MODULE 3

RECONCILIATION
Note to the Teacher:
It is important that learners understand and are able to draw up cash journals and post to the bank account
in the General Ledger. This should have been covered adequately in Grade 10. The following three Tasks
may be used to assess the competency level of your learners. If your learners are sufficiently competent
with these skills proceed to Task 4.

TASK 3.1 Ashley: Revision - Case study

3.1.1 Explain how Ashley benefits from operating a current banking account.
Safety – he does not have to keep large amounts of cash as the cheque account allows for daily depositing.
Cheques are reasonably safe and convenient means of payment.
Any other valid reason may apply.

3.1.2 Calculate Ashley’s bank balance on 30 June.

2 500 – 1 800 + 1 960 = R2 660

3.1.3 Will Ashley’s bank balance be the same as that of the bank statement? Explain.
No.
The bank has already deducted the charges from Ashley’s account.
Ashley’s books will not have reflected the charges.

3.1.4 If not, what would the balance in the bank statement be?
2 660 – 124 = R2 536

3.1.5 Ashley’s financial records would have to be updated with the charges appearing on the
bank statement. In which journal would he record this?
CPJ

3.1.6 After updating his financial records, will Ashley’s bank account balance be the same as
that of his account at the Bank? Explain.
Yes.
His bank account balance of R2 660 will decrease by R124 thus giving him a balance of R2 536.

New Era Accounting: Grade 11 1 Teacher’s Guide

TASK 3.2 BB Traders: Revision Task on cash journals
CASH RECEIPTS JOURNAL OF BB TRADERS FOR JANUARY 20.5 CRJ
Doc. Analysis of Cost of Sundry accounts
D Details Fol Bank Sales
no. receipts sales Amount Fol Details
R001 1 B. Ben 500 000 500 000 Capital
R002 4 Alpha Insurance Association 500 000 500 000 Loan: Alpha Ins. Assoc.
R003 9 Namaqua Butchery 13 500 13 500 13 500 Rent income
R004 15 B. Ben 120 000 120 000 Capital
CRT 17 Sales 53 980 53 980 53 980 29 940
CRT 23 Sales 43 870 43 870 43 870 24 370
CRT 30 Sales 49 450 49 450 49 450 27 470
EFT Sandveld Trust 110 110 Interest on fixed deposit
1 280 910 147 300 81 780 1 133 610

New Era Accounting: Grade 11 2 Teacher’s Guide

CASH PAYMENTS JOURNAL OF BB TRADERS FOR JANUARY 20.5 CPJ
Doc. Trading Sundry accounts
D Details Fol Bank Stationery
no. stock Amount Fol Details
001 2 Cash 1 500 1 500 Petty cash
002 Cash 2 000 2 000 Cash float
003 5 AK Agents 300 000 300 000 Premises/Land & Buildings
004 6 FFS Shopfitters 53 575 53 575 Equipment
005 7 ABC Wholesalers 19 645 19 645
006 Office Suppliers Ltd. 12 250 12 250 Equipment/Furniture
007 8 Witbank Municipality 1 500 1 500 Licence
008 9 Hawk Insurance Brokers 6 000 6 000 Insurance
009 11 Office Suppliers Ltd 24 000 24 000 Equipment
010 12 Hawk Insurance Brokers 12 000 12 000 Insurance
011 13 Afghan Stationers 575 575
012 14 B. Ben/Cash 2 500 2 500 Drawings
013 16 Cash 500 500 Petty cash
014 TJ Traders 22 168 22 168
015 Sandveld Trust 50 000 50 000 Fixed deposit: Sandveld Trust
016 17 Fast Carriers 1 250 1 250
017 20 Municipality/Electricity Dept. 3 950 3 950 Water and electricity
018 21 FM Stationers 600 600
019 22 B. Ben/Cash 850 850 Drawings
020 23 SA Transport Services 2 850 2 850
021 25 Alpha Insurance Association 37 560 25 000 Loan: Alpha Ins. Assoc.
12 560 Interest on loan
022 26 NM Stationers 3 045 3 045
023 27 City Treasurer 6 850 6 850 Rates and taxes
024 Witbank Wholesalers 16 510 15 998 512 Consumable stores
025 30 L. Lane 17 200 17 200 Salaries
026 M. Michael 17 500 17 500 Salaries
027 Cash 1 840 1 840 Petty cash
B/S Memela Bank 412 412 Bank charges
618 630 4 220 61 911 552 499

New Era Accounting: Grade 11 3 Teacher’s Guide

TASK 3.3  Baseline assessment
COLUMN A COLUMN B COLUMN A COLUMN B
A 13 M 3
B 11 N 22
C 9 O 4
D 10 P 6
E 14 Q 8
F 15 R 2
G 17 S 20
H 18 T 1
I 21 U 7
J 19 V 12
K 23 W 5
L 16

TASK 3.4  Joe Duffy: Bank Statement and cash journals

3.4.1 Calculate the bank balance in the books of Joe Duffy. Indicate whether the bank bal-
ance is favourable or unfavourable.
Total deposits R19 400
Total cheque payments 2 900
Favourable bank balance R16 500

3.4.2 Calculate the bank balance as per the bank statement. Indicate whether the bank bal-
ance is favourable or unfavourable.
Total deposits R19 400
Total cheque payments 2 900
Favourable B/S balance R16 500

3.4.3 From Joe Duffy’s point of view, is the bank balance an asset or a liability?
Asset

3.4.4 From the bank’s point of view, is the bank balance an asset or a liability?
Liability

3.4.5 Compare the bank balances in 3.4.1 and 3.4.2 above. What conclusion can you draw
from these?
Both balances are equal – all deposits appear on the bank statement and all cheques issued have been pre-
sented to the bank.

3.4.6 Refer to the payment of R1 500 in the CPJ on 06-05. This amount also appears on the
bank statement. What does this imply?
The cheque has been presented to the bank for payment.

3.4.7 Refer to the payment of R1 500 in the CPJ on 06-05. This amount appears on the bank
statement on 10-05. Explain the difference in the dates.
Joe Duffy issued the cheque on the 06th; the payee presented the cheque on the 10th.
The payee can present the cheque to the bank at any time after he has received the cheque.
The cheque is no longer valid after six months when the cheque becomes stale.

3.4.8 Does Joe Duffy make daily deposits? Explain.

No.
He makes deposits periodically.
He probably wants to save on bank charges – deposits attract a fee called cash deposit fees.

New Era Accounting: Grade 11 4 Teacher’s Guide

3.4.9 Joe Duffy made three cheque payments during May. For what reasons could these
cheques have been issued? Give four examples.
To buy stock; to pay a supplier; to purchase consumables; to pay for repairs; etc.

3.4.10 Assume that the deposit of R5 400 does not appear on the May bank statement.
What would this imply?
The books of Joe Duffy and the bank would not be in balance.

3.4.11 Give a possible reason for the deposit of R5 400 not appearing on the bank state-
ment.
The deposit is late – the amount was deposited after the bank statement had been completed.

3.4.12 Assume that the cheque for R600 does not appear on the May bank statement. What
would this imply?
The books of Joe Duffy and the bank would not be in balance.

3.4.13 Give a possible reason for the cheque for R600 not appearing on the bank statement.
The payee has not yet presented the cheque to the bank for payment.

TASK 3.5  Bank Statement

BANK STATEMENT (Extract)
Details Date Debits Credits Balance
Balance 01-11 6 142
Deposit 03-11 1 500 7 642
Cheque 781 05-11 1 122 6 520
Deposit 06-11 1 761 8 281
Deposit 10-11 2 344 10 625
Cheque 780 15-11 138 10 487
Cheque 784 18-11 669 9 818
Deposit 21-11 1 800 11 618
Cheque 783 25-11 467 11 151
Deposit 26-11 2 315 13 466
Deposit 28-11 1 966 15 432

TASK 3.6 Case study on Internet fraud

3.6.1 What do you understand by “spyware”? Explain to the person sitting next to you how
you think the hackers use this spyware.
Learners to discuss with their fellow pupils from their own experience.
It is not so much the full understanding of how the equipment works, but the realisation that this is taking
place and therefore, internet users have to be extra vigilant.
Spyware is used by hackers to read the customer’s data.
This can take the form of reading your profile on the internet or at an ATM.
By some sophisticated mechanism, they can ‘hack’ into your system and read the keystrokes to obtain your
PIN code, etc.
In most cases, the customer has to allow them in by accepting their email.

New Era Accounting: Grade 11 5 Teacher’s Guide

3.6.2 This article was written a few years ago. Do you think that this type of fraud has been
eliminated today? Why? Discuss using examples from your own experience or from
what you have read.
Learners to give their own opinions.
Fraud and hacking on the internet is still taking place, so therefore, the authorities have not been able to
stop it completely.
As soon as they stop one process, the hackers develop something else.

3.6.3 What, in your opinion, makes a person engage in fraud of any sort? Do you believe they
are justified in their opinion?
Learners to give their own opinions.
Suggestions:
It is unethical and unlawful.
People are often driven to this type of crime due to greed or due to their personal circumstances, e.g. hun-
ger, etc.
However, it does entail a degree of intelligence to be involved in this type of crime – can they not put these
skills to better use?
Perhaps it is so lucrative and the sentences are not very high.

3.6.4 How can customers making use of the internet banking facility assist the banks in re-
ducing the amount of fraud? Discuss as many measures as you can.
Do not give out your pin or banking details.
Do not let anybody else work on your internet banking.
Log off when you are finished.
Do not respond to emails that ask for private details and pin codes.
Do not accept email from people you do not know.
Be vigilant at all times.
Etc.

3.6.5 In your opinion what is the effect of fraud of this nature on the economy of the country.
Even if the clients are insured, somebody is losing and this has a negative effect.
This results in higher premiums which causes hardships to people.
So much money is spent on security that could be better spent elsewhere.
Has a negative effect on tourism and investment in the country.

TASK 3.7 On-line banking

Suggested marking grid:
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4
A thorough re-
Some attempt to Adequate research Excellent research
search is evident so
conduct a research is evident in order which ensures that
Research that a meaningful
but little valuable to complete the an in-depth report
report can be pro-
evidence. report. can be produced.
duced.
Some attempt to Thorough interpre- Excellent interpre-
Interpreting in- Adequate interpre-
adequately inter- tation of data so tation of data en-
formation tation based on
pret the infor- that a meaningful suring an in-depth
research.
mation. report is produced. report.
Thorough explana- Excellent explana-
Explanations Some attempt to Adequate explana- tions ensuring an
tions ensuring a
give explanations. tions given. in-depth report.
meaningful report.

New Era Accounting: Grade 11 6 Teacher’s Guide

TASK 3.8  Bank Statement

FIRSTBANK GROUP FirstBank of South Africa Limited

Registered Bank
PIETERMARITZBURG NORTH Reg. No. 19433/24356560
PO Box 3211 PIETERMARITZBURG 3200 VAT Reg. No. 41500209871
23 March 20.6
MR G. VAN ROVER
PO BOX 991
PIETERMARITZBURG
3200

PIETERMARITZBURG NORTH 7925 Statement No. 231

MONTHLY MAIL Page 1 of 1

BANK STATEMENT / TAX INVOICE

Masterplan Cheque Account Account Number: 05 114 006 7

Service
Details Debits Credits Date Balance
fees
BALANCE BROUGHT FORWARD 03.01 238.91
AUTOBANK CASH WITHDRAWAL AT CASCADES .
11H01 460098 11.80 1 000.00 03.02 -761.09
INTEREST ON OVERDRAFT 42.45 03.14 -803.54
CHEQUE 423 3.40 120.00 03.14 -923.54
ELECTRONIC BANKING PAYMENT:
SALARY 324 4.73 14 000.48 03.20 13 076.94
INTERNET PAYMENT TO TELMOK 460098 5.19 555.66 03.20 12 521.28
MCHOICE SERVICE AGREEMENT 1017989 8.59 579.00 03.21 11 942.28
QW MEDICAL AID 12345 5.19 789.00 03.21 11 153.28
OLD MUTUAL INSURANCE PREMIUM 34446 5.19 1 210.00 03.22 9 943.28
CHEQUE 425 2.80 6 578.99 03.22 3 364.29
ELECTRONIC TRANSFER:
R. JACKSON 21311 2.80 300.75 03.22 3 665.04
SERVICE FEE 49.69 03.22 3 615.35

These fees are inclusive of VAT at 14.00%.

Please verify all transactions reflected on this statement and notify any discrepancies to the
bank as soon as possible.

3.8.1 State three reasons which indicate that this bank statement refers to a private individ-
ual and not a business concern.
 It is addressed to a private individual and not to a business.
 The Autobank cash withdrawal at Cascades.
 Electronic banking payment in respect of salary.
 A business would make deposits more regularly.
 Etc.

3.8.2 Complete the missing details marked ‘*’. Indicate overdrawn amounts with a ‘-’. E.g. -
R19
Refer to the bank statement.

3.8.3 Mr G. Van Rover made a deposit of R250 on 24 March 20.6. Give one possible reason
why this deposit does not appear on the bank statement.
The bank statement is dated 23rd while the deposit was made on the 24th.

New Era Accounting: Grade 11 7 Teacher’s Guide

3.8.4 Cheque no. 424 for R2 500 was issued during March 20.6. Give one possible reason
why this cheque does not appear on the bank statement.
The payee has not presented the cheque to the bank.

3.8.5 Which transaction indicates that Mr G. Van Rover does internet banking?
Internet payment to Telmok.

3.8.6 Are electronic payments/transfers safer than writing out cheques? Explain.
Yes.
Cheques can fall in the wrong hands.
Cheques can be lost or stolen.
Electronic payments are cleared quicker than cheques.
Etc.

TASK 3.9  Introduction to Bank Reconciliation

3.9.1 Calculate the bank balance in the books of G. van Rover on the 23 March 20.6.
CRJ total: R14 551.23
CPJ total: R10 754.65
Bank balance: 238.91 + 14 551.23 – 10 754.65 = R4 035.49

3.9.2 Compare the balance in the bank account to the balance you calculated on the bank
statement in the previous Task.
Bank statement balance is R3 615.35 while the bank account balance is R4 035.49.

3.9.3 Discuss potential problem areas and why the balances do not agree.
R250 commission which was deposited on the 23 rd does not appear on the bank statement.
Cheque no. 424 for R2 500 in respect of rates and taxes does not appear on the bank statement.
R42.45, R579, R789, R1 210 and R49.69 appear on the bank statement but do not appear in the CPJ.

3.9.4 Process entries that you deem are necessary in order to correct the situation above.
You are required to give an explanation as to why you are processing the entries.
R250: Record in the Bank Reconciliation Statement (credit side) as an outstanding deposit. The deposit
appears in the CRJ but not on the bank statement.
R2 500: Record in the Bank Reconciliation Statement (debit side) as an outstanding cheque. The cheque
appears in the CPJ but not on the bank statement.
R42.45: Record in the CPJ as interest on overdraft. The interest appears on the bank statement but not in
the CPJ.
R579: Debit/stop order – record in the CPJ.
R789: Debit/stop order – record in the CPJ.
R1 210: Debit/stop order – record in the CPJ.
R49.69: Bank charges – record in the CPJ.

Updated CPJ total: 10 754.65 + 42.45 + 579 + 789 + 1 210 + 49.69 = R13 424.79
Updated bank balance: 238.91 + 14 551.23 – 13 424.79 = R1 365.35

BANK RECONCILIATION STATEMENT ON 31 MARCH 20.6

Debit Credit
Balance as per bank statement 3 615.35
Outstanding deposit 250.00
Outstanding cheques: No. 424 2 500.00
Balance as per bank account 1 365.35
3 865.35 3 865.35

New Era Accounting: Grade 11 8 Teacher’s Guide

CASH RECEIPTS JOURNAL FOR MARCH 20.6 CRJ
Doc D Details Bank Sundry Details of sundry
Transfer 20 Salary 14 000.48 14 000.48 Salary
Transfer 22 R. Jackson 300.75 300.75 Rent
Rec 100 23 B. Beki 250.00 250.00 Commission
14 551.23 14 551.23

CASH PAYMENTS JOURNAL FOR MARCH 20.6 CPJ

Doc D Details Bank Sundry Details of sundry
ATM 2 Cash 1 000.00 1 000.00 Sundry expenses
C423 14 Mnet 120.00 120.00 TV fees
C424 16 City Treasurer 2 500.00 2 500.00 Rates and taxes
Internet 20 Telmok 555.66 555.66 Telephone
C425 22 Wakefields 6 578.99 6 578.99 Rent
B/S 23 Firstbank Group 42.45 42.45 Interest on o/draft
B/S Mchoice 579.00 579.00 Subscriptions
B/S QW Medical Aid 789.00 789.00 Medical aid
B/S Old Mutual 1 210.00 1 210.00 Insurance
B/S Firstbank Group 49.69 49.69 Bank charges
13 424.79 13 424.79

3.9.5 Report back to the class and share your ideas.

Note to Teacher:
Allow learners time to share their ideas and explore their own opinion.
Ensure that they justify their opinion and ideas with sound, logical reasoning.

Suggestion: Allow students who are struggling with this concept to draw their own diagram us-
ing drawings, pictures from magazines or the internet to demonstrate this concept.

Suggestion: Groups can work on a poster to show in picture format the journey of a cheque or
a dishonoured cheque or a credit card purchase and pin them up on your classroom wall.

TASK 3.10  Sarah: Discussion on ethics

Learners are to discuss and give their own opinions.
Suggestions:
Do you agree with Sarah?
It is unethical and unlawful to issue cheques when you do not have the money in the account.

Why?
You will give yourself a bad name and could end up been blacklisted. This could have a negative result next
time you apply for credit.

Explain to her what the consequences are of her approach to writing out cheques when she
does not have the money in the account.
Even if people owe you money, it is not an excuse to write out cheques without having the money in the
account.

Share your feelings with the person sitting next to you.

The bank levies heavy bank charges on all R/D cheques.

New Era Accounting: Grade 11 9 Teacher’s Guide

TASK 3.11 Khan Stores: Bank Reconciliation
3.11.2
KHAN STORES
CASH RECEIPTS JOURNAL FOR MAY 20.8 CRJ
Debtors control Sundry accounts
Doc. Cost of
D Details Fol Bank Sales Discount
No. sales Receipts Amount Fol Details
allowed
31 Totals b/f 2 937 2 101 1 401 836 44
B/S Glow Flora 875 875 Rent income
3 812 2 101 1 401 836 44 875
B
CASH PAYMENTS JOURNAL FOR MAY 20.8 CPJ
Creditors control Sundry accounts
Station- Creditors Trading
Doc. No. D Details Fol Bank
ery for wages Payments Discount stock Amount Fol Details
received
31 Totals b/f 6 019 207 2 000 496 18 2 025 1 291
B/S J. Sewak (r/d) 416 416 Debtors control
B/S QuikBank 454 167 Bank charges
287 Interest on o/d
B/S Olive Insurers 750 650 Insurance
100 Drawings
B/S J. Khan 1 500 1 500 Drawings
9 139 207 2 000 496 18 2 025 4 411
B
3.11.3 GENERAL LEDGER OF KHAN STORES
BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.8 20.8
May 31 Sundry accounts CRJ 3 812 May 1 Balance b/d 930
Balance c/d 6 257 31 Sundry accounts CPJ 9 139
10 069 10 069
June 1 Balance b/d 6 257

New Era Accounting: Grade 11 10 Teacher’s Guide

3.11.4 BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.8
Debit Credit
Balance as per bank statement 5 506
Outstanding deposit 530
Outstanding cheques: No. 753 499
No. 755 782
Balance as per bank account 6 257
6 787 6 787

Note to Teachers:
The one column method can also be used.

3.11.4 BANK RECONCILIATION STATEMENT AS AT 31 MAY 20.8

Balance as per bank statement (5 506)
Outstanding deposit 530
Outstanding cheques: No. 753 (499)
No. 755 (782)
Balance as per bank account 6 257

TASK 3.12 Tripco: Bank Reconciliation

3.12.2 CASH RECEIPTS JOURNAL OF TRIPCO FOR FEBRUARY 20.8 CRJ
Debtors control Sundry accounts
Doc. Cost of
D Details Fol Bank Sales Discount
No. sales Receipts Amount Fol Details
allowed
28 Totals b/f 37 460 33 500 25 125 1 960 40 2 000
B/S ZipBank 300 300 Interest income
B/S B. Bugbear 2 100 2 100 -
B/S N. Fellow 420 420 Bad debts recovered
B/S Municipality 670 670 Water & electricity
40 950 33 500 25 125 4 060 40 3 390
B

New Era Accounting: Grade 11 11 Teacher’s Guide

CASH PAYMENTS JOURNAL FOR FEBRUARY 20.8 CPJ
Consum- Creditors control Sundry accounts
Trading
Doc. No. D Details Fol Bank able Discount
stock Payments Amount Fol Details
stores received
28 Totals b/f 22 980 1 230 13 360 1 900 190 6 490
B/S H. Flier (r/d) 1 960 1 960 Debtors control
B/S ZipBank 819 503 Bank charges
316 Interest on o/d
B/S Cash Co. Ltd. 2 960 2 960 Loan: Cash Co. Ltd.
B/S Rob Morse 2 500 2 500 Salary
31 219 1 230 1 900 190 13 360 14 729
B

3.12.3 GENERAL LEDGER OF TRIPCO

BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.8 20.8
Feb 28 Sundry accounts CRJ 40 950 Feb 1 Balance b/d 3 780
28 Sundry accounts CPJ 31 219
Balance c/d 5 951
40 950 40 950
Mar 1 Balance b/d 5 951

3.12.4 BANK RECONCILIATION STATEMENT AS AT 28 FEBRUARY 20.8

(or make use of the 1 column method)
Debit Credit
Balance as per bank statement 9 641
Outstanding deposit 6 800
Outstanding cheques: No. 095 3 950
No. 096 5 990
No. 097 550
Balance as per bank account 5 951
16 441 16 441
Note: Cheque no. 087 was outstanding in the previous month, i.e. January. This cheque has been presented for payment in the current period, i.e. February.
The cheque will not be recorded – it will be ticked off in the January Bank Reconciliation Statement.

New Era Accounting: Grade 11 12 Teacher’s Guide

TASK 3.13  Bank Reconciliation
Bank Reconciliation
Cash Journal
No. Item Statement
CRJ CPJ DEBIT CREDIT
1. Bank charges as per B/S. X
2. Cheques not yet presented for payment. X
3. R/D cheques. X
4. Interest on overdraft. X
5. Rent deposited into banking account by tenant. X
Direct payment made by debtor into banking X
6.
account of the business.
7. Interest earned on current banking account. X
8. Debit orders as reflected in the B/S. X
9. Deposit not yet credited by the bank. X
10. Credit card levies as reflected in the B/S. X

TASK 3.14  Ben: Internal control

No. Problem Solution
Try to employ somebody else or do the job yourself to
1. Mary is responsible for too many jobs.
ensure division of duties.
Mary receives the cash and banks the mon-
2. Try to get somebody else to check Mary.
ey.
Receipts must always be completed to act as proof
3. Mary does not always complete a receipt.
that the transaction has taken place.
Either Mary must deposit the cash daily or somebody
4. Mary does not deposit cash regularly.
else must assist her.
There are large outstanding deposits at the All deposits must be made before the bank reconcilia-
5.
end of the month. tion is completed.
Somebody else must complete the bank reconciliation
6. Mary is drawing up the bank reconciliation.
process.

New Era Accounting: Grade 11 13 Teacher’s Guide

TASK 3.15  Scoop Dealers: Bank Reconciliation
3.15.1 SCOOP DEALERS
CASH RECEIPTS JOURNAL FOR MARCH 20.9 CRJ
Debtors control Sundry accounts
Doc. Cost of
D Details Fol Bank Discount Sales
No. Receipts sales Amount Fol Details
allowed
31 Totals b/f 7 801* 2 409 120 3 988 2 650 1 404
B/S H. Appleton 1 300 1 300 -
B/S Mr Doodle 2 500 2 500 Rent income
11 601 3 709 120 3 988 2 650 3 904
B
*2 409 + 3 988 + 1 404

CASH PAYMENTS JOURNAL FOR MARCH 20.9 CPJ

Creditors control Sundry accounts
Doc. Trading Debtors
D Details Fol Bank Discount
No. stock Payments control Amount Fol Details
received
Totals b/f 9 375* 4 444 1 908 110 1 345 1 678
B/S 31 FirstBank 259 181 Bank charges
78 Interest on o/d
191 QR Stores 1 250 1 250 -
B/S C. Springer (r/d cheq) 451 451
B/S Multisat 350 350 Drawings
B/S Allsure Insurers 450 450 Insurance
12 135 4 444 3 158 110 1 796 2 737
B
*4 444 + 1 908 + 1 345 + 1 678

New Era Accounting: Grade 11 14 Teacher’s Guide

3.15.2 GENERAL LEDGER OF SCOOP DEALERS
BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.9 20.9
Mar 31 Sundry accounts CRJ 11 601 Mar 1 Balance b/d 250
Balance c/d 784 31 Sundry accounts CPJ 12 135
12 385 12 385
April 1 Balance b/d 784

3.15.3 BANK RECONCILIATION STATEMENT AT 31 MARCH 20.9

Debit Credit
Balance as per bank statement 3 156
Outstanding deposit 800
Outstanding cheques: No. 191 1 250
No. 201 280
No. 220 2 450
No. 223 760
Balance as per bank account 784
4 740 4 740

3.15. All businesses should prepare bank reconciliation statements regularly. Provide two
4 reasons for this.
 Confirms the accuracy of all transactions recorded in the cash journals and the balance in the bank a c-
count.
 Keeps track of outstanding cheques, deposits, r/d cheques, bank charges, debit orders, etc.
 Identifies errors/omissions in the cash journals.
 Identifies errors/omissions in the bank statement.

TASK 3.16 Completion of table: Cash journals

Provisional totals
Bank charges
(amounts re-

R/d cheques
Debit orders

(before receipt of
Interest on

Final totals
the bank state-
Electronic

overdraft
transfers

No. ment)
ceived)

CRJ CPJ CRJ CPJ

1. 500 230 50 120 0 12 0 620 292

2. 1 444 1 983 234 896 220 54 72 2 340 2 563
3. 7 320 3 337 1 389 455 1 444 68 0 7 775 6 238
4. 6 528 7 002 612 0 989 119 345 6 528 9 067
5. 1 535 4 650 2 000 1 652 350 130 386 3 187 7 516

TASK 3.17 Bank Reconciliation

3.17.1
Balance as per Bank Balance as per Bank
No. account (indicate if Outstanding deposit Outstanding cheque Statement (indicate
debit or credit) if debit or credit)
1. 2 000 Dr 3 450 2 450 1 000 Cr
2. 520 Cr 150 0 670 Dr
3. 15 Cr 98 89 24 Dr
4. 5 612 Dr 12 277 2 344 4 321 Dr
5. 909 Dr 1 245 444 108 Cr

New Era Accounting: Grade 11 15

3.17.2 BANK RECONCILIATION STATEMENT
Debit Credit
Balance as per bank account 520
Outstanding deposit 150
Outstanding cheques 0
Balance as per bank statement 670
670 670

Skill check!
 If learners have not mastered this skill encourage them to prepare the Bank Reconciliation
Statement for numbers 3 and 5.

3. BANK RECONCILIATION STATEMENT

Debit Credit
Balance as per bank account 15
Outstanding deposit 98
Outstanding cheques 89
Balance as per bank statement 24
113 113

5. BANK RECONCILIATION STATEMENT

Debit Credit
Balance as per bank account 909
Outstanding deposit 1 245
Outstanding cheques 444
Balance as per bank statement 108
1 353 1 353

Note to Teacher:
Learners need to understand the difference between receiving a post-dated cheque and paying a post-dated
cheque. When a post-dated cheque is received, it cannot be deposited until the due date. This causes a
problem as the cheque can be lost or mislaid if it is not put in a safe place and that you remember to deposit
it on the date of the cheque.

When a business issues a post-dated cheque, they regard it as if the amount has already been taken out of
the bank and therefore it is recorded in the Cash Payments Journal immediately. The date written on the
cheque is not relevant.

TASK 3.18  Ntuli Traders: Bank Reconciliation

3.18.1 NTULI TRADERS
CASH RECEIPTS JOURNAL FOR OCTOBER 20.9 CRJ
Doc. Sundry accounts
D Details Fol Bank
no. Amount Fol Details
31 Totals b/f 12 300 12 300
B/S M. Milligan 2 500 2 500 Rent income
14 800 14 800
B
NOTE:
The cheque for R800 received from H. Reubens is not recorded as the cheque is post -dated.

New Era Accounting: Grade 11 16

 CASH PAYMENTS JOURNAL FOR OCTOBER 20.9 CPJ
Doc. Sundry accounts
D Details Fol Bank
no. Amount Fol Details
31 Totals b/f 8 425 8 425
B/S Credit Bank 375 240 Bank charges
135 Interest on overdraft
B/S Midas Insurance Co. 3 100 2 100 Insurance
1 000 Drawings
B/S M. Fysh (r/d) 390 390 Debtors control
51 Care Hugo & Co. 1 230 1 230 Creditors control
13 520 13 520
B
NOTE:
Even though cheque no. 51 is post-dated, it must be entered in the CPJ and treated as outstanding in the
Bank Reconciliation Statement.

3.18.2 GENERAL LEDGER OF NTULI TRADERS

BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.9 20.9
Oct 31 Sundry accounts CRJ 14 800 Oct 1 Balance b/d 1 700
Balance c/d 420 31 Sundry accounts CPJ 13 520
15 220 15 220
Nov 1 Balance b/d 420

3.18.3 BANK RECONCILIATION STATEMENT AT 31 OCTOBER 20.9

Debit Credit
Balance as per bank account 420
Outstanding deposit 4 600
Outstanding cheques: No. 34 1 870
No. 45 300
No. 51 1 230
Balance as per bank statement 1 620
5 020 5 020

TASK 3.19 Ciara Stores: Bank Reconciliation

3.19.1 Refer to no. 1. Is this balance required for reconciliation purposes? Explain why.
No.
This is the opening balance for March brought forward from the previous month’s (February) bank state-
ment.
This balance would have been used for reconciliation in February.
3.19.2 Refer to no. 5. Who made this error? Explain how this error is corrected.
The error was made by the bank.
The error is corrected in the Bank Reconciliation Statement.
The bank would have credited Ciara Stores with the deposit.
A debit entry is, therefore, needed to correct the error.
3.19.3 Why is it necessary to process an entry for no. 5? Why can one not just keep quiet
about it? Discuss.
Firstly you would not have a credit entry or account for this amount – unless a fictitious one was made.
This is unethical.
Allow the learners to discuss this answer – guide them on the ethics and the right and wrong in this situa-
tion.

New Era Accounting: Grade 11 17

3.19.4 Refer to no’s. 6, 7 and 8. Suggest a system which Ciara Stores can implement to pre-
vent a recurrence (repetition) of such errors.
No. 6 and 7:
Cheque stubs should be filled in correctly and completely.
A check with the invoice/statement/order can be made to verify the payment.
Before casting the journal a check should be made of all payments, preferably by another person in the
business.
No. 8:
Details on cheques should be carefully scrutinised.
The cashier or the person responsible for collections should check the following:
- The cheque must be completely filled.
- Amounts in words and figures agree.
- No alterations appear.
- The date is correctly filled in – a post-dated cheque should be kept away in a safe place and only deposit-
ed on the date stipulated on the cheque.
- Post-dated cheque payments need to be pre-authorised by the owner or a senior person in the business.
- Any other suitable answer.

3.19.5 Errors 6, 7 and 8

Effect on bank
No
No. Journal Account debit Account credit Amount balance
entry
+ - 0
6. CPJ Trading stock Bank R99 -
7. CRJ Bank Consumables R900 +
8. X

Note to Teacher:

Error no. 8:
The error was discovered immediately by the teller. He/she did not process the deposit. The deposit has
however been recorded in the CRJ. This deposit will have to be deleted and the figures adjusted according-
ly.

3.19.6 BANK RECONCILIATION STATEMENT ON 31 MARCH 20.2

Debit Credit
Balance as per bank statement 18 992
Outstanding deposit 5 598
Outstanding cheques 4 561
Amount wrongly credited 1 996
Balance as per bank account 18 033
24 590 24 590

3.19.7 Show how the bank balance of R18 033 was arrived at.
Opening bank balance 17 232
Amount understated [99]
Amount overstated 900
Bank balance 18 033

New Era Accounting: Grade 11 18

TASK 3.20  Amelia Retailers: Bank Reconciliation
3.20.1 CASH RECEIPTS JOURNAL OF AMELIA RETAILERS FOR AUGUST 20.3 CRJ
Doc. Sundry accounts
D Details Fol Bank
no. Amount Fol Details
31 Totals b/f 14 110 14 110
337 LifeLine Centre (stale) 500 500 Donation
B/S Khumalo Development 1 500 1 500 Rent income
921 Avery Stats (overstated) 540 540 Stationery
16 650 16 650
B

CASH PAYMENTS JOURNAL FOR AUGUST 20.3 CPJ

Doc. Sundry accounts
D Details Fol Bank
no. Amount Fol Details
31 Totals b/f 13 610 13 610
930 LifeLine Centre 1 000 1 000 Donation
B/S Fedbank 550 370 Bank charges
180 Interest on o/d
B/S SureFed Brokers 1 780 1 780 Insurance
B/S Upton CC (r/d) 340 340 Debtors control
B/S Mr Suttler (r/d) 3 190 3 190 Debtors control
925 Ayanda’s Bazaar (understated) 270 270 Trading stock
20 740 20 740
B

3.20.2 GENERAL LEDGER OF AMELIA RETAILERS

BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.3 20.3
Aug 1 Balance b/d 8 910 Aug 31 Sundry accounts CPJ 20 740
31 Sundry accounts CRJ 16 650 Balance c/d 4 820
25 560 25 560
Sep 1 Balance b/d 4 820

3.20.3 BANK RECONCILIATION STATEMENT AT 31 AUGUST 20.3

Debit Credit
Balance as per bank statement 3 920
Outstanding deposit 4 120
Outstanding cheques: No. 930 1 000
No. 935 2 220
Balance as per bank account 4 820
8 040 8 040

3.20.4 Explain the significance of a bank reconciliation statement.

 It confirms the accuracy of all transactions recorded in the cash journals and the balance in the bank a c-
count.
 It also keeps track of outstanding cheques, deposits, r/d cheques, bank charges.
 The reconciliation procedure also enables the trader to identify errors/omissions in the cash journals and
errors/omissions in the bank statement.

New Era Accounting: Grade 11 19

3.20.5 Refer to No. 6 below. How would you treat cheque no. 935 at the end of the financial
year? Supply reason(s).
The amount has not yet been deducted from Amelia’s current banking account.
This means that the account has not yet been paid.
On the Balance Sheet date, all post-dated cheques are reversed:
Add to Bank; Add to Creditors control.

TASK 3.21  Cosmos Stores: Bank Reconciliation

3.21.1 3.21.2
CRJ CPJ
54 210 49 210
529 254
2 900 788
2 500 4 562
500 327
1 344
3 500
60 639 59 985

3.21.3 GENERAL LEDGER OF COSMOS STORES

BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.8 20.8
Oct 31 Sundry accounts CRJ 60 639 Oct 1 Balance[1] b/d 8 924
Balance c/d 8 270 31 Sundry accounts CPJ 59 985
68 909 68 909
Nov 1 Balance b/d 8 270

[1]
14 320 + 500 + 1 548 + 996 – 8 440

3.21.4 BANK RECONCILIATION STATEMENT AT 31 OCTOBER 20.8

Debit Credit
Balance as per bank statement 4 011
Outstanding deposit 2 561
Outstanding cheques: No. 223 1 321
No. 236 1 999
No. 248 3 500
Balance as per bank account 8 270
10 831 10 831

TASK 3.22  Tyron Traders: Bank Reconciliation

3.22.1 TYRON TRADERS
CASH RECEIPTS JOURNAL FOR SEPTEMBER 20.4 CRJ
Doc. Sundry accounts
D Details Fol Bank
no. Amount Fol Details
30 Totals b/f 33 220 33 220
512 TT Tennis Club (cancelled) 150 150 Donation
767 Arrow Adverts (overstated) 270 270 Advertising
B/S EBSE Bank 10 200 10 000 Fixed deposit
200 Interest income
43 840 43 840
B

New Era Accounting: Grade 11 20

CASH PAYMENTS JOURNAL FOR SEPTEMBER 20.4 CPJ
Doc. Sundry accounts
D Details Fol Bank
no. Amount Fol Details
30 Totals b/f 40 921 40 921
B/S ConBank 608 175 Interest on o/d
433 Bank charges
781 Mike Motors (understated) 18 18 Repairs
B/S Z. Shezi (r/d cheque) 310 310 Debtors control
B/S D. Side (r/d cheque) 545 545 Debtors control
B/S ID Insurance Brokers 755 510 Insurance
245 Drawings
43 157 43 157
B

3.22.2 GENERAL LEDGER OF TYRON TRADERS

BALANCE SHEET ACCOUNTS SECTION
Dr BANK B Cr
20.4 20.4
Sep 30 Sundry accounts CRJ 43 840 Sep 1 Balance[1] b/d 1 178
Balance c/d 495 30 Sundry accounts CPJ 43 157
44 335 44 335
Oct 1 Balance b/d 495

[1`]
150 + 2 700 + 630 – 962 – 1 340

3.22.3 BANK RECONCILIATION STATEMENT AT 30 SEPTEMBER 20.4

Debit Credit
Balance as per bank statement 5 465
Outstanding deposit 900
Outstanding cheques: No. 766 2 700
No. 786 1 360
No. 802 2 800
Balance as per bank account 495
6 860 6 860

TASK 3.23  True or False

No. True/False Reason
1. True
2. False Negative bank balance is on the Dr side of the bank statement.
3. False Concept of materiality stipulates that interest on overdraft must be kept sepa-
rate from bank charges.
4. False Bank only transfers money as and when it is needed.
5. False A cheque is only cancelled when it is 6 months old.
6. True
7. False The entry must be made on the Dr side to reduce the bank balance.
8. False The bank will not hold post-dated cheques. These will be dishonoured and re-
turned to the accountholder.
9. True
10. True

New Era Accounting: Grade 11 21

TASK 3.24 Sokhela Enterprises: Bank Reconciliation; Analy-
sis
3.24.1
Bank account Bank Reconciliation Statement
No entry
No. Debit Credit Debit Credit
E.g. (a) 1 000
E.g. (b) 1 240
1. 3 579
2. 345
3. 196
4. 1 190
5. 219
6. 29
7. 323
8. X
9. 3 422
10. 830 1 660 1 660
11. 9

3.24.2 Calculate the bank balance on 31 May 20.8.

[1 240 + 219 + 323 + 830] – [1 000 + 345 + 196 + 29 + 3 422 + 1 660 + 9]
2 612 – 6 661 = (R4 049) (credit – unfavourable)
Alternate:
3 579 + 1 660 – 1 190 = (R4 049) (credit – unfavourable)

3.24.3 BANK RECONCILIATION STATEMENT AT 31 MAY 20.8

Debit Credit
Balance as per bank statement 3 579
Outstanding deposit 1 190
Outstanding cheque (No. 154) 1 660
Balance as per bank account 4 049
5 239 5 239

TASK 3.25 Article on FICA

3.25.1 What do you understand by the term ‘money laundering’?
Money generated by criminal activities.

3.25.2 Why do you think it was necessary to introduce these regulations?

To prevent criminal activities such as money laundering.

3.25.3 What evidence do the banks require their clients to produce when opening an account
or confirming their identity on existing accounts?
Personal particulars: identity document; utility bill to serve as proof of residence.

3.25.4 Why is this a problem to people living in informal settlements?

They cannot easily be contacted telephonically or by mail.

New Era Accounting: Grade 11 22

3.25.5 What implications have these regulations had for the banking world in order to co m-
ply with the regulations?
FICA aims to bring international standards for combating money laundering and other unlawful activities.

3.25.6 What is going to happen to the bank accounts of clients who have not been verified?
Banks may freeze accounts.

TASK 3.26  Ethics and Internal control

3.26.1 The balance on the bank statement at the end of each month is always greater than
R50 000.
Problem:
The bank balance should not be so high on a consistent basis – this means that the business is losing out on
the potential earning of interest.
Solution:
Arrange with the bank for, say, R40 000 to be invested in a daily call account which can be utilised at one
day’s notice in the event of an emergency.
This will generate further interest income.

3.26.2 The bookkeeper, I.M. Idle, has not prepared a Bank Reconciliation Statement for the
past two months. She says she has been too busy.
Problem:
The preparation of a bank reconciliation statement is an important part of the work of a bookkeeper as it
ensures that the figures in the books are correct, and it aids internal control.
Solution:
Speak to the bookkeeper and get her to acknowledge how important this Task is.
Warn her that she faces dismissal if she does not carry out this duty.

3.26.3 You notice that the bank statement reflects a dishonoured cheque of R5 500. This is in
respect of a cash customer who paid by cheque for goods bought on a sale. This cus-
tomer cannot be contacted. He has provided a false phone number on the back of the
cheque.
Problem:
The sales assistant should not have accepted a cheque for a large amount such as this.
Cheques should not be accepted from unknown customers.
Solution:
Institute a policy in the business which precludes sales assistants from accepting cheques.
Get assistance from the bank in tracing this customer, and refer it to the police if necessary (this is a fraud
case).

3.26.4 The bank statement reflects a deposit of R10 000 made into the account of Bestbuy
Stationers. You have no knowledge of the person who has deposited this amount.
Problem:
This money might not belong to Bestbuy Stationers.
This money must not be used until the source is checked as it will have to be repaid if an error is detected in
future.
Solution:
Contact the bank – ask them to check the source and report back to Bestbuy Stationers.

3.26.5 A cheque was made out to a creditor, R. Dummer, for R5 000 six months ago. This
cheque has never been recorded in any bank statement for the past six months.
Problem:
It appears that R. Dummer has never received this cheque or he has lost it and has forgotten about the
amount Bestbuy Stationers owed him.
Solution:
Contact R. Dummer – offer to cancel the cheque and issue him with a new one as the old cheque is stale.

New Era Accounting: Grade 11 23

3.26.6 The cashier, I. Steele, is responsible for filling out the deposit slips every month. At
the end of each month, you notice that there are always large outstanding deposits
exceeding R15 000 appearing in the Bank Reconciliation Statement, even though
some of these amounts were received a few days before date on the bank statement.
Problem:
It appears that I. Steele is deliberately understating the deposits each month.
It appears that she has taken a large amount of money for her own use and replaces this each month with
new funds received near the end of each month (this is called ‘rolling’ of cash – this is fraud).
Solution:
Near the end of the month, allocate a senior person or the auditor to check I. Steele’s process of depositing
cash.
It will probably be noticed that she will be short of cash to account for all receipts issued to date.
Disciplinary action should follow – she has the right to a fair hearing.
If fraud has occurred, a criminal charge should be laid at the police station. She could face dismissal.

3.26.7 The bank statement reflects a direct transfer to TV Supplies for R12 000. On further
investigation, you find that these were for assets ordered by a senior manager, B.A.
Crooke.
Problem:
This could be an unauthorised payment.
Solution:
Check who authorised the payment, check that the asset is recorded in the fixed assets register, and check
that the asset is physically on the property.
If fraud is detected, B.A. Crooke should be placed through a disciplinary hearing and he should be charged
with fraud. He could face dismissal.

3.26.8 A customer, Ivor Kwerry, asks why his payment last week for R1 000 was not deduct-
ed from the balance on his latest account. He produces receipt number 10245 to
prove his payment. You investigate and you find that all the receipt numbers for the
past month have been numbered in the sequence 367 to 488.
Problem:
It appears that I. Kwerry has been issued with a false receipt, and that someone in the business has pocke t-
ed the cash.
Solution:
Ask I. Kwerry to identify the person to whom he paid the cash.
If fraud is suspected, the employee should be placed through a disciplinary hearing and charged with fraud.
The employee faces dismissal.
As a gesture of goodwill, Kwerry’s account should be adjusted so that he is not disadvantaged.

3.26.9 A stop-order for R6 000 in favour of Nastee Rentals appears in the bank statements 13
times over the last 12 months. The business rents its property from Nastee Rentals.
Problem:
It appears Nastee Rentals has processed an additional stop-order incorrectly.
Solution:
Ask them for a refund.
If they fail to do this, then instruct the bank not to honour the next payment to Nastee Rentals.

3.26.10 The bank charges on the bank statements for 20.5 were R4 100. For 20.6 the total
was R8 400.
Problem:
It appears that bank charges might be increasing unreasonably.
Solution:
Make an appointment to see the bank manager.
Query the calculation of the charges with the bank.
If the rates have been increased by the bank, the business has the right to choose another bank.

New Era Accounting: Grade 11 24

CREDITORS RECONCILIATION

Note to the Teacher:

Learners will have been exposed to completing Creditors Control accounts in Grade 10, as well as, posting to
the Creditors Ledger. Similar to Bank Reconciliations, as part of internal control, it is essential that busines s-
es control these accounts to ensure that they pay the correct amounts to the correct creditors. It is custom-
ary for the creditors to send out statements once a month. The onus is then on the business to check their
records against those on the statement. If there are differences, these will have to be investigated and the
appropriate corrections made.

Therefore the principle of the Creditors Reconciliation is very similar t o that of the Bank, and this is one of
the reasons why this section has now been included into Grade 11 (it was in Grade 12 under the NCS).
However, you are urged to discuss internal control at each step with the learners as you work through these
Tasks.

TASK 3.27  Mary Dealers: Revision on Creditors control

3.27.1 GENERAL LEDGER OF MARY DEALERS
BALANCE SHEET ACCOUNTS SECTION
Dr CREDITORS CONTROL B Cr
20.4 20.4
Sep 30 Bank CPJ 70 992 Sep 1 Balance b/d 82 345
Discount received CPJ 3 214 30 Bank (R/D) CRJ 2 450
Sundry accounts CAJ 5 766 Sundry accounts CJ 35 479
Balance c/d 41 270 Sundry accounts GJ 968
[920 + 18 + 30]
121 242 121 242
Oct 1 Balance b/d 41 270

3.27.2 Answer the following questions:

(a) What type of account is Creditors Control? Why?
Liability.
We (the business) owe them money.

(b) Discuss two methods that the bookkeeper could use to check the accuracy of the
information.
1. Check that the balance on the Creditors Control account agrees with the total on the Creditors List.
2. Check the business’s records with the statements received from the supplier.

TASK 3.28  Revision on theory relating to creditors

NO. LETTER
1. E
2. A
3. C
4. B
5. F
6. D

New Era Accounting: Grade 11 25

CREDITORS RECONCILIATION STATEMENT

Note to the Teacher:

It is important for the learners to understand the concept that while I buy from my creditor and therefore
owe him money, he also keeps records of what I owe him. However, in his books I am a debtor.

It will be a good idea, at this stage to role-play this concept. Have 2 learners, one the buyer and one the
seller and let them make the respective entries for transactions that take place. In this way you can demo n-
strate the role of one being the Debtor and the other the Creditor.

TASK 3.29  Berg Traders: Creditors Reconciliation

Note:
Before undertaking this Task, the Teacher should ask learners to identify and describe the entries that are
on the statement and in the ledger account. The Teacher should ensure that learners understand the ‘mirror
image’ of the one in relation to the other.

3.29.1 GENERAL JOURNAL OF BERG TRADERS FOR JUNE 20.8 GJ

Debtors con- Creditors con-
No. D Details Fol Debit Credit trol trol
Debit Credit Debit Credit
30 Trading stock 1 800
Acme Manufacturers 1 800 1 800
Correction of invoice no. 2460
Trading stock 250
Acme Manufacturers 250 250
Correction of debit note no. 35

CORRECT BALANCE IN THE CREDITORS LEDGER ON 30 JUNE 20.8

Balance as per Creditors Ledger R9 225
Invoice no. 2 460 [5 300 – 3 500] 1 800
Credit note no. 126 [750 – 500] 250
Correct balance as per ledger account R11 275

3.29.2 CREDITORS RECONCILIATION AS AT 30 JUNE 20.8

Balance as per Acme statement R17 075
Discount not reflected on 7 June (300)
Payment not reflected on 27 June (5 000)
Discount not reflected on 27 June (500)
Balance as per ledger account R11 275

TASK 3.30 Village Mall Retailers: Creditors Reconciliation

Note:
Before undertaking this Task, the Teacher should ask learners to identify and describe the entries that are
on the statement and in the ledger account. The Teacher should ensure that learners under stand the ‘mir-
ror image’ of the one in relation to the other.

New Era Accounting: Grade 11 26

3.30.1 GENERAL JOURNAL OF VILLAGE MALL RETAILERS FOR AUGUST 20.9 GJ
Debtors con- Creditors con-
No. D Details Fol Debit Credit trol trol
Debit Credit Debit Credit
2 31 Umgeni Shoes 500 500
Discount received 500
Discount not entered on 31 July
4 Discount received 1 100
Umgeni Stores 1 100 1 100
Correction of discount on 12 Aug.
5 Umgeni Shoes 1 800 1 800
Trading stock 1 800
Correction of Invoice no. 458
8 Trading stock 410
Umgeni Shoes 410 410
Delivery charges not entered
7 Umgeni Shoes 9 800 9 800
Tugela Manufacturers 9 800 9 800
Correction of Invoice no. 24338

CORRECT BALANCE IN THE CREDITORS LEDGER ON 31 AUGUST 20.9

Balance as per Creditors Ledger R26 030
Discount on 30 June (500)
Correction of discount on 12 August 1 100
Invoice no. 458 (1 800)
Delivery charges 410
Invoice no. 24338 (9 800)
Correct balance as per ledger account R15 440

3.30.2 CREDITORS RECONCILIATION AS AT 31 AUGUST 20.9

Balance as per statement of Umgeni Shoes R20 540
Correction of C/N no. 432 [no3] 360
Invoice no.477 wrongly reflected [no6] ( 2 560)
Invoice no. 562 not on statement 5 900
Cheque no. 34622 not on statement (8 000)
Discount not on statement (800)
Balance as per ledger account R15 440

TASK 3.31 W & D Dealers: Creditors Reconciliation

3.31.2 CREDITORS RECONCILIATION STATEMENT ON 31 MAY 20.2
Dr Cr
Dr balance as per statement of account 3 675
Cr discount not recorded on 4th May 275
Cr error on Statement (Invoice no. 1182) 500
Dr Invoice no. 1296 not recorded on statement 600
Cr payment not yet recorded (Cheque no. 1335) 2 900
Cr balance as per Creditors Ledger 600
4 275 4 275

New Era Accounting: Grade 11 27

OR
Dr balance as per statement of account 3 675
Cr discount not recorded on 4th May (275)
Cr error on Statement (Invoice No. 1182) (500)
Dr Invoice no. 1296 not recorded on statement 600
Cr payment not yet recorded (Cheque no. 1335) (2 900)
Cr balance as per Creditors Ledger 600

TASK 3.32 Noni: Creditors Reconciliation

RECONCILATION BETWEEN THE CREDITORS LEDGER AND THE STATEMENT OF ACCOUNT
CREDITORS STATEMENT OF
DETAILS
LEDGER ACCOUNT
Balance 30 710 31 440
Trade discount (1 560)
Discount allowed (150)
Debit note no. 56 (2 400)
Invoice no. 48 (2 600)
Outstanding cheque (4 400)
Outstanding discount (440)
Outstanding invoice 2 900
CORRECT BALANCE 26 750 26 750

TASK 3.33 Geoff Hadebe: Scenarios

Scenario 1:
3.33.1 Identify the problem area/s in this business.
His debtors take 30 days to pay him while he is paying cash for his stocks – this may be putting a strain on
working capital.
It is possible that working capital is not properly managed.
Any other appropriate answer.

3.33.2 Suggest ways in which the liquidity situation can be improved.

Encourage debtors to pay back sooner – offer discounts or any other incentives.
Negotiate credit facilities with suppliers.
Any other appropriate answer.

Scenario 2:
3.33.3 What are the implications of the actions of the clerk and cashier? Also indicate why
the books will not be in balance.
They are stealing money from the business – this could result in a loss of profits.
Payments to creditors are reflected incorrectly in the Creditors Ledger as the discount is not shown.
Cheque payments are not matched with total payments in the CPJ.

3.33.4 What control measures can you put in place to rectify this situation?
Verify cheques with the amounts shown on the statement and the ledger.
Get a third person to check entries in the CPJ and posting from the CPJ.

3.33.5 What action do you intend taking against the clerk and the cashier?
Lay criminal charges against them.
Reprimand them.
Dismiss them (provided all legal requirements have been met).

New Era Accounting: Grade 11 28

TASK 3.34 Umkhele Uniforms: Ethics & internal control re-
lating to purchases and creditors
3.34.1 This is an internal control matter. He should make best use of his cash resources by taking ad-
vantage of the credit terms offered. It will take time for the stock to be sold, and his suppliers are
aware of that. If he pays them too early he will experience cash flow problems.

3.34.2 This is unethical. Harry should be made aware of this. Jennifer will earn the business a poor repu-
tation, which will not be good for his business in the long run.

3.34.3 This is unethical. Harry’s business relies on the support of the community. He should not cause
them to travel far distances to get their uniforms. The primary school children will eventually be in
a high school. It makes good business sense for him to encourage their parents to support his
business even if it does not make him much profit at this stage.

3.34.4 This reflects poor internal control. Harry is being naïve to think that Jennifer is doing this job
properly. Although errors can be made in the counting of stock, which could lead to a big shortage
in one month and a surplus in the next, it is unlikely that surpluses will occur regularly. Harry
should supervise the stock count and he should rotate his staff on this task to ensure that there is
no opportunity for fraud.

3.34.5 This is unethical of Harry. The supplier is doing the right thing by passing on the saving to the re-
tailer. However, they would expect that this saving be passed on to the customer as well. When
information on the cost reductions reaches the public, Harry will get a poor reputation for not pla c-
ing the interests of his customers first, which will affect the sustainability of his business.

3.34.6 This is unethical and may be considered as a bribe. Harry should support the suppliers who have
helped him grow his business over the past decade. Harry has no idea at this stage what Bennie’s
prices will be (they might well be more than 20% higher than the prices of his existing suppliers),
and the quality of Bennie’s stock is still to be verified. He could stock a limited supply of Bennie’s
uniforms to assess if the public approves. However, he must realise that he should not discard
suppliers who have supported him for a very long time.

3.34.7 This reflects poor internal control. There is opportunity for Jennifer to commit fraud without any-
one detecting this, as she handles all aspects of the buying, receiving and paying for stock. One
obvious example is that she could order stock that is not necessary and take this home. Harry’s
business would then be paying for stock that was never sold. In view of Jennifer’s financial difficul-
ties, it does not make sense to rely on her honesty.

New Era Accounting: Grade 11 29

CHECKLIST

Requires
Yes – profi-
Skills more atten- Complete
cient
tion
Updating of cash journals.
Posting to the Bank account.
Preparation of a Bank Reconciliation Statement.
Identify and explain why some entries do not appear in the
Bank statement.
Identify and explain why some entries do not appear in the
Cash receipts and cash payments journals.
Process entries for post-dated cheques received and issued.
Process a bank reconciliation statement taking last month’s
bank reconciliation into consideration.
Process entries for stale cheques.
Correct errors in the business’ books.
Correct errors made by the bank on the bank statement.
Appreciate the need for completing a bank reconciliation
statement.
The impact of internet on the banking world.
Completion of general journal entries to record errors or
items left out of the Creditors Control.
Completion of the Creditors Reconciliation Statement.
Understand the need for internal control mechanisms in
Creditors control and Bank Reconciliation.
Identify unethical behaviour in relation to Creditors and
banking.

New Era Accounting: Grade 11 30