QUESTION (21 marks)(25 minutes)

The following balances and totals appeared in the accounting records of Nkome Traders at
28 February 2022:
BALANCES AND TOTALS AT 28 FEBRUARY 2022
R
Capital…….. ...................................................................................................................... 87 450
Drawings…… .................................................................................................................... 3 750
Land and buildings (at cost price) ...................................................................................... 80 000
Equipment (at cost price) ................................................................................................... 40 000
Vehicles (at cost price) ...................................................................................................... 60 000
Accumulated depreciation: Equipment (1 March 2021) ...................................................... 8 000
Accumulated depreciation: Vehicles (1 March 2021) ......................................................... 15 000
Inventory (1 March 2021) ................................................................................................... 10 200
Trade receivables control .................................................................................................. 13 800
Bank (Dr) ................................................................................................................................. 12 600
Trade payables control ...................................................................................................... 6 600
Sales…………………......................................................................................................... 246 860
Sales returns ..................................................................................................................... 1 200
Purchases……… ............................................................................................................... 109 000
Purchases returns ............................................................................................................. 800
Settlement discount granted .............................................................................................. 420
Water and electricity .......................................................................................................... 10 450
Telephone expenses ......................................................................................................... 5 040
Salaries……….. ................................................................................................................. 20 400
Stationery….. ..................................................................................................................... 2 350
Rental income.................................................................................................................... 4 500

Additional information
1. A physical inventory count indicated the value of closing inventory to be R9 550 on
28 February 2022.
2. An outstanding debt of R500 is irrecoverable and must be written off.
3. Depreciation must be provided as follows:
Equipment: 10% per annum according to the straight-line method.
Vehicles : 20% per annum according to the diminishing balance method.
4. The amount paid for water and electricity above excludes an amount of R950 still payable for
February 2022.
5. The entity rented out an office in their building to a lawyer for R1 500 per month. The lawyer took
occupation on 2 January 2022 and paid an amount of R4 500, being the rent for January, February
and March 2022.

REQUIRED:
Prepare the following final accounts in the general ledger of Nkome Traders:
a) The trading account to calculate the gross profit/loss for the year ended 28 February 2022.
b) The profit or loss account to calculate the net profit/loss for the year ended 28 February 2022.
SOLUTION
NKOME TRADERS
GENERAL LEDGER
NOMINAL ACCOUNTS SECTION
Dr Trading account Cr
R R
2022 2022
Feb 28 Inventory 10 200 Feb 28 Sales
Purchases (246 860 - 1 200 - 420) 245 240
(109 000 - 800) 108 200 Inventory 9 550
Profit or loss account
(Gross profit) 136 390
254 790 254 790

(8)

Dr Profit or loss account Cr

R R
2022 2022
Feb 28 Water and electricity Feb 28 Trading account
(10 450 + 950) 11 400 (Gross profit) 136 390
Salaries 20 400 Rental income
Stationery 2 350 (4 500/3 x 2) 3 000
Credit losses 500
Depreciation 13 000
Telephone expenses 5 040
Capital (Profit for the
year) 86 700
139 390 139 390

(13)

Calculation

Depreciation
R
Equipment : 40 000 x 10% 4 000
Vehicles : (60 000 - 15 000) x 20% = 45 000 x 20% 9 000
13 000