan: Pulin Bank (12.00%) 71 000

• His bank statement showed a credit balance of R48 010 as at 30 November 2020, but a cheque for R6 420
had not yet been brought into account by the bank.
• All cash received had been deposited, except for R520 that was being kept as petty cash.
• A stock-take at cost on 30 November 2020 showed that inventory was valued at R222 610.
• The outstanding debtors and creditors on 30 November 2020 amounted to R44 800 and R21 250
respectively.
• From the cancelled cheques, it was clear that he had purchased equipment of R5 150 during the year.
• Depreciation of R2 080 and R4 260 respectively on equipment and vehicles had to be written off.
• The owner had taken R48 620 in cash for personal use during the year ended 30 November 2020.
• R19 400 was paid off on the loan during the year.
• The owner inherited R71 000 and paid this into the current account of the business on 1 July 2020.

Required:

5.1. Calculate the total for Owner’s equity of Surfs Up as at 30 November 2020.
5.2. Draft the Statement of financial position of Surfs Up as at 30 November 2020.

Note: No notes to the financial statements are required.

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