UNIVERSITY OF THE FREE STATE

SCHOOL OF ACCOUNTANCY

EACC1614/EFCC2614

TEST 1 – 11 MARCH 2020

TIME: 90 minutes MARKS: 60

This paper comprises of 2 questions, set on 2 numbered pages

Please check whether your paper is complete.
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INSTRUCTIONS
1. Answer each new question on a new page in the answer book and clearly number each
question.
2. Answers may not be written in pencil or erasable pen.
3. The marks shown against the requirement(s) for each question should be taken as an
indication of the expected length and the required depth of the answer.
4. Even if it is not explicitly required, you should show workings and cross-reference them to
your answer.
5. Marks are awarded for appropriate arrangement and layout, clarity of explanation, logical
argument and clear and concise language.
6. Working papers must be handed in with scripts.
7. Tippex may not be used.

Disclaimer: All names of persons, places and business entities mentioned in this test paper are
fictitious and any resemblance to real persons, living or dead, places and business entities are
purely coincidental.

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Question 1

Question 1.1 (18 marks; 27 minutes)

Trevor, an old friend from Varsity decided to open his own law firm at the beginning of 2020, TT
Attorneys Inc. Trevor, the owner asked you to assist in defining some of the basic concepts in
accounting.

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 Question 1.1: Required Marks

a) What does the abbreviation IFRS stand for? 1

b) Briefly explain the underlying assumption on which financial

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statements are prepared (par 3.9 of the Conceptual Framework).

Define the following elements of financial statements:

c)
Assets
Liability
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Equity
Income
Expenses
Your answer should comply with the Conceptual Framework of IFRS’s

Question 1.2 (25 marks; 38 minutes)

You availed yourself to assist with the capturing of the first month’s transactions.

On 1 January 20.20 Trevor the owner deposited R100 000 via an internet transfer as a capital
contribution into the bank account of the firm. He owns a new home computer, worth R25 000,
that nobody uses and decided to contribute it to the firm as well.
On 10 January services were rendered to Mr. Mofokeng at a value of R6 500, Mr. Mofokeng paid
a R2 000 as deposit and the remainder was done on credit.
On 12 January a payable was paid, R890.
On 14 January the owner made an EFT from his private bank account to buy a delivery vehicle for
the firm worth R200 000.
Received R2 000 from Mr. Mofokeng as part payment of his debt on 20 January.
Bought stationery on credit on 23 January worth R2 900.
On 25 January the owner withdrew R5 000 for his own use.

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Question 1.2: Required Marks

a) Record the above transactions in the general ledger of TT Attorneys Inc.

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Balance the bank and payables account at the end of the month.

b) Prepare the trial balance on 31 January 20.20 5

Your answer should comply with the Conceptual Framework of IFRS’s

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Question 2 (17 marks; 25 minutes)

ATD Tyres imports tyres from China and started operating on 2 January 20.20. The entity uses
the perpetual inventory system and a gross profit percentage of 40 % on sales is maintained.

The following business transactions in respect of ATD Tyres took place during January 20.20:

1. Initial capital investment by the owner of R600 000.

2. Furniture purchased for cash worth R20 000.
3. Merchandise purchased on credit, R300 000.
4. Paid freight on goods purchased, R2 500.
5. Credit sales of merchandise to Truck World, R120 000.
6. The owner took goods for private use, marked R15 000 (cost?)
7. Truck World returned some of the goods purchased in no 5, R30 000.

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Question 2: Required Marks
Prepare the general journal entries for all of the above transactions.
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Journal narrations are not required.
Your answer should comply with the Conceptual Framework of IFRS’s

END OF PAPER