ACCOUNTING P2 NOTES 2024
Asia Yarlett
, BANK RECONCILIATION
last month
A
Extract from BRS on
31 Jan 2022
DR + CR
B
-
he
1
Bal as per bank acc in
Ledger far O unfav ~ goes to bank acc
bank bal (this yr)
3
work out new
+
-
Cr outsanding deposits -
may need tprepar
line
a mini BRS
Dr outstanding EFTs 110V
recordaga
a
120 last month bank bal
It Bal as per Bank state only neeoa
GAAP prudence principal for writing off
(far/unfar)
Cr
⑬Balance on BIS on 28 Feb was R -
Cash not deposited but in CRJ
eg
1
↳ enter BRS F
.
in +
Theft
or
journals had of
C Cash following totals on 28 Feb before BRS :
Rolling Cash
CRJ #
CDJ # INTERNAL CONTROL
·mmm a
D
Following appeared on Bank state for Feb 2022
but
(not in cash journals) must still be taken into account
① tick
everything
that corresponds on BRS
&
vin
② Enter Jrulg (everything
outstanding entries Into Cash
else)
and /or BRS
· Keepestas received outsource transport of cash
to
actually
·
overstated * enter amount
payment CRJ
security companies
:·
ETHICS
-
ROLLING OF CASH When deposits only
E Following appearedIn Cash Jouls but not in Bank State .
reflect after a while
·
Enter in BRS -
FUTURE DATED EFTs appear In BRS
* "no made" until date (without supporting docs)
payment don't record in either
F
Following errors were noted when
preparing the [EFT's I
BRS for Mar . bank made ADVANTAGES OF INTERNET BANKING :
(business made mistake) (mistake
correct discrepancies In Cash Jrnls & BRS
· time-saving no questiness
·
his
+ Bank -
no of cash: less thell + fraud
carrying
·
bal b/dG Tot .
pints CPJ
Maintain Internet banking limits
Transactions immediate
Tot . Receipts (RT bal-
- PO P .
. can be sent immediately
-
Convenient 3 easy to use
-
·
bal &
d ** bal
to work out bank
Cheaper bank
charges
BRS F+ -
Dr + Cr
(we sometimes
REASONS FOR BRS
are
S
bal to bank state! unfar fav >
- :
a
to
liab.
bank) according bal figure
Cr Internal control confirms accuracy
outstanding
>
-
deposits
+
·
,
>
-
keeps track of
outstanding EFTs
Dr
outstanding EFTs &
and deposits
Dr/r correction of bank error ⑳
&
when this
-
Identifies errors Omissions
[bal according to bank acc * fav unfar - is a
makes sure all entries are
,
bal .
Figure, -
correctly
X take he diff
X
from the largest recorded by business and Bank.
side (Dr/Cr)
Debit order - 3rd Party
Stop order >
- we order
, CREDITORS RECONCILIATION
must correspond
REASONS FOR DIFFERENCES
& LEDGER (US)
ours
STATEMENT (them)
theirs
balances of what we one
·
Wrong amar-correda difference
&
·
Wrong creditor
L + + A-
another customer -
take money our
-
·
Debit note Credit hole
Invoice Invoice omitted it in (look of dates )
entry -> add
·
(we return) (we purchase) (we purchase) (we returns
CAS CJ
Interest
·
entry on wrong side -
double correct
Bank/EFT Recept
(we pay) (we owe) (we pay) · treated as wrong source doc
CPJ not deduct
GJ ·
discount entered -
disc
ee
.
·
posted wrong creditor Acc : No change - Net
to
·
transferred money from ledger to statement (Jrnl rouch)
... was not recorded " - record in both
"
·
-
ROLLING OF CASH When deposits only reflect after a while
AL/TOTAL/Summe
CREDITORS CONTROL
& DTORs
↳ if amounts dont balance take the
Ledger)
i
General
Ledger) ,
difference + 2 (if made 1 mistake)
creditors together
is
↳ we EFTd ce (with discounty)
of creditors
"Journals" : statement : -
(x + y)
REASONS FOR CREDITORS RECON :
·
an Internal control measure to ensure all pints ,
returns , discounts
are deducted , and invoices are legit ,
reconcile differences between ledger and statement
·
Ensure correct amnts bald to creditor
·
Detect fraud
·
Update our records
Creditors control account summary of
is a all creditors ledger account.
INTERNAL CONTROL :
IMPROVE MANAGEMENT OVER CREDITORS
/Authorisation
Division of duties check documents , ensure accuracy
·
·
from senior management pay on time
Regular Stocktakes -good credit history
-
quality for discounts
WHEN CHANGING CREDITORS : ·
internal audits minimiseFraud
,
Quality ? Proper authorisation for purch
·
·
.
·
price ?
·
Reliability ? (regular (
·
credit terms ?
pint terms ?
·
trade/cash discounts ?
RECEIVING GOODS
check for damages
·
good received corresp . W invoice
freg issues :
change supplier
·
.
,DEBTORS RECONCILIATION
DEBTORS LEDGER Fol Dr Cr Bal REASONS FOR DIFFERENCES
Bal b/d
Invoice sales DJ W + ·
No
entry : enter in DC 3 List
Receipt CRJ ~ -
·
Error on source doc : Correct in DC b List
allowed Dup CRJ ~ debtor
Disc poster to correct List
.
wrong
...
-
Rea
·
in
Credit note DAJ ~ -
·
Totals in Juuls corres :· correct in DC
Jun 1 Dr Charge Int GS ~ t
Jrn) Cr Baddebts GJ ~ -
BEFORE GRANTING CREDIT
Check
-
" history
credit score
Ensure proper documentation
DEBTORS CONTROL =
DEBTORS LIST
-
statements
be
Bank
14
Total outstanding Individual
·
ID
(Ledger)
·
(Journal)
.
.
salary slips
Proof
·
of address
!
PROBLEMS ENSURE ADHERENCE TO TERMS
(period) > 30 days -
Discount
-
over/exceed creditterms (too long to
pay) -
Interest
-
-
Reminders
-
ineffective/poor internal control .
>
- continue to
buy even
though they're owing -
Dont sell until they pay
> 90 > 60 > 30 ) current -
Ensure settle prev month
before purch . On credit
-
over/exceed credit limit amount
CALC % DEBTORS STICKING TO TERMS
(current + 30
days)
R within terms
X 100
R total owed
DEBTORS' AGE ANALUSIS HELPS
3
HOW
Internal Control
IN MANAGING DEBTORS MORE EFFECTIVELY
See which debtors : NAME > god 90 60 30 current
must be handed over
↳
-
-
Entitled discound
-
charged interest
-
exceed credit limit TOTAL >
- & TOTAL
-total
-
sticking to terms (slow/late) amount
-
betauting (non-paying) - handed over (attourney ,
Sue owed by
debtors
-
can be granted more credit
on
current
date
be laken to
encourage point
% Action can
↳ bad debts kept to a minimum
, > 12 months
~ lifespan
FIXED ASSETS - -
trading slock
WITH DISPOSAL : ADDITION
d Asset Disposal (months until & old
① sold )
:
sale- .
CP AD + ② Remaining
S D -cash bank
:
P/L Sp Depres on CP :
(one step) Bal -
CP
creat:debtors canacont
↑
·
DimBal :
(three steps)
personal : drawings new :
um
use 1 .
Rem CD -
donated :
donations .
2 Rem AD (excluding) =
1>
3. Dem CV m
x 20 %
⑤ New (months since purchase-)
↳ "Installation fees" incr cost Price
FIXED ASSET NOTE REASONS FOR DISPOSAL
asset is old/obsolete/outdated
LSB Veh Equip
replacing as It's not in good condition
·
CV-beg yr upgrading to better model
·S
Cost technological advances
Accum maintenance expensive
Deprec 111
·
.
no longer effective for specific use
MOVEMENTS
mcul extentions
Additions
.
& Cp renovations
ex1 repairs
.
Disposals e cv [cpY as] + UNETHICAL BEHAVIOR :
Depreciation (Forthese [+ 1 (sadtremtnew) () personal use of F A .
.
(years
misuse of F A
CV-end yu
.
last step
E-co thelt
·
Cost disposal
family engagements during
Accum Deprec &) [CAD + d) disposal) 2) procurement or disposal
.
check when melod CP !!! for INTERNAL CONTROL : MOVEABLE FA
* Always ~
is .
.
(TOO EACH division of duties update F A
CLUES FOR RI CV MUCH DEPREC) -
register
·
.
.
asset
·
depreciation method must be ep authorization when buying
·
log book
devices
low VI high AD keep reliable documentation
tracking
·
·
·
"Very old asset" frequent checks on FA .
·
maintenance plans
alarm / lock
"end of usehil life" rememberto
subtc as
register (count) garage
>
- depre CV CP-AD last un "were bought"
~ and are included
:
Depreciation (AD) = CV 1 In the balance
-
IMPORTANCE OF FA REGISTER
that Cp-AD
.
so =
Cr o RI
detailed breakdown of
gives
·
each FA.
.
Owned
important tool in Internal
Imputed expense (doesn't outflow of cash)
·
depreciation involve
and
auditing process
-
Control
GL
verifies asset info
accumulated-negative sa .
In
·
and financial statements
,STOCK SYSTEMS
PERPETUAL Cold system) "continuous" PERIODIC (new system
value of stock determined of Intervals /
·
Balance updated with every transaction/
of TS
.
.
continuously compared to physical stock/updated
↑
end of
year/periodically updated
not
Trading slock account affected
·
·
Everything goes through Trading Stock acc T
cused for
opening + closing & year end)
↳ rather PURCHASES A22 is
continuously updated
·
cal ?OS - use mark-up (Xmu)
cal. formula
every time C O S
↳ calc ,
·
.
.
- :
↳ M-up
= opening stockpurchtcarrage
et l,
is
-
x10
↳
is acc asset (T S Acc) Trading stock ac is exp (Purchases Acc)
·
·
is an . an
costs incurred in TS
costs the TS
. getting the are
·
incurred in
getting is .
· .
.
TS debited to their own expense as
debited to .
.
ac
(customs ; carrage op ; ek .
)
When
·
we return : ·
When we return is :
& reduces exp of purch
TS
.
credit . account credit creditors allowances (income
to determine thell/loss Not
easy to determine the
·
easy
·
to stock take .. do frequent stock take
:
compare ledger
used for businesses
used for businesses selling expensive stock selling large quantities
·
·
with lower turnover with low value.
less expensive to administer
more expensive to administer
·
·
Stocktake
·
: to check balance of is acc v ·
stocktake to determine how much inv Sold .
is Delicit Tis deficit Acc
:
Easy to determine :
no
2 O S..
.
FORMULA
·
Difficult to implement ·
Easy to impliment balance
open stock
sophisticated computer system required
- our
Total & returns
clos stock calc + Net
·
. .
by purch .
donationsto
·
closing stock is calc .
by looking at doing stocktake ↓ Other Cost
C0 P
. .
.,
customs etc
expense (added to cost of
stock)
clos . bal of T/ stock ↑ Purchases -
= stock available for sale
↳
compare to stocktake deficit/surplus cred cont cred allow during year
sales deblors allow closed off to : bank Donations
-
closing stock stock take
↑TradingAs
Adjustments =
C O S : cost of stock
t
Drawings
. .
- A
I t - sold
*tradinga
Asset
&
trading stock cost of sales
+ -
t -
Pour en Trading acc
I
ia
stock sales
slock turn-over rale opening
22) cost of sales Notpurchases Closing
= R /times per yr)
(A) are inventones C O P
.
. . ↳ hole entries
& year
↳Stockscreens customs that happen end
after stock Lake
P/ (GP) (fig
net
Sales -
C O S
.
= GP
sarej
.
-Gp = c O S
..
.
, VALUATION METHODS
#I WA SIM
I
SUSTEM ·
Perpetual/Periodic . Periodic ·
Perpetual
EXPLANATION stock values
Assumption that stock Average Cost Price are
·
· ·
first sold first used realistic , as per
bought , of units is
(valued& current prices/ at all times Invoice when purch
more realistic
fairly expensive,
·
low value goods
·
easily identifiable
TYPE
·
GOODS
separate items sold at high quantity goods sold in
·
limited shelf life Lidentical Small Items) small quantities
(perishables)
CLOSING STOCK CLOSING UNITS SPLIT YQ FORMULA XCIOS UNITS .
UNIT PRICE Y CLOS .
UNIT
·
WA cost per unit)
·
Actual price each unit
· months (borrom-up) -
returns value (Goods Arl .
to be sold)
- UNITS CLOS
(Price (thar month) eg
·
x + C OP
Pei)
.
Stock
Cty (Goods Arl to be sold)
.
.
,
(open purch) XSe
.
model :
+
c
=
#
SPLIT :
units cost
M
- donations # I -
ret -sold
purch-return t
.
Opening + a
lit-rextcop) model "Ixm
=
-donations
opening + purch-returns =
y
(given)
WACAnswers WIS Cos SSHock
Mode
"Ix
: X .
=
value closing stock
COST OF SALES FORMULA WA/FORMULA GP = S-COS
· months top down D =
WAX units sold
depending system
·
on or
perpetual ② Periodic system :
·
Perpetual System :
periodic
Tr Aca Tr AC
Trad . ACC Trad .
ACC
cos Sales
opensas open stock sales (- DA) cost of Sales Sales (DA)
GP
= closing stock
PK(p)
*
NET purch ↳
- C-returns) -
↳ -closing
stock
CO P
.
. .
=
CO S plus
=
Open + purch-clos
open + purch-returns + COP-clos P/L(GP)
.
.
-
-
-
② using MU %
-
EFFECT CHANGING
:
↓ lower Clos Stock
VALUATION METH
&
higher Clos .
Stock .
flower C O S
. ↑ higher CO S
.
.
: .
.
: .
.
(cost Open +purch-clos)
=
cost =
open + purch-closd)
higher
. ↓ lower GP
0 5 .
4) (GPd =
Sats-Cost)
lower
.
: higher tax i
: tax i
- Ave >
-
or
nunit obsolescencee
STOCK
TURNOVERT
·
STOCKHOLDING Elopentclos)
/
= closing shelf-life
x 365 RATE
·
PERIOD (Value/Units)
:
clos
Cognit nounit · durable
=
or
R Y Ave
E = D units :
sold ·
perishable
=
what you
STOLEN returns
opening units + purchases sold
closing
=
should
-
-
-
mun
(missing) have
,STOCK
INTERNAL CONTROL
POTENTIAL RISKS ·
division of duties (elaborate depending on situation)
stolen stocktakes (and compare with records
regular
·
·
records falsified (fraud) ·
proper authorisation for procurement of stock
·
Personal use ·
Limit to stock / store room
access
·
obsolete / damaged lost I damaged / stolen reported immediately
insured
Properly
·
GAAP ·
Documentation
·
Historical cost Physical security
·
measures
·
Prudence ·
Changing suppliers
·
change Stock system (Periodic e
Perpetual)
·
CCTV
ANALYSIS 3 INTERPRETATON security tags
(when buy in smaller quantities
comparing companies)
·
Calculate :
stock
missing
·
money not deposited
·
Gross proht per unit = (SP = no units sold) -
CP
per unit
GB -
Sales
-
COS
·
look e stock on hand
REASONS AGAINST CHANGING VALUATION METHOD
·
over time the diff .
Will be cancelled
Impossible to compare to prev years
·
GP
·
incr ...
higher tax
· unethical to manipulate records
DONATING STOCK
forms part of
·
CSR
·
creates goodwill for company
good image/publicity
·
·
tax deductable
,COST ACCOUNTING :
OVERVIEW
cost of a
manfaturing business * PROD .
COST STATE
.
L & ↓
production costs period costs
FIN . GOODS NOTE
FC and distribution
L ~
·
selling vC
↓
Prime costs overheads marketing bad debt
Factory
-
-
-
advertising -
commission
VC· Direct material
·
indirect material INCOME STATE (NP)
-
delivery -
depres delivery reh
used
-
materials for -
not
directly Administration costs "office"
manufacturing F2
·
for products
-
import manufactured -bookkeeper
-
Storage secretary
-
-
telephone
Cop
·
indirect labour
prod-receptionist (salary) Stationery
-
factory
-
-
in not on
, uction
- factorySupervis -
Internal accountant
VC Direct labour
.
.
-
cleaners
-
external
-Salaries 3 Wages accountant
security guards
-
-
for people rent for office
directly-quality controllers. -
manufacturing
-
contrib .
made
·
other factory costs
by bus . rent
-
-
water 3 elec
insurance
-
-
maintenance
-
deprec .
of machinery
-
safety controlls
"All work started was completed
"
V
Li
WA =
: No wip balance
P .
C S
. .
"factory
PRODUCTION CUST STATEMENT ③ Wip -Dudesallso
8
I
Direct
NET
COP -clos . openinrd donations etc (of finished goods)
S
open + purch +
material
inci : Gross + contributions + overtime direct
finished
balancing fig
I
goods
-
Direct labour 3 foreman ; deductions
materialprod bala
excl : cleaner
closing
FACTORY
PRIME COST labour costs
shouldn't be large amnt
+S
Dr "left over a end yu"
factoryeads
Factory Overhead see notes
TOTAL COST OF PRODUCTION
'
+ Work In
Progress (beg yr)
t
come here to be sold
"shop" goods
.
e
Finished Goods work out using mark-down
unfinished
Lacton)]Stor
(sales ,mu)
openina d of
x
(In Cost Of Sales
Work In
Progress (endyr > bal fig.
-
closingstockbalancingfig,
.
TOTAL COST OF PRODUCTION OF FINISHED GOODS finished good,s
m
& units X cost, unit
to Fin Goods note
goes .
4 CAL)
bal
:
Pd
Opening stock + Finished goods (Wip) -
closing stock
Shortcut
, NOTES TO PROD .
COST STATEMENT & expenses incurred
"Warehouse"
① raw material stock
transferred to factory
DIRECT (RAW) MATERIAL COST
I Mar opening Feb
28
Craw materials
VC 2015 bal b/d 201s WIP usually
issued) balancing
open(opening (bal-beg ur)
cash
28 Feb
fig
stock returns/defective
.
2016
bank purch
ot. [ Net purchases less returns
credit
cred
purch
cont bald
cos(carraige
carraige
on purchases bank
·
-
Custom duties
FOR
(Closing
REASONS INCR :
(
clos .
stock
(bal-endyr) (fro / wassim
-
price of material ↑
materials issued tofuchoyaction
WIP
cost - Raw raw materials issued is
Fuel/ &
-
Transport
wastage / untrained workers
-
- New supplier chargea prices
VC DIRECT LABOUR COST
- Better quality raw mar .
Salary (Net
Gross (Basic) = Gross-deduct .
I
num
overtime
UIF contributions
no opening bal as its closed off
* &
FC FACTORY OVERHEAD COST
"cons · Stores used In factory
"
a factory Overheads
28 Feb
Indirect materials open + purch .
+ CO
.
.
P .
-
clos. 2Feb indirecta 2016
WIP
incl : contributions Indirect
Indirect labour excl : deductions labour
.. .
vehile maintenance
Rales & taxes
Insurance REASONS FOR INCR :
Incr should be in line
water
a electricity vario -
With inflation (15 % )
Rent expense should be fairly constant
-
Nor influenced by IV1 prod.
Sundry expenses
-
Deprecation
COST Of FINISHED GOODS SOLD
VC SELLING AND DISTRIBUTION COST
open stock
from
Advertising cost of
goods manuf WIP P C S
. .
vehile maintenance
1
-
stock
closing
FC ADMINISTRATION COST *
Cost of Sales
...
"Office"
2 Finished Goods
open cus
Wip clos
-
Asia Yarlett
, BANK RECONCILIATION
last month
A
Extract from BRS on
31 Jan 2022
DR + CR
B
-
he
1
Bal as per bank acc in
Ledger far O unfav ~ goes to bank acc
bank bal (this yr)
3
work out new
+
-
Cr outsanding deposits -
may need tprepar
line
a mini BRS
Dr outstanding EFTs 110V
recordaga
a
120 last month bank bal
It Bal as per Bank state only neeoa
GAAP prudence principal for writing off
(far/unfar)
Cr
⑬Balance on BIS on 28 Feb was R -
Cash not deposited but in CRJ
eg
1
↳ enter BRS F
.
in +
Theft
or
journals had of
C Cash following totals on 28 Feb before BRS :
Rolling Cash
CRJ #
CDJ # INTERNAL CONTROL
·mmm a
D
Following appeared on Bank state for Feb 2022
but
(not in cash journals) must still be taken into account
① tick
everything
that corresponds on BRS
&
vin
② Enter Jrulg (everything
outstanding entries Into Cash
else)
and /or BRS
· Keepestas received outsource transport of cash
to
actually
·
overstated * enter amount
payment CRJ
security companies
:·
ETHICS
-
ROLLING OF CASH When deposits only
E Following appearedIn Cash Jouls but not in Bank State .
reflect after a while
·
Enter in BRS -
FUTURE DATED EFTs appear In BRS
* "no made" until date (without supporting docs)
payment don't record in either
F
Following errors were noted when
preparing the [EFT's I
BRS for Mar . bank made ADVANTAGES OF INTERNET BANKING :
(business made mistake) (mistake
correct discrepancies In Cash Jrnls & BRS
· time-saving no questiness
·
his
+ Bank -
no of cash: less thell + fraud
carrying
·
bal b/dG Tot .
pints CPJ
Maintain Internet banking limits
Transactions immediate
Tot . Receipts (RT bal-
- PO P .
. can be sent immediately
-
Convenient 3 easy to use
-
·
bal &
d ** bal
to work out bank
Cheaper bank
charges
BRS F+ -
Dr + Cr
(we sometimes
REASONS FOR BRS
are
S
bal to bank state! unfar fav >
- :
a
to
liab.
bank) according bal figure
Cr Internal control confirms accuracy
outstanding
>
-
deposits
+
·
,
>
-
keeps track of
outstanding EFTs
Dr
outstanding EFTs &
and deposits
Dr/r correction of bank error ⑳
&
when this
-
Identifies errors Omissions
[bal according to bank acc * fav unfar - is a
makes sure all entries are
,
bal .
Figure, -
correctly
X take he diff
X
from the largest recorded by business and Bank.
side (Dr/Cr)
Debit order - 3rd Party
Stop order >
- we order
, CREDITORS RECONCILIATION
must correspond
REASONS FOR DIFFERENCES
& LEDGER (US)
ours
STATEMENT (them)
theirs
balances of what we one
·
Wrong amar-correda difference
&
·
Wrong creditor
L + + A-
another customer -
take money our
-
·
Debit note Credit hole
Invoice Invoice omitted it in (look of dates )
entry -> add
·
(we return) (we purchase) (we purchase) (we returns
CAS CJ
Interest
·
entry on wrong side -
double correct
Bank/EFT Recept
(we pay) (we owe) (we pay) · treated as wrong source doc
CPJ not deduct
GJ ·
discount entered -
disc
ee
.
·
posted wrong creditor Acc : No change - Net
to
·
transferred money from ledger to statement (Jrnl rouch)
... was not recorded " - record in both
"
·
-
ROLLING OF CASH When deposits only reflect after a while
AL/TOTAL/Summe
CREDITORS CONTROL
& DTORs
↳ if amounts dont balance take the
Ledger)
i
General
Ledger) ,
difference + 2 (if made 1 mistake)
creditors together
is
↳ we EFTd ce (with discounty)
of creditors
"Journals" : statement : -
(x + y)
REASONS FOR CREDITORS RECON :
·
an Internal control measure to ensure all pints ,
returns , discounts
are deducted , and invoices are legit ,
reconcile differences between ledger and statement
·
Ensure correct amnts bald to creditor
·
Detect fraud
·
Update our records
Creditors control account summary of
is a all creditors ledger account.
INTERNAL CONTROL :
IMPROVE MANAGEMENT OVER CREDITORS
/Authorisation
Division of duties check documents , ensure accuracy
·
·
from senior management pay on time
Regular Stocktakes -good credit history
-
quality for discounts
WHEN CHANGING CREDITORS : ·
internal audits minimiseFraud
,
Quality ? Proper authorisation for purch
·
·
.
·
price ?
·
Reliability ? (regular (
·
credit terms ?
pint terms ?
·
trade/cash discounts ?
RECEIVING GOODS
check for damages
·
good received corresp . W invoice
freg issues :
change supplier
·
.
,DEBTORS RECONCILIATION
DEBTORS LEDGER Fol Dr Cr Bal REASONS FOR DIFFERENCES
Bal b/d
Invoice sales DJ W + ·
No
entry : enter in DC 3 List
Receipt CRJ ~ -
·
Error on source doc : Correct in DC b List
allowed Dup CRJ ~ debtor
Disc poster to correct List
.
wrong
...
-
Rea
·
in
Credit note DAJ ~ -
·
Totals in Juuls corres :· correct in DC
Jun 1 Dr Charge Int GS ~ t
Jrn) Cr Baddebts GJ ~ -
BEFORE GRANTING CREDIT
Check
-
" history
credit score
Ensure proper documentation
DEBTORS CONTROL =
DEBTORS LIST
-
statements
be
Bank
14
Total outstanding Individual
·
ID
(Ledger)
·
(Journal)
.
.
salary slips
Proof
·
of address
!
PROBLEMS ENSURE ADHERENCE TO TERMS
(period) > 30 days -
Discount
-
over/exceed creditterms (too long to
pay) -
Interest
-
-
Reminders
-
ineffective/poor internal control .
>
- continue to
buy even
though they're owing -
Dont sell until they pay
> 90 > 60 > 30 ) current -
Ensure settle prev month
before purch . On credit
-
over/exceed credit limit amount
CALC % DEBTORS STICKING TO TERMS
(current + 30
days)
R within terms
X 100
R total owed
DEBTORS' AGE ANALUSIS HELPS
3
HOW
Internal Control
IN MANAGING DEBTORS MORE EFFECTIVELY
See which debtors : NAME > god 90 60 30 current
must be handed over
↳
-
-
Entitled discound
-
charged interest
-
exceed credit limit TOTAL >
- & TOTAL
-total
-
sticking to terms (slow/late) amount
-
betauting (non-paying) - handed over (attourney ,
Sue owed by
debtors
-
can be granted more credit
on
current
date
be laken to
encourage point
% Action can
↳ bad debts kept to a minimum
, > 12 months
~ lifespan
FIXED ASSETS - -
trading slock
WITH DISPOSAL : ADDITION
d Asset Disposal (months until & old
① sold )
:
sale- .
CP AD + ② Remaining
S D -cash bank
:
P/L Sp Depres on CP :
(one step) Bal -
CP
creat:debtors canacont
↑
·
DimBal :
(three steps)
personal : drawings new :
um
use 1 .
Rem CD -
donated :
donations .
2 Rem AD (excluding) =
1>
3. Dem CV m
x 20 %
⑤ New (months since purchase-)
↳ "Installation fees" incr cost Price
FIXED ASSET NOTE REASONS FOR DISPOSAL
asset is old/obsolete/outdated
LSB Veh Equip
replacing as It's not in good condition
·
CV-beg yr upgrading to better model
·S
Cost technological advances
Accum maintenance expensive
Deprec 111
·
.
no longer effective for specific use
MOVEMENTS
mcul extentions
Additions
.
& Cp renovations
ex1 repairs
.
Disposals e cv [cpY as] + UNETHICAL BEHAVIOR :
Depreciation (Forthese [+ 1 (sadtremtnew) () personal use of F A .
.
(years
misuse of F A
CV-end yu
.
last step
E-co thelt
·
Cost disposal
family engagements during
Accum Deprec &) [CAD + d) disposal) 2) procurement or disposal
.
check when melod CP !!! for INTERNAL CONTROL : MOVEABLE FA
* Always ~
is .
.
(TOO EACH division of duties update F A
CLUES FOR RI CV MUCH DEPREC) -
register
·
.
.
asset
·
depreciation method must be ep authorization when buying
·
log book
devices
low VI high AD keep reliable documentation
tracking
·
·
·
"Very old asset" frequent checks on FA .
·
maintenance plans
alarm / lock
"end of usehil life" rememberto
subtc as
register (count) garage
>
- depre CV CP-AD last un "were bought"
~ and are included
:
Depreciation (AD) = CV 1 In the balance
-
IMPORTANCE OF FA REGISTER
that Cp-AD
.
so =
Cr o RI
detailed breakdown of
gives
·
each FA.
.
Owned
important tool in Internal
Imputed expense (doesn't outflow of cash)
·
depreciation involve
and
auditing process
-
Control
GL
verifies asset info
accumulated-negative sa .
In
·
and financial statements
,STOCK SYSTEMS
PERPETUAL Cold system) "continuous" PERIODIC (new system
value of stock determined of Intervals /
·
Balance updated with every transaction/
of TS
.
.
continuously compared to physical stock/updated
↑
end of
year/periodically updated
not
Trading slock account affected
·
·
Everything goes through Trading Stock acc T
cused for
opening + closing & year end)
↳ rather PURCHASES A22 is
continuously updated
·
cal ?OS - use mark-up (Xmu)
cal. formula
every time C O S
↳ calc ,
·
.
.
- :
↳ M-up
= opening stockpurchtcarrage
et l,
is
-
x10
↳
is acc asset (T S Acc) Trading stock ac is exp (Purchases Acc)
·
·
is an . an
costs incurred in TS
costs the TS
. getting the are
·
incurred in
getting is .
· .
.
TS debited to their own expense as
debited to .
.
ac
(customs ; carrage op ; ek .
)
When
·
we return : ·
When we return is :
& reduces exp of purch
TS
.
credit . account credit creditors allowances (income
to determine thell/loss Not
easy to determine the
·
easy
·
to stock take .. do frequent stock take
:
compare ledger
used for businesses
used for businesses selling expensive stock selling large quantities
·
·
with lower turnover with low value.
less expensive to administer
more expensive to administer
·
·
Stocktake
·
: to check balance of is acc v ·
stocktake to determine how much inv Sold .
is Delicit Tis deficit Acc
:
Easy to determine :
no
2 O S..
.
FORMULA
·
Difficult to implement ·
Easy to impliment balance
open stock
sophisticated computer system required
- our
Total & returns
clos stock calc + Net
·
. .
by purch .
donationsto
·
closing stock is calc .
by looking at doing stocktake ↓ Other Cost
C0 P
. .
.,
customs etc
expense (added to cost of
stock)
clos . bal of T/ stock ↑ Purchases -
= stock available for sale
↳
compare to stocktake deficit/surplus cred cont cred allow during year
sales deblors allow closed off to : bank Donations
-
closing stock stock take
↑TradingAs
Adjustments =
C O S : cost of stock
t
Drawings
. .
- A
I t - sold
*tradinga
Asset
&
trading stock cost of sales
+ -
t -
Pour en Trading acc
I
ia
stock sales
slock turn-over rale opening
22) cost of sales Notpurchases Closing
= R /times per yr)
(A) are inventones C O P
.
. . ↳ hole entries
& year
↳Stockscreens customs that happen end
after stock Lake
P/ (GP) (fig
net
Sales -
C O S
.
= GP
sarej
.
-Gp = c O S
..
.
, VALUATION METHODS
#I WA SIM
I
SUSTEM ·
Perpetual/Periodic . Periodic ·
Perpetual
EXPLANATION stock values
Assumption that stock Average Cost Price are
·
· ·
first sold first used realistic , as per
bought , of units is
(valued& current prices/ at all times Invoice when purch
more realistic
fairly expensive,
·
low value goods
·
easily identifiable
TYPE
·
GOODS
separate items sold at high quantity goods sold in
·
limited shelf life Lidentical Small Items) small quantities
(perishables)
CLOSING STOCK CLOSING UNITS SPLIT YQ FORMULA XCIOS UNITS .
UNIT PRICE Y CLOS .
UNIT
·
WA cost per unit)
·
Actual price each unit
· months (borrom-up) -
returns value (Goods Arl .
to be sold)
- UNITS CLOS
(Price (thar month) eg
·
x + C OP
Pei)
.
Stock
Cty (Goods Arl to be sold)
.
.
,
(open purch) XSe
.
model :
+
c
=
#
SPLIT :
units cost
M
- donations # I -
ret -sold
purch-return t
.
Opening + a
lit-rextcop) model "Ixm
=
-donations
opening + purch-returns =
y
(given)
WACAnswers WIS Cos SSHock
Mode
"Ix
: X .
=
value closing stock
COST OF SALES FORMULA WA/FORMULA GP = S-COS
· months top down D =
WAX units sold
depending system
·
on or
perpetual ② Periodic system :
·
Perpetual System :
periodic
Tr Aca Tr AC
Trad . ACC Trad .
ACC
cos Sales
opensas open stock sales (- DA) cost of Sales Sales (DA)
GP
= closing stock
PK(p)
*
NET purch ↳
- C-returns) -
↳ -closing
stock
CO P
.
. .
=
CO S plus
=
Open + purch-clos
open + purch-returns + COP-clos P/L(GP)
.
.
-
-
-
② using MU %
-
EFFECT CHANGING
:
↓ lower Clos Stock
VALUATION METH
&
higher Clos .
Stock .
flower C O S
. ↑ higher CO S
.
.
: .
.
: .
.
(cost Open +purch-clos)
=
cost =
open + purch-closd)
higher
. ↓ lower GP
0 5 .
4) (GPd =
Sats-Cost)
lower
.
: higher tax i
: tax i
- Ave >
-
or
nunit obsolescencee
STOCK
TURNOVERT
·
STOCKHOLDING Elopentclos)
/
= closing shelf-life
x 365 RATE
·
PERIOD (Value/Units)
:
clos
Cognit nounit · durable
=
or
R Y Ave
E = D units :
sold ·
perishable
=
what you
STOLEN returns
opening units + purchases sold
closing
=
should
-
-
-
mun
(missing) have
,STOCK
INTERNAL CONTROL
POTENTIAL RISKS ·
division of duties (elaborate depending on situation)
stolen stocktakes (and compare with records
regular
·
·
records falsified (fraud) ·
proper authorisation for procurement of stock
·
Personal use ·
Limit to stock / store room
access
·
obsolete / damaged lost I damaged / stolen reported immediately
insured
Properly
·
GAAP ·
Documentation
·
Historical cost Physical security
·
measures
·
Prudence ·
Changing suppliers
·
change Stock system (Periodic e
Perpetual)
·
CCTV
ANALYSIS 3 INTERPRETATON security tags
(when buy in smaller quantities
comparing companies)
·
Calculate :
stock
missing
·
money not deposited
·
Gross proht per unit = (SP = no units sold) -
CP
per unit
GB -
Sales
-
COS
·
look e stock on hand
REASONS AGAINST CHANGING VALUATION METHOD
·
over time the diff .
Will be cancelled
Impossible to compare to prev years
·
GP
·
incr ...
higher tax
· unethical to manipulate records
DONATING STOCK
forms part of
·
CSR
·
creates goodwill for company
good image/publicity
·
·
tax deductable
,COST ACCOUNTING :
OVERVIEW
cost of a
manfaturing business * PROD .
COST STATE
.
L & ↓
production costs period costs
FIN . GOODS NOTE
FC and distribution
L ~
·
selling vC
↓
Prime costs overheads marketing bad debt
Factory
-
-
-
advertising -
commission
VC· Direct material
·
indirect material INCOME STATE (NP)
-
delivery -
depres delivery reh
used
-
materials for -
not
directly Administration costs "office"
manufacturing F2
·
for products
-
import manufactured -bookkeeper
-
Storage secretary
-
-
telephone
Cop
·
indirect labour
prod-receptionist (salary) Stationery
-
factory
-
-
in not on
, uction
- factorySupervis -
Internal accountant
VC Direct labour
.
.
-
cleaners
-
external
-Salaries 3 Wages accountant
security guards
-
-
for people rent for office
directly-quality controllers. -
manufacturing
-
contrib .
made
·
other factory costs
by bus . rent
-
-
water 3 elec
insurance
-
-
maintenance
-
deprec .
of machinery
-
safety controlls
"All work started was completed
"
V
Li
WA =
: No wip balance
P .
C S
. .
"factory
PRODUCTION CUST STATEMENT ③ Wip -Dudesallso
8
I
Direct
NET
COP -clos . openinrd donations etc (of finished goods)
S
open + purch +
material
inci : Gross + contributions + overtime direct
finished
balancing fig
I
goods
-
Direct labour 3 foreman ; deductions
materialprod bala
excl : cleaner
closing
FACTORY
PRIME COST labour costs
shouldn't be large amnt
+S
Dr "left over a end yu"
factoryeads
Factory Overhead see notes
TOTAL COST OF PRODUCTION
'
+ Work In
Progress (beg yr)
t
come here to be sold
"shop" goods
.
e
Finished Goods work out using mark-down
unfinished
Lacton)]Stor
(sales ,mu)
openina d of
x
(In Cost Of Sales
Work In
Progress (endyr > bal fig.
-
closingstockbalancingfig,
.
TOTAL COST OF PRODUCTION OF FINISHED GOODS finished good,s
m
& units X cost, unit
to Fin Goods note
goes .
4 CAL)
bal
:
Pd
Opening stock + Finished goods (Wip) -
closing stock
Shortcut
, NOTES TO PROD .
COST STATEMENT & expenses incurred
"Warehouse"
① raw material stock
transferred to factory
DIRECT (RAW) MATERIAL COST
I Mar opening Feb
28
Craw materials
VC 2015 bal b/d 201s WIP usually
issued) balancing
open(opening (bal-beg ur)
cash
28 Feb
fig
stock returns/defective
.
2016
bank purch
ot. [ Net purchases less returns
credit
cred
purch
cont bald
cos(carraige
carraige
on purchases bank
·
-
Custom duties
FOR
(Closing
REASONS INCR :
(
clos .
stock
(bal-endyr) (fro / wassim
-
price of material ↑
materials issued tofuchoyaction
WIP
cost - Raw raw materials issued is
Fuel/ &
-
Transport
wastage / untrained workers
-
- New supplier chargea prices
VC DIRECT LABOUR COST
- Better quality raw mar .
Salary (Net
Gross (Basic) = Gross-deduct .
I
num
overtime
UIF contributions
no opening bal as its closed off
* &
FC FACTORY OVERHEAD COST
"cons · Stores used In factory
"
a factory Overheads
28 Feb
Indirect materials open + purch .
+ CO
.
.
P .
-
clos. 2Feb indirecta 2016
WIP
incl : contributions Indirect
Indirect labour excl : deductions labour
.. .
vehile maintenance
Rales & taxes
Insurance REASONS FOR INCR :
Incr should be in line
water
a electricity vario -
With inflation (15 % )
Rent expense should be fairly constant
-
Nor influenced by IV1 prod.
Sundry expenses
-
Deprecation
COST Of FINISHED GOODS SOLD
VC SELLING AND DISTRIBUTION COST
open stock
from
Advertising cost of
goods manuf WIP P C S
. .
vehile maintenance
1
-
stock
closing
FC ADMINISTRATION COST *
Cost of Sales
...
"Office"
2 Finished Goods
open cus
Wip clos
-
