section a: revision video questions ratio analysis: sole...

ICB Financial Statements Playlist Handbook

1

SECTION A: REVISION VIDEO QUESTIONS

Ratio analysis: sole proprietorship

The following financial information relates to Hariffe Supplies at the end of their financial year:

Extract from the general ledger:

Trading account F1

Date Details Fol. Amount Date Details Fol. Amount

20.9 20.9

March 31 Cost of sales GJ12 434 687.52 March 31 Sales GJ12 905 599.00

Profit and loss GJ12 470 911.48

905 599.00 905 599.00

Profit and loss account F2

Date Details Fol. Amount Date Details Fol. Amount

20.9 20.9

March 31 Depreciation GJ12 29 431.97 March 31 Trading account GJ12 470 911.48

Rates and services GJ12 16 753.58 Services rendered GJ12 13 583.99

Internet expense GJ12 16 789.81 Dividend income GJ12 11 138.87

Packaging GJ12 8 059.83

Wages and salaries GJ12 48 902.35

Security expense GJ12 6 791.99

Stationery GJ12 2 897.92

Settlement discount granted GJ12 7 063.67

Credit losses GJ12 10 957.75

Entertainment GJ12 8 603.19

Capital (Net profit) GJ12 339 382.28

495 634.34 495 634.34

Section A: Revision Video Questions

2

Statement of financial position of Hariffe Supplies on 31 March 20.9

R R R

Assets Cost price Accumulated depreciation

Carrying value

Non-current assets

Land and buildings 860 319.05 - 860 319.05

Office machinery 597 695.34 161 377.74 436 317.60

1 458 014.39 161 377.74 1 296 636.65

Available-for-sale financial asset: R 5 Ordinary shares (Nashies Ltd) 99 615.89

1 396 252.54

Current assets 103 238.29

Trading inventories 49 807.95

Trade receivables 31 695.97

Cash and cash equivalents 21 734.38

Total assets 1 499 490.82

Owner’s equity and liabilities

Owner's equity 1 403 497.33

Capital 1 104 867.01

Plus: Net profit 339 382.28

Less: Drawings (40 751.96)

Non-current liabilities 58 863.94

Mortgage loan: French Mortgage 58 863.94

Current liabilities 37 129.56

Trade payables 20 828.78

Anex credit card 16 300.78

Total equity and liabilities 1 499 490.82

Additional information:

No capital contributions were made during the year.

Assume a 365 day year. 75 % of all sales are on credit.

Purchases constitutes 60 % of cost of sales

60 % of all purchases are on credit.

Net trade debtors balance on 1 April 20.8 was R 30 111.17.

Net trade creditors balance on 1 April 20.8 was R 21 037.06.

Trade inventory on hand as at 1 April 20.8 was R 50 804.10.

Required:

Calculate the following ratios for the year ended 31 March 20.9 and comment on the business’s

profitability and liquidity. Refer in particular to the past figures shown in your answer template. Please

note that one point will be allocated for every formula quoted.

Gross profit percentage

Net profit percentage

Return on average owner’s equity

Note: The industry averages and previous year-end ratios are provided in your answer book.


3

Answer template:

Name of ratio: Comparative figures: Ratio for the years ended 31 March ….

Gross profit percentage

The average gross margin for the industry is 55.00%

20.9 20.8 20.7

(calculated) (given) (given)

Formula:

55.00% 65.00%

Calculation:

Comments:


Net profit percentage

The average net margin for the industry is 48.00%

20.9 20.8 201.7


Formula:

42.00% 58.00%

Calculation:

Comments:


4


Return on average owner's equity

The return on average owner's equity for the industry is 65.00%

20.9 20.8 201.7


Formula:

58.00% 65.00%

Calculation:

Comments:


5

Asset disposal

The following information was taken from the books of Jepson Traders. The two items of office

machinery featured in the asset register is the only Office Machinery owned by the firm during its

existence.

Jepson Traders: Asset register

General ledger account: Office machinery B5 - Asset 1 Page 1

Date purchased: 01 January 20.9 Date

Current depreciation

Accumulated depreciation

Make and reg. B4 Shaper (ASA3698)

Purchased from: Cluster CC (Credit) 20.9/01/31 1 815.92 1 815.92

Cost price: R 155 650.00 20.10/01/31 21 536.77 23 352.69

Rate of depreciation: 14.00% p.a. according to the Reducing balance method

20.11/01/31 18 521.62 41 874.31

Sold to: Libby (Pty) Ltd 20.12/01/31 15 928.60 57 802.91

Type of sale: Cash 20.13/01/31 ? ?

Date sold: 31 January 20.13

Selling price: R 82 465.53

General ledger account: Office machinery B5 - Asset 2 Page 2

Date purchased: 01 November 20.12 Date

Current depreciation


Make and reg. B3 Shaper (ASA4589)

Purchased from: Bintins Traders (Cash) 20.13/01/31 ? ?

Cost price: R 74 569.00

Rate of depreciation: 14.00% p.a. according to the Reducing balance method

Sold to:

Type of sale:

Date sold:

Selling price:

Required:

Draw up the following accounts in the general ledger of Jepson Traders for the financial year ended 31

January 20.13 ONLY. Start with the opening balances for the 20.13 financial year. Make all necessary

entries including the closing transfers for the 20.13 financial year and balance the accounts at the end

of the month. Ignore VAT.

Office machinery - B5

Accumulated depreciation: Office machinery - B6

Depreciation - N20

Asset disposal - N22

Profit / loss on sale of Office machinery - N23


6

Answer template:

General ledger of


7


8

Year-end accounting for sole proprietorship – Perpetual

The following pre-adjustment trial balance appeared in the books of Lester & Venter at the end of their

financial year. Ignore VAT.

Pre-adjustment trial balance of Lester & Venter for the year ended 31 May 2011

Folio Debit (R) Credit (R)

Balance sheet section

Capital – 1 June 2010 B1 105 000.00

Drawings B2 525.00

Property B3 141 750.00

Office machinery B4 47 250.00

Computer equipment B5 49 350.00

Accumulated depreciation: Office machinery – 1 June 2010 B6 7 087.50

Accumulated depreciation: Computer equipment – 1 June 2010 B7 9 870.00

Fixed deposit (maturing on 30 September 2012) B8 12 600.00

Bank B9 2 730.00

Debtors control B10 4 725.00

Allowance for credit losses – 1 June 2010 B11 236.25

Allowance for settlement discount granted – 1 June 2010 B12 56.70

Petty cash B13 577.50

Trading inventory B14 2 887.50

Bank loan B15 52 500.00

Creditors control B16 5 565.00

Cash float B17 1 417.50

Rent deposit B18 472.50

Credit card account B19 15 067.50

SARS (UIF/SDL/PAYE) B20 3 832.50

Nominal accounts

Sales N1 193 735.50

Sales returns N2 8 536.50

Cost of sales N3 76 963.84

Rent income N4 11 812.50

Interest income N5 1 260.00

Service income N6 7 941.15

Interest on debtors accounts N7 892.50

Credit losses recovered N8 787.50


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Telephone and fax N9 3 759.00

Credit losses N10 1 281.00

Travel and accommodation N11 3 717.00

Printer consumables N12 1 312.50

Packing materials N13 2 478.00

Repairs and maintenance N14 2 823.45

Rates and services N15 1 417.50

Interest on creditors accounts N16 913.50

Internet expenditure N17 9 065.70

Wages and salaries N18 28 192.50

Entertainment expenditure N19 5 966.21

Fuel N20 4 932.90

415 644.60 415 644.60

Additional information and adjustments as at 31 May 2011:

1. Provide for depreciation as follows:

On office machinery: 15 % per annum on cost. Note that new office machinery costing

R 25 000.00, was bought on April 1, 2011. This has been properly recorded.

On computer equipment: 20 % per annum on the reducing balance method.

2. A debtor, Trekstor Traders, who owed R 212.63, has been declared insolvent. The business

received 81 cents in the rand from the debtor’s insolvent estate. This transaction must still be

recorded. Write the rest of the debt off as irrecoverable.

3. An allowance for credit losses of 3 % of trade receivables should be maintained. Adjust the

allowance for settlement discount granted to 6 % of good book debtors.

4. R 66.89 has been recovered in cash from a debtor whose account had previously been written off

as irrecoverable. No entry has been made as yet.

5. The telephone and fax account for May 2011 has not yet been paid, R 341.73.

6. Repairs and maintenance for June 2011 has been prepaid, R 217.19.

7. Rent income for May 2011 has not been received as yet, R 1 073.86.

8. The service income for June 2011 has been received already, R 610.86.

9. An invoice for R 850.00 has been received from Zwelini Municipality for Rates and services. This

transaction has not yet been recorded.

10. An amount of R 3 050.00 was paid to Zebeleng Travels for delivery (by rail) of trading inventory to

the business. This was debited to the Travel and accommodation account in error which has not

yet been corrected. The trading inventory to which the railage relates has not yet been sold.

11. The owner took trading inventory for personal use. The selling price was R 11 923.08 (VAT is not

applicable). The mark-up is 65 % on the selling price. The transaction must still be processed.

12. The stock-take revealed the following items on hand:

Trading inventory – R 1 613.13

Printer consumables – R 682.50

Packing materials – R 1 362.90


10

13. Provide for the interest on the bank loan. Interest is calculated at 10 % per annum. The liability

was increased by R 22 000.00 on May 1, 2011. There were no other additional loans or

repayments during the financial year, but twelve end-of-month instalments of R 481.25 each are

due to be repaid on the loan, starting at the end of June 2011.

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

(a) 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.

(b) Prepare the income statement for the year ended 31 May 2011.

(c) Draft the statement of financial position as at 31 May 2011.

(d) Prepare the notes to the financial statements.


11

Answer template:

General journal of


12


13

Income statement of

Notes R R


14

Notes R R


15

Statement of financial position of

Notes R R


16

Notes to the financial statements 1. Interest income

2. Interest expense

3. Property, plant and equipment

Total


17

4. Available-for-sale financial assets

5. Inventories

6. Trade and other receivables

7. Cash and cash equivalents


18

8. Owner's equity

9. Long-term borrowings

10. Trade and other payables


19

Year-end accounting for a sole proprietorship – Periodic

The following pre-adjustment trial balance appeared in the books of Avalon Suppliers at the end of their

financial year. Ignore VAT.

List of accounts of Avalon Suppliers for the year ended 30 April 20.12

Account Fol. Balance (R)

Capital – 1 May 20.11 B1 410 000.00

Drawings B2 2 050.00

Land and buildings B3 553 500.00

Motor vehicles B4 184 500.00

Furniture and fittings B5 192 700.00

Accumulated depreciation: Motor vehicles – 1 May 20.11 B6 55 350.00

Accumulated depreciation: Furniture and fittings – 1 May 20.11 B7 38 540.00

Fixed deposit (Eaton Bank) B8 49 200.00

Bank (Favourable) B9 10 660.00

Debtors control B10 18 450.00

Allowance for credit losses – 1 May 20.11 B11 553.50

Allowance for settlement discount granted – 1 May 20.11 B12 221.40

Petty cash B13 2 255.00

Trading inventory B14 11 275.00

Mortgage loan B15 205 000.00

Creditors control B16 21 730.00

Cash float B17 5 535.00

Printer deposit B18 1 845.00

Credit card account (unfavourable) B19 58 835.00

SARS (UIF/SDL/PAYE) B20 14 965.00

Sales N1 756 491.00

Sales returns N2 33 333.00

Purchases N3 373 718.69

Purchases returns N4 51 496.00

Consignment income N5 46 125.00

Interest on fixed deposit N6 4 920.00

Rent income N7 31 008.30

Interest on debtors accounts N8 3 485.00

Credit losses recovered N9 3 075.00

Telephone and fax N10 14 678.00


20

Credit losses N11 5 002.00

Office refreshments N12 14 514.00

Cleaning materials N13 5 125.00

Stationery N14 9 676.00

Railage inwards N15 5 608.80

Delivery expenses N16 11 024.90

Electricity N17 5 535.00

Interest on creditors accounts N18 3 567.00

Advertising N19 35 399.40

Wages and salaries N20 110 085.00

Printer expenditure N21 23 296.61

Fuel N22 19 261.80

Additional information and adjustments as at 30 April 20.12: 1. Provide for depreciation as follows:

On motor vehicles: 30 % per annum on cost. Note that a new motor vehicle costing

R 30 000.00, was bought on February 1, 20.12. This has been properly recorded.

On furniture and fittings: 20 % per annum on the reducing balance method.

2. A debtor, J. Zoot, who owed R 830.25, has been declared insolvent. The business received

40 cents in the rand from the insolvent estate. This transaction must still be recorded. Write the

rest of the debt off as irrecoverable.

3. An allowance for credit losses of 2 % of trade receivables should be maintained. Adjust the

allowance for settlement discount granted to 3 % of good book debtors.

4. R 261.17 has been recovered in cash from a debtor whose account had previously been written

off as irrecoverable. No entry has been made as yet.

5. The telephone and fax for April 20.12 has not yet been paid, R 1 334.36.

6. Delivery expenses for May 20.12 has been prepaid, R 848.07.

7. Consignment income has not been received for April 20.12, R 4 193.18.

8. The rent income for May 20.12 has been received already, R 2 385.25.

9. An invoice for April, for R 500.00 has been received from ‘The Argus’ for an advertisement placed

to invite applicants to apply for a position within the organisation. This transaction has not yet

been recorded.

10. An amount of R 675.00 was paid to Golden Rail for delivery (by rail) of trading inventory to the

business. This was debited to the office refreshments account in error which has not yet been

corrected. The trading inventory to which the railage relates has not yet been sold.

11. The owner took trading inventory for personal use. The selling price was R 7 250.00 (VAT is not

applicable). The mark up is 60 % on selling price. The transaction must still be processed.

12. The stock take revealed the following items on hand:

Trading inventory – R 8 054.50

Cleaning materials – R 2 665.00

Stationery – R 5 321.80


21

13. Provide for the interest on the mortgage loan. Interest is calculated at 25 % per annum. The

liability was increased by R 50 000.00 on December 1, 20.11. There were no other additional

loans or repayments during the financial year, but twelve end-of month instalments of R 1 879.17

each are due to be repaid on the loan, starting at the end of May 20.12.

Note: The owner made no further capital contributions during the year in question. Required: (a) 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.

(b) Prepare the income statement for the year ended 30 April 20.12.

(c) Draft the balance sheet as at 30 April 20.12.

(d) Prepare the notes to the financial statements.


22

Answer template:

General journal of


23


24

Income statement of

Notes R R


25

Notes R R


26


Notes R R


27

Notes to the financial statements 1. Interest income

2. Interest expense

3. Property, plant and equipment

Total


28

4. Available-for-sale financial assets

5. Inventories

6. Trade and other receivables



29

8. Owner's equity

9. Long-term borrowings

10. Trade and other payables


30

Current and appropriation accounts for partnerships

The following information was taken from the books of Nolan and Chetty:

Balances in the general ledger of Nolan and Chetty at the financial year-end – 31 May 20.11

Account Debit (R) Credit (R)

Capital: P. Nolan (1 June 20.10) 700 000.00

Capital: S. Chetty (1 June 20.10) 625 000.00

Current: P. Nolan (1 June 20.10) 140 000.00

Current: S. Chetty (1 June 20.10) 125 000.00

Drawings: P. Nolan 70 000.00

Drawings: S. Chetty 62 500.00

Net profit for the year (profit and loss) 3975 000.00

Property, plant and equipment 5152 500.00

Appropriations according to the partnership agreement at the financial year-end 31 May 20.11:

1. Interest on capital must be appropriated at 8 % per annum. Capital account balances remain

constant.

2. Interest on drawings must be appropriated at 12 % per annum, as if the drawings were made

3 months prior to the end of the financial year.

3. Interest on current accounts must be appropriated at 10 % per annum (on opening balances).

4. Both partners must receive an annual salary at the end of the financial year:

P. Nolan – R 556 500.00

S. Chetty – R 675 750.00

5. S. Chetty must receive an annual bonus at the end of the financial year: R 119 250.00

6. The remaining profit must be split between the partners in the following ratio:

P. Nolan – 6

S. Chetty – 5

Required:

Open, post to and balance the following accounts in the general ledger of Nolan and Chetty for the year

ended 31 May 20.11.

Appropriation account

Current: P. Nolan

Current: S. Chetty


31

Answer template:

General ledger of


32

Year-end adjustments for a partnership

The following information was taken from the books of Zum & Buck:

Balances in the general ledger of Zum & Buck at the financial year end – 30 June 20.11


Capital: H. Zum (1 July 20.10) 74 400.00

Capital: M. Buck (1 July 20.10) 68 200.00

Current: H. Zum (1 July 20.10) 14 880.00

Current: M. Buck (1 July 20.10) 13 640.00

Drawings: H. Zum 7 440.00

Drawings: M. Buck 6 820.00

Salary: H. Zum 10 000.00




33

Appropriations according to the partnership agreement at the financial year end 30 June 20.11:

1. Interest on capital must be appropriated at 10 ½ % per annum. Capital account balances remain

constant.

2. Interest on drawings must be appropriated at 12 ¾ % per annum, as if the drawings were made


3. Interest on current accounts must be appropriated at 11 ¼ % per annum (on opening balances).


H. Zum – R 50 000.00

M. Buck – R 72 000.00

5. M. Buck must receive an annual bonus at the end of the financial year: R 42 000.00


H. Zum – 4

M. Buck – 3

Required:

Journalise the year-end adjustments and appropriations (including closing transfers) in the general

journal of Zum & Buck for the year ended 30 June 20.11.


34

Answer template:

General journal of Zum & Buck – June 20.11 GJ6

Doc. no. Date Details Fol. Debit Credit


35

Doc. no. Date Details Fol. Debit Credit


36

Equity disclosure for a partnership

The following information was taken from the books of Thiru & Nair:

Balances in the general ledger of Thiru & Nair at the financial year end – 31 October 20.11


Capital: M. Thiru (1 November 20.10) 62 000.00

Capital: B. Nair (1 November 20.10) 55 800.00

Current: M. Thiru (1 November 20.10) 12 400.00

Current: B. Nair (1 November 20.10) 11 160.00

Drawings: M. Thiru 6 200.00

Drawings: B. Nair 5 580.00



Appropriations according to the partnership agreement at the financial year end 31 October 20.11:

1. Interest on capital must be appropriated at 9 % per annum. Capital account balances remain

constant.

2. Interest on drawings must be appropriated at 15 % per annum, as if the drawings were made


3. Interest on current accounts must be appropriated at 11 % per annum (on opening balances).


M. Thiru – R 21 000.00

B. Nair – R 28 000.00

5. B. Nair must receive an annual bonus at the end of the financial year: R 15 000.00.


M. Thiru – 2

B. Nair – 3

Required:

(a) Open, post to and balance the appropriation account in the general ledger of Thiru & Nair for the

year ended 31 October 20.11.

(b) Draft the current accounts note to the Statement of financial position on 31 October 20.11.


37

Answer template:

General ledger of

Notes to the financial statements

Current accounts

M. Thiru B. Nair Total

Balance as at 1 November 20.10

Primary distribution of profit

Salaries

Bonuses

Interest on capital

Interest on drawings

Interest on current

Final distribution of profit

Net profit as per income statement after transfer to reserve

Primary distribution of profit

Drawings for the year

Balance as at 31 October 20.11


38

Financial reporting for companies

The following information was taken from the books of Malteasers Ltd:

Balances of the accounts in the general ledger of Malteasers Ltd on 31 August 2012

Details Debit (R) Credit (R)

Balance sheet section

Accumulated profit (1 September 2011) 56 040.00

Ordinary share capital 267 801.00

14 % Preference share capital 255 024.00

Land and buildings 450 593.00

Equipment 255 024.00

Accumulated depreciation: Equipment 29 348.00

Trading inventory 30 613.00

Debtors control 33 143.00

Allowance for credit losses 493.00

Bank 38 203.00

Petty cash 5 060.00

Fixed deposit 53 510.00

Creditors control 12 789.00

Mortgage liability 15 307.00

Nominal accounts section

Net income before tax 229 344.00

866 146.00 866 146.00


1. The company tax rate is 28 %.

2. R 6 515.00 must be transferred to the general reserve.

3. Provide for the preference dividend at year-end as well as for a final ordinary dividend of R 0.10

per ordinary share issued.

4. Land and buildings were re-valued from R 450 593.00 to R 509 105.00 during the past financial

year but this revaluation has not yet been recorded.

5. A fresh issue of 18 200 ordinary shares took place during the past financial year at an issuing

price of R 2.00 per share. This issue has been recorded.

6. There were 212 500 ordinary shares in issue at 31 August 2012.


39

You are required to:

(a) Draft the statement of changes in equity of Malteasers Ltd for year ended 31 August 2012.

(b) Draft the capital and reserves section of the balance sheet of Malteasers Ltd at 31 August 2012.

Answer template:

Statement of changes in equity of

Details Ordinary share

capital Preference

share capital

General/ Replacement

reserve

Revaluation surplus

Retained earnings

Total



40

Financial reporting for close corporations

Frooties CC was registered on 1 June 20.8. The founding statement of the CC sets out the following:

1. Names of members, their interests and contributions:

Name % interest Contributions

C.Angle 80 % R 116 000

D.Bowler 20 % R 29 050

2. The accounting date: 31 May.

The following abbreviated trial balance of the close corporation was available on 31 May 20.11:

Debit Credit

Members’ contributions 145 050 00

Undrawn profits 44 700 00

Mortgage bond 89 250 00

Loan to D.Bowler 11 250 00

Land and buildings 167 400 00

Bank 100 350 00

279 000 00 279 000 00

3. With regard to the 20.12 financial year the following was available:

C. Angle transferred 30 % (nominal value R 25 000) of his contribution on 31 May to D.Bowler.

C.Angle lent the CC R 18 000, repayable on 31 May 20.13.

On 31 May the land and buildings were revalued at R 223 200.

All interest was paid and received promptly on 31 May.

Undrawn profit for the year ended 31 May 20.12 amounted to R 133 800.

The distribution of income is equal to 50 % of undrawn profits at the end of the financial

year.

Required:

(a) Calculate the change in members’ % interest and members’ funds at 31 May 20.12.

(b) Calculate the values of the members’ net investment at 31 May 20.12.


41

Answer template:

(a)

Change in members’ % interest:

Member C.Angle

Member D.Bowler

Total

Change in members’ funds:

Funds immediately before transfer (on 31 May 20.12):

Member C.Angle

Member D.Bowler

Total

(b) Members’ net investment

Member C.Angle

Member D.Bowler

Total


42

Statement of cash flows: Companies

The following is an extract from the financial statements of Vuvuzela Ltd for the year ended 31 May

20.7:

Statements of financial position of Vuvuzela Ltd on 31 May

20.7 (R) 20.6 (R)

Assets

Non-current assets

Land 2 325 000.00 1 550 000.00

Furniture and fittings 395 020.60 355 105.00

Cost 507 935.00 449 500.00

Less: Accumulated depreciation on Furniture and fittings 112 914.40 94 395.00

Financial assets : Unit trusts in Greens Ltd 143 685.00 139 500.00

2 863 705.60 2 044 605.00

Current assets 998 654.28 914 500.00

Inventories 251 100.00 279 000.00

Trade receivables 265 050.00 294 500.00

Cash and cash equivalents 482 504.28 341 000.00

Total assets 3 862 359.88 2 959 105.00

Equity and liabilities

Equity 3 278 056.52 2 327 962.38

Share capital 2 023 370 1 844 500

Retained earnings 1 060 936.52 289 712.38

Other components of equity 193 750.00 193 750.00

Non-current liabilities

Mortgage loan (12 % p.a.) 225 525.00 232 500.00

Current liabilities 358 778.36 398 642.62

Trade payables 292 950.00 325 500.00

Taxation payable 63 407.35 70 452.61

Dividends payable 2 421.01 2 690.01

Total equity and liabilities 3 862 359.88 2 959 105.00


43

Calculation of retained earnings for the year ended 31 May 20.7

Line item Amount (R)

Sales 3 410 000.00

Cost of sales 1 091 200.00

Dividends income 51 150.00

Depreciation (on all furniture and fittings) 44 950.00

Interest expense 23 250.00

Loss on sale of furniture and fittings 3 977.18

Net profit before tax 1 104 272.82

Income tax expense 320 239.12

Dividends expense 12 809.56

Retained earnings for the year 771 224.14


1. During the year Furniture and fittings with a cost of R 125 860.00 and accumulated depreciation

to the date of sale of R 26 430.60 was sold for R 95 452.22. There were no other disposals of

non-current assets.

2. Cash and cash equivalents on 31 May 20.7 comprised Current account of R 410 128.64, 30 day

Money Market account of R 28 950.26 and Petty cash of R 43 425. 38. Cash and cash

equivalents on 31 May 20.6 comprised Current account of R 296 670.00, 30-day money market

account of R 27 280.00 and Petty cash of R 17 050.00.

3. There were no accruals or prepayments for the financial year-end.

You are required to:

Follow the six steps outlined in your answer book to prepare the statement of cash flows with applicable

notes of Vuvuzela Ltd for the year ended 31 May 20.7. Note: Ignore VAT.


44

Answer template:

Step 1: Asset disposal procedures


Asset disposal


45

Land

Financial assets

Step 2: Calculation of cash receipts from customers

Cash receipts from customers


46

Step 3: Cash paid to suppliers and employees

1. Draw up an illustrative ‘income account’.

2. Adjust for accruals


47

Step 4: Calculation of dividends and tax paid in cash during the year

Shareholders for dividends

SARS (Income tax)


48

Step 5 and 6: Prepare the statement of cash flows and notes

Notes to the statement of cash flows

1. Reconciliation of net profit before tax with cash generated from operations


20.7 20.6


49

Statement of cash flows of

Notes R


50

section a: revision video questions ratio analysis: sole...

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