ifiso Phakathi has a general dealer store in the Ixopo area that he has been operating for a few years. The following information was provided by Sifiso for the financial year ended 28 February 2021: Additional information: 1. A physical stock-take on 28 February 2021 revealed the following: • Trade goods on hand was valued at R96 000; and • Consumable stores on hand were R1 830. 2. Advertising included an amount of R 2 160 for advertisement to appear in print from 1 November 2020 to 30 April 2021. 3. Depreciation on equipment is provided at 10% per year using the reducing balance method. Note that equipment was purchased on 31 July 2020 for R30 000. The purchase was recorded and is included in the above balances. 4. The long term borrowing from Niks’ Finance was granted on 1 May 2020. The borrowing is payable in full on 31 April 2025. Provide for the outstanding interest. 5. The tenant has already paid the rent for March 2021. Note that the
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Sifiso Phakathi has a general dealer store in the Ixopo area that he has been operating for a
few years. The following information was provided by Sifiso for the financial year ended 28
February 2021:
Additional information:
1. A physical stock-take on 28 February 2021 revealed the following:
• Trade goods on hand was valued at R96 000; and
• Consumable stores on hand were R1 830.
2. Advertising included an amount of R 2 160 for advertisement to appear in print from 1
November 2020 to 30 April 2021.
3.
method
R30 000. The purchase was recorded and is included in the above balances.
4. The long term borrowing from Niks’ Finance was granted on 1 May 2020. The borrowing
is payable in full on 31 April 2025. Provide for the outstanding interest.
5. The tenant has already paid the rent for March 2021. Note that the monthly rent was
increased by 10% effective on 1 December 2020.
6. A debit order of R800 for the insurance of Sifiso’s home was erroneously allocated to the
business insurance account. A correction is required.
7. A debtor who owed R1 600 has been declared insolvent and his estate paid out 70 cents
in the Rand on all debts. The balance of the account must be written off as irrecoverable.
Entries must be made to record the receipt of money from the estate and the write-off of
the remaining balance.
8. Create an allowance for credit losses equal to 5% of remaining outstanding debtors.
Required:
Prepare the following for Sifiso’s Stolo for the financial year ended 28 February 2021:
The statement of profit or loss and other comprehensive income.
Information attached
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