Question

In: Accounting

Otho owns a pet shop, Nero Enterprises. The entity uses the perpetual inventory system to manage...

Otho owns a pet shop, Nero Enterprises.

The entity uses the perpetual inventory system to manage its inventory. All inventory sold is sold at 33% markup on cost.

Nero Enterprises is not registered as a VAT vendor, as the annual turnover is not expected to exceed R1 000 000. The entity also decided not to voluntary register for VAT.

The following is a summary of the source documents you received from Otho for April 2020:

1 The owner, Otho, deposited R46 000 in the bank as a further capital contribution. Receipt no. 116: Cash sales, R17 024.

3 Cheque no. 197: Purchased a computer from Pertinax for R14 000.

6 Supplier invoice C0222: Purchased inventory from Commodus, R38 000. Cheque no. 198: Paid the municipality for rates, R11 160.

13 Credit invoice 1120: Sales to Mr Galba, R12 768.

14 Cheque no. 199: Payment to Commodus for 50% of the invoice received on 6 April 2020.

15 Supplier invoice P6811: Received from Nexis for cleaning material, R2 000, as well as trading inventory, R28 657.

20 Cheque no. 200: Purchased inventory from Ela, R14 916.

28 Receipt no. 117: Received R10 100 from Mr Severus, a debtor. Receipt no. 118: Cash sales, R11 172. This amount was banked with the money as per receipt no. 117.

29 Credit invoice 1121: Issued to Macrinus, R18 221.

30 Cheque no. 201: Cash salaries for the month, R16 860. On inspection of the bank statement, it is noted that the following transactions are reflected only on the bank statement: deposit of R198 as interest on the favourable bank balance and R85 as the monthly bank fees.

Required: Record the transactions in the correct subsidiary journals. (show all workings)

2.1. Cash Receipts Journal

2.2. Cash Payments Journal

2.3. Debtors/Sales Journal

2.4. Creditors/Purchases Journal

Solutions

Expert Solution

CASH/BANK PAYMENTJOURNAL

1) (CONTRA ENTRY) BANK A/C DR---- 46000

TO CASH 46000

( BEING CASH DEPOSIT INTO BANK VIDE Receipt no. 116 )

2) COMPUTER A/C DR---14000

TO BANK 14000

( BEING Cheque no. 197 FOR Purchased a computer from Pertinax )

3) MUNCILPAL TAXES A/C--- DR 11160

TO BANK 11160

( BEING PAYMENT TO MUNICIPALITY VIDE CHEQUE NO 198)

4) COMMODO A/C DR---- 18000

TO BANK 18000

( BEING PAYMENT OT COOMODO VIDE Cheque no. 199 )

5) PURCHASES A/C DR----14916

TO BANK 14916

( BEING INVENTORY PURCHASED VIDE Cheque no. 200)

6) SALARIES A/C DR--- 16860

TO BANK 16860

( BEING SALARIES PAID VIDE Cheque no. 201)

7) (CONTRA ENTRY) BANK A/C DR-11172

TO CASH 11172

(BEING CASH DEPOSIT INTO BANK VIDE receipt no. 117 )

8) BANK CHARGES DR--- 85

TO BANK 85

( BEING MONTHLY BANK CHARGES RECORDED)

CASH/BANK RECEIPTJOURNAL

1) (CONTRA ENTRY) BANK A/C DR---- 46000

TO CASH 46000

( BEING CASH DEPOSIT INTO BANK VIDE Receipt no. 116 )

2) CASH A/C DR----17024

TO SALES 17024

(BEING CASH SALE MADE)

3) CASH A/C DR--- 10100

TO Mr Severus 10100

(BEING CASH RECEIVED FROM MR. SEVERUS VIDE Receipt no. 117)

4) CASH DR---11172

SALES 11172

(BEING CASH SALES MADE)

5) (CONTRA ENTRY) BANK A/C DR-11172

TO CASH 11172

(BEING CASH DEPOSIT INTO BANK VIDE receipt no. 117 )

6) BANK A/C DR---198

TO BANK INTEREST 198

(BEING BANK INT RECORDED)

Debtors/Sales Journal

1) MR. GABLA A/C DR-----12768

TO SALES 12768

( BEING CREDT SALE MADE VIDE Credit invoice 1120 )

2)  Macrinus DR-- 18221

TO SALES 18221

( BEING CREDT SALE MADE VIDE Credit invoice 1121)

Creditors/Purchases Journal

1) PURCHASES A/C--DR 38000

TO COMMODU 38000

( BEING CREDIT PURCHASE MADE VIDE Supplier invoice C0222 )

2) CLEARING MATERIAL DR---2000

TO NEXIS 2000

( BEING MATERIAL PURCHASED ON CREDIT VIDE Supplier invoice P6811 )


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