FAC1502 Financial Accounting_fac1502_assignment_1_semester_1_2019.

FAC1502 Financial Accounting_fac1502_assignment_1_semester_1_2019.Accounting is therefore a process consisting of the following three activities:  Identifying those events that are evidence of economic activity (transactions) relevant to the particular business or entity  Recording the monetary value of the economic events (transactions) in order to provide a permanent history of the financial activities of a business. Recording involves keeping a chronological diary of measured events in an orderly and systematic manner and classifying and summarising economic events  Communicating the recorded information to interested users. This information is communicated through the preparation and distribution of accounting reports, the most common of which are known as financial statements. 2. 3 Financial statements can be prepared annually, six-monthly, quarterly or even on a monthly basis. The financial statements prepared for periods of six months and less are usually for internal use by management, for planning and control purposes. Annual financial statements are compiled on the same date each year and are used by internal (planning and control) and external parties. The period from that date in one year to the day preceding it in the following year is a financial year. Financial statements must, by law, be compiled annually for companies and close corporations. S - The Marketplace to Buy and Sell your Study Material Downloaded by: thelmatonny | Distribution of this document is illegal This study source was downloaded by from CourseH on :24:53 GMT -06:00 S - The Marketplace to Buy and Sell your Study Material © CTM Tutoring All rights reserved +19 3. 2 4. 1 Vehicles account (Asset) will increase Bank account (Asset) will decrease because of the cheque issued 5. 1 The list of zero rated items includes the following items:  brown bread  dried mealies  dried beans  lentils  pilchards or sardinella in tins or cans S - The Marketplace to Buy and Sell your Study Material Downloaded by: thelmatonny | Distribution of this document is illegal This study source was downloaded by from CourseH on :24:53 GMT -06:00 S - The Marketplace to Buy and Sell your Study Material © CTM Tutoring All rights reserved +19  rice  fresh fruit and vegetables  vegetable oil  Farming inputs  eggs  edible legumes. 6. 5 Income received in advance can be seen as the direct opposite of accrued income. With accrued income, money is owed to the entity for inventory sold or services already rendered, whereas with income received in advance money has already been received but the inventory or service has not yet been delivered. 7. 3 Income received in advance can be seen as the direct opposite of accrued income. With accrued income, money is owed to the entity for inventory sold or services already rendered, whereas with income received in advance money has already been received but the inventory or service has not yet been delivered. Accrued or arrear expenses are expenses that were incurred during a particular financial year, but which have not yet been paid or recorded in the books of the entity. A prepaid S - The Marketplace to Buy and Sell your Study Material Downloaded by: thelmatonny | Distribution of this document is illegal This study source was downloaded by from CourseH on :24:53 GMT -06:00 S - The Marketplace to Buy and Sell your Study Material © CTM Tutoring All rights reserved +19 expense is an item that was paid for and recorded during a certain financial period but which pertains to one or more future periods. When an asset is purchased, it is expected to produce income over a certain period, usually longer than one year. The asset gradually loses value over its useful life, which cannot always be determined precisely and has to be estimated. The estimation of the portion of the cost of an asset used in the production of income is known as depreciation. Depreciation is thus the accounting process by means of which the cost of an asset is fairly and systematically allocated to expenses over the economic life of that asset. 8. 4 Selling price excluding vat = 15 525* 100/115 = 13 500 Margin = 35/(100+35) = 26% Gross profit = 13 500* 26% = 3500 Cost price = 13 500 – 3 500 = 10 000 9. 5 Any expenses incurred to bring the merchandise to its present location and condition, for example, import duties and freight on purchases, should be debited to the inventory account, as these expenses form part of the cost price of the merchandise purchased. When merchandise is sold, the cost price of the sales is transferred from the inventory account to a cost of sales account.