QUESTIONThe following balances were obtained from the accounting records of Rocky’s Hike, a rock climbing and hiking club, for the year ended 31 December 2019.RLand and buildings at cost820 000Office equipment at cost35 000Accumulated depreciation: office equipment (1 January 2019)9 520Fixed Deposit: Stallone Bank at 11% per annum100 000Climbing and hiking accessories on hand (1 January 2019)15 000Refreshments on hand (1 January 2019)6 000Accrued membership fees (1 January 2019)32 550Bank (favourable) (1 January 2019)45 000Cash on hand2 000Accumulated fund (1 January 2019)85 000Long-term loan: Sylvester Bank at 15% per annum250 000Creditors control4 300Membership fees received in advance (1 January 2019)3 500The following amounts were received and paid during the year ended 31 December 2019:RWages8 140Stationery3 100Water and electricity16 000Telephone7 560Interest on loan20 900Admission fees received120 000Donations received50 000Interest received5 560Membership fees received75 000Sales: Climbing and hiking accessories540 000Purchases: Climbing and hiking accessories230 000Refreshments purchased56 000Equipment purchased on 1 July 201950 000Paid creditors4 300Paid instalment on long-term loan80 000Additional information:1. On 31 December 2018, the club had 320 members. On 3 January 2019, 70 members joined the club. Admission fees and membership fees for these members were received in full. Admission fees are R65 per member and must be capitalized.2. Membership fees are R250 per member per year. R73 850 of the membership fees owing on 31 December 2018 was received. The remainder must be written off and the membership of the non-members must be terminated as from 1 January 2019. One member has already paid membership fees for 2020, while some membership fees for 2019 are still outstanding.3. Donations received must be capitalized.4. An honorarium of R3 000 was awarded to the club secretary but has not yet been paid.5. Inventories on hand on 31 December 2019:a. Climbing and hiking accessories:b. Refreshmentsc. Stationery6. Depreciation on office equipment must be provided for at 12% per annum according to the reducing balance method.REQUIRED:a. Prepare the membership fees account and the trading account: climbing and hiking accessories in the general ledger on 31 December 2019 and close them off properly.b. Prepare the statements of receipts and payments for the year ended 31 December 2019.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
QUESTION
The following balances were obtained from the accounting records of Rocky’s Hike, a rock climbing and hiking club, for the year ended 31 December 2019.
R
Land and buildings at cost
820 000
Office equipment at cost
35 000
9 520
Fixed Deposit: Stallone Bank at 11% per annum
100 000
Climbing and hiking accessories on hand (1 January 2019)
15 000
Refreshments on hand (1 January 2019)
6 000
Accrued membership fees (1 January 2019)
32 550
Bank (favourable) (1 January 2019)
45 000
Cash on hand
2 000
Accumulated fund (1 January 2019)
85 000
Long-term loan: Sylvester Bank at 15% per annum
250 000
Creditors control
4 300
Membership fees received in advance (1 January 2019)
3 500
The following amounts were received and paid during the year ended 31 December 2019:
R
Wages
8 140
Stationery
3 100
Water and electricity
16 000
Telephone
7 560
Interest on loan
20 900
Admission fees received
120 000
Donations received
50 000
Interest received
5 560
Membership fees received
75 000
Sales: Climbing and hiking accessories
540 000
Purchases: Climbing and hiking accessories
230 000
Refreshments purchased
56 000
Equipment purchased on 1 July 2019
50 000
Paid creditors
4 300
Paid instalment on long-term loan
80 000
Additional information:
1. On 31 December 2018, the club had 320 members. On 3 January 2019, 70 members joined the club. Admission fees and membership fees for these members were received in full. Admission fees are R65 per member and must be capitalized.
2. Membership fees are R250 per member per year. R73 850 of the membership fees owing on 31 December 2018 was received. The remainder must be written off and the membership of the non-members must be terminated as from 1 January 2019. One member has already paid membership fees for 2020, while some membership fees for 2019 are still outstanding.
3. Donations received must be capitalized.
4. An honorarium of R3 000 was awarded to the club secretary but has not yet been paid.
5. Inventories on hand on 31 December 2019:
a. Climbing and hiking accessories:
b. Refreshments
c. Stationery
6. Depreciation on office equipment must be provided for at 12% per annum according to the
REQUIRED:
a. Prepare the membership fees account and the trading account: climbing and hiking accessories in the general ledger on 31 December 2019 and close them off properly.
b. Prepare the statements of receipts and payments for the year ended 31 December 2019.
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