IIE Learn Guide ACBP5111

ACCOUNTING 1A
ACBP5111
LEARN GUIDE 2017
(First Edition: 2016)

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Act, 1997 (reg. no. 2007/HE07/002). Company registration number: 1987/004754/07.

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Table of Contents
Introduction ............................................................................................................... 3
Using this Guide ........................................................................................................ 5
This Module on Learn................................................................................................ 6
Module Resources .................................................................................................... 7
Module Purpose ........................................................................................................ 7
Module Outcomes ..................................................................................................... 7
Module Pacer ............................................................................................................ 8
Assessment............................................................................................................. 14
Module Glossary ..................................................................................................... 15
Icons Used in Learn ................................................................................................ 23
Learning Unit 1: Introduction to Business, Bookkeeping and Accounting................. 24
Learning Unit 2: The Accounting Equation and Double Entry System ..................... 29
Learning Unit 3: Value Added Tax and Source Documents ..................................... 34
Learning Unit 4: Recording Cash Transactions ....................................................... 41
Learning Unit 5: Recording Credit and Sundry Transactions ................................... 48
Learning Unit 6: Inventory (stock) systems .............................................................. 53
Learning Unit 7: Debtors (Accounts Receivable) and Creditors (Accounts Payable) 57
Learning Unit 8: Salaries and Wages ...................................................................... 61
Learning Unit 9: Year-End Procedures .................................................................... 66
Intellectual Property................................................................................................. 70

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Introduction
You will complete a variety of different modules. These modules were carefully
selected to ensure that the purpose and exit level outcomes set for this qualification
are met. The purpose of the Bachelor of Business Administration (BBAG) and the
Bachelor of Business Commerce is to provide a quality undergraduate degree in
management and administration to add to the management administration skills-base
required within the business industry.

The qualification focuses on general management and administration to prepare

students for a cross-section of industries. When you graduate you will be well-
positioned to add value to the organisation that employs you and to pursue further
studies in this field.

The specific outcomes for this programme were identified through a process of
consultation with practising industry experts and appropriately qualified academics
and include the following exit level outcomes:

1. Demonstrate a deep understanding of the critical success factors of modern

business.

2. Demonstrate the ability to manage and administer a business by formulating

and implementing sound management and administration strategies for
business prosperity.

3. Evaluate and identify human resource management and administration

approaches conducive to achieving business objectives.

4. Evaluate and identify effective marketing strategies to address marketing

challenges and achieve competitive advantage.

5. Critically evaluate financial performance and apply and administer sound and
appropriate decisions to support and sustain a business enterprise.

6. Demonstrate the ability to function effectively and ethically as a responsible

business leader and contribute to the economic welfare of a business in a
team.

As indicated above, one of the exit level outcomes of these qualifications is that you
should be able to critically evaluate financial performance and apply and administer
sound and appropriate decisions to support and sustain a business enterprise. To
achieve this you will complete two modules related to Accounting during your studies,
starting with this module, Accounting 1A. Accounting and recording is an important
function in an organisation, because without being able to evaluate a business’
financial position, organisations cannot achieve a competitive advantage in the
market. The knowledge gained in this module is an essential foundation for any
management programme because it focuses on the financial function within an

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organisation. Refer to the module purpose and module outcomes under the Module
information link above for further information on this particular module.

If at any stage you require any additional support and assistance with regards to the
module, any activities you completed or for any feedback on your progress, contact
your appointed lecturer/tutor.

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Using this Guide

This guide has been developed to support your learning. Please note that the
content of this module is in Learn and in the prescribed work. You will not succeed
in this module if you focus on this guide alone.

 This guide is not identical to the versions on Learn as it does not contain the
images and URLs (links) to the online resources, nor the specific instructions for
the group and individual activities. However, it will indicate where online
resources are provided in Learn, what type of activities you will find in Learn,
as well as the estimated time it will take you to complete each of the
activities.
 Some of the graphics are interactive in the Learn version, providing additional
information to support your learning.
 Your lecturer will decide when activities are available/ open for submission and
when these submissions or contributions are due. Ensure that you take note of
announcements made during lectures and/ or posted within Learn in this regard.

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This Module on Learn

Learn is an online space, designed to support and maximise your learning in an active
fashion. Its main purpose is to guide and pace you through the module. In addition to
the information provided in this guide, you will find the following when you access
Learn:
 A variety of online resources (articles, videos, audio, interactive graphics, etc.)
to explain theoretical concepts;
 Questions to guide you through the theory;
 Collaborative and individual activities (all of which are gradable) with time-on-
task estimates to assist you in managing your time around these.

Kindly note:
 Learn does not replace your contact time with your lecturers and/ or tutors.
 Your lecturer will communicate submission dates for specific activities in
class and/ or in Learn.

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Module Resources
Prescribed Book for this Please note that this module guide is intended to
Module support your learning – the content of this module
should be sourced from the prescribed material. You
will not succeed in this module if you focus on this
module guide only.

J Maritz, 2012. Accounting 1A Textbook, 4th

edition, 1st impression. Cape Town: EDGE Learning
Media.

J Maritz, 2012. Accounting 1A Workbook. Cape

Town: EDGE Learning Media.
Digital and Web Additional digital resources are also available for this
Resources module. Please log onto the Student Portal, and
follow the links to ‘Supplementary Digital Material’ to
source the following.
Module Overview You will find an overview of this module in Learn
under the Module Information link in the Course
Menu.
Assessments Find more information regarding assessments for this
module in this guide, in Learn under the Module
Information link in the Course Menu and on the
Student Portal.

Module Purpose
This module covers the concepts and principles of appropriate accounting
frameworks and policies. The module provides you with the applied competence to
orderly and systematically identify and record monetary values of business
transactions.
Module Outcomes
MO1 Explain the development, role and functions of accounting as a Business
Information System.
MO2 Demonstrate an understanding of accounting principles and concepts in
a business environment.
MO3 Apply the accounting equation and its composites when recording
transactions.
MO4 Accurately record financial transactions to trial balance.
MO5 Demonstrate an understanding of statutory requirements in a business
environment.

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Module Pacer
Code ACBP5111 Hour Sessions 65
Code ACBP5111e Hour Sessions 44
Credits 12
Code ACBP5111f Hour Sessions 65
Code ACBP5111p Hour Sessions 44
Learning Unit 1 Theme: Introduction to Pages in the
Business, Bookkeeping and textbook:
Accounting
ACBP5111 Learning Content: Pp.1–21
Sessions: 1 – 5  Provide a brief overview of
ACBP5111e the history of accounting;
Sessions: 1 – 3  Outline the users and uses
ACBP5111f of accounting information;
Sessions: 1 – 5  Explain the principles of
ACBP5111p International Financial
Sessions: 1 – 3 Reporting Standards
Related Outcomes: (IFRS);
 MO1  Illustrate the accounting
 MO2 cycle graphically;
 Contrast financial and
management accounting;
 List the various types of
transactions that can occur
during the ordinary course
of business.
Learning Unit 2 Theme: The Accounting Pages in the
Equation and Double Entry textbook:
System
ACBP5111 Learning Content: Pp.22–70
Sessions: 6 – 14  Analyse transactions
ACBP5111e under the accounting
Sessions: 4 – 9 equation;
ACBP5111f  Define assets, non-current
Sessions: 6 – 14 assets and current assets;
ACBP5111p  Define liabilities, non-
Sessions: 4 – 9 current liabilities and
current liabilities;
Related Outcomes:  Explain what is meant by a
 MO3 ‘proprietary account’;
 Define income and
expenses;
 Discuss the profit motive
and demonstrate how
gross profit and net profit
are derived;
 Explain and apply the
rules of double entry.
25 % of ICE tasks to be completed by this point

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Learning Unit 3 Theme: Value Added Tax and Pages in the

Source Documents textbook:
ACBP5111 Learning Content: Pp.71–97
Sessions: 15 – 20  Explain what Value Added Tax
ACBP5111e (VAT) is, and how the system
Sessions: 10 – 14 works;
ACBP5111f  Compare the VAT system to
Sessions: 15 – 20 the traditional GST system;
ACBP5111p  Identify standard rated, zero-
Sessions: 10 – 14 rated and exempt supplies, as
well as non-allowable items;
Related Outcomes:  Compare the two bases
 MO5 according to which vendors
may be registered for VAT;
 Explain what a valid tax invoice
looks like;
 Differentiate between the
various source documents
used by business to record
various transactions;
 Perform basic VAT
calculations.
Test 1 to be written covering learning units 1-3 (excluding the periodic
inventory system)
Learning Unit 4 Theme: Recording Cash Pages in the
Transactions textbook:
ACBP5111 Learning Content: Pp.98–125
Sessions: 21 – 26  Explain the accounting
ACBP5111e process/ cycle with respect to
Sessions: 15 – 18 specified time periods.
ACBP5111f  Recognise and define the types
Sessions: 21 – 26 of source documents and
ACBP5111p provide related journal entries
Sessions: 15 – 18 for basic cash transactions.
Related Outcomes:  Identify the different subsidiary
 MO3 cash journals and explain what
 MO4 they are used for.
 Record source documents in
appropriate subsidiary cash
journals.
 Post the cash journals to the
General Ledger.
 Prepare a simple trial balance.
50% of ICE tasks to be completed by this point

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Learning Unit 5 Theme: Recording Credit and Pages in the

Sundry Transactions textbook:
ACBP5111 Learning Content: Pp.126–169
Sessions: 27– 41  Explain why offering credit
ACBP5111e can benefit a business;
Sessions: 19 – 28  Explain the risks associated
ACBP5111f with offering credit to
Sessions: 27 – 41 customers;
ACBP5111p  Record credit sales in the
Sessions: 19 – 28 debtors journal from
Related Outcomes: duplicate credit invoices;
 MO4  Record duplicate credit
notes in the debtors
allowances journal;
 Record credit purchases in
the creditors journal from
original credit invoices;
 Record original credit notes
in the creditors allowances
journal;
 Record sundry transactions
in the general journal;
 Complete a comprehensive
exercise in which all eight
subsidiary journals are
combined;
 Account for VAT in the
journals by recording a
variety of different;
transactions that involve
standard rated, zero-rated,
exempt and non-allowable
items;
 Explain how the rules of
double entry are adhered to
when making a journal entry;
 Post a completed set of
subsidiary journals to the
general ledger;
 Balance the ledger accounts
and draft a trial balance;
 Analyse a variety of different
transactions under the
accounting equation.
75% of ICE Tasks to be completed by this point.

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Learning Unit 6 Theme: Inventory (Stock) Pages in the

Systems textbook:
ACBP5111 Learning Content: Pp.170–189
Sessions: 42– 46  Explain why some
ACBP5111e businesses choose not to
Sessions: 29 – 31 use a perpetual inventory
ACBP5111f system, but a periodic
Sessions: 42 – 46 system instead.
ACBP5111p  Calculate cost of sales
Sessions: 29 – 31 using a periodic inventory
Related Outcomes: system;
 MO3  Demonstrate the working
 MO4 of the purchases and
purchases returns
accounts under a periodic
inventory system;
 Demonstrate the working
of the carriage on
purchases and similar
accounts that affect the
calculation of cost of sales
under a periodic inventory
system;
 Analyse inventory-related
transactions under the
accounting equation when
using a periodic inventory
system;
 Record inventory-related
transactions in the
subsidiary journals when
using a periodic inventory
system;
 Explain which one of the
two inventory systems is
most desirable in the world
in which we live.
Test 2 to be written covering learning units 1 to 6, and both inventory
systems
100% of ICE tasks to be completed by this point

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Learning Unit 7 Theme: Debtors (Accounts Pages in the

Receivable) and Creditors textbook:
(Accounts Payable)
ACBP5111 Learning Content: Pp.190–203
Sessions: 47– 53  Explain how the individual
ACBP5111e account of a debtor works,
Sessions: 32 – 36 and why it is important to
ACBP5111f have separate debtors’
Sessions: 47 – 53 accounts in a separate
ACBP5111p ledger.
Sessions: 32 – 36  Explain why a trial balance
Related Outcomes: will not include individual
 MO4 debtors’ or creditors’
accounts.
 Explain how the individual
account of a creditor
works, and why it is
important to have separate
creditors’ accounts in a
separate ledger.
Learning Unit 8 Theme: Salaries and Wages Pages in the
textbook:
ACBP5111 Learning Content: Pp.204–233
Sessions: 54 – 59  Explain how a payroll
ACBP5111e accounting function
Sessions: 37 – 40 operates;
ACBP5111f  Calculate gross wages,
Sessions: 54 – 59 selected deductions and
ACBP5111p net wages;
Sessions: 37 – 40  Record all payroll
Related Outcomes: components in the
 MO3 appropriate wages or
 MO4 salaries journal;
 MO5  Post the wages and
salaries registers as well
as the cashbook payments
to the general ledger to
affect the double entries
for payroll;
 Prepare the EMP 201
return for remittance.

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Learning Unit 9 Theme: Year-end Procedures Pages in the

textbook:
ACBP5111 Learning Content: Pp.234–246
Sessions: 60 – 65  Demonstrate how a ‘year-
ACBP5111e end’ procedure is run in
Sessions: 41 – 44 the books of a business;
ACBP5111f  Explain the purpose and
Sessions: 60 – 65 working of a trading
ACBP5111p account;
Sessions: 41 – 44  Explain the purpose and
working of a profit and loss
Related Outcomes: account;
 MO3  Journalise closing
 MO4 transfers;
 MO5  Explain the difference
between ‘gross’ and ‘net’
profit;
 Prepare the final accounts
for a small business;
 Balance the capital
account of a sole trader to
determine the owner’s
equity at the end of a
financial period.

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Assessment
Integrated Curriculum Engagement (ICE)
Minimum number of ICE activities to complete 4
Weighting towards the final module mark 10%

Tests/ Examination Test 1 Test 2 Examination

Weighting 25% 30% 35%
Duration 1 hour 1 hour 3 hours
Total marks 60 60 180
Open/ closed book Closed book Closed book Closed book
Resources required
Learning Units covered LU 1-3 LU1-6 All learning units
(Test 1 requires (Focus of test 2
knowledge of the on LU4-6;
perpetual Test 2 requires
inventory system knowledge of
only) the perpetual
AND periodic
inventory
systems)

Assessment Preparation Guidelines

Format of the Assessment Preparation Hints
(The Focus/ Approach/ (How to Prepare, Resources
Objectives) to Use, etc.)
Tests and The tests and exam will To prepare effectively for the
Examination comprise of theory and assessments you can include
application of theory (practical) the following in your
questions involving preparation:
calculations.  Ensure that you work
Theory-based questions will through all the examples
consist of a variety of formats, and questions in your
such as Match-the-Column textbook.
questions, multiple choice  Revision exercises in the
questions, short questions, module guide.
and/ or paragraph questions.  Check if you are confident
However, the majority of that you could answer
questions will test the questions relating to all of
application of theory and will be the Learning Objectives for
practical questions with the Learning Units tested.
calculations.  Work through Mock
Assessments or previous
assessments.

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Module Glossary
Abridged A source document that is issued when a VAT vendor makes a sale
tax invoice of goods or services for less than R50.
Accounting The accounting cycle commences with a transaction, which needs
cycle to be analysed in journals. Journals are then summarised and
posted to the ledger, where after a trial balance is drawn up. These
three steps are repeated for every subsequent month in the
financial year – until the final month. In the final month of the
financial year (usually month 12), the trial balance is followed by
year-end adjustments, a post-adjustment trial balance, a post-
closing trial balance and the preparation of financial statements.
Accounting The equation on which the main framework of accounting is based.
equation It is a mathematical equation that must always balance.
Accumulate A negative asset account that holds the accumulated pool of
d depreciation that has been written off on a specific asset or group of
depreciation assets since they were acquired.
account
Asset Shows all the important details pertaining to a particular asset, from
register the date of purchase to the date of sale.
Assets Resources controlled by the firm, as a result of past events, and
from which future economic benefits are likely to flow to the
business.
Balance A financial statement that reflects the accounting equation (the
sheet financial position of the business). The modern term used for the
balance sheet is the “Statement of financial position”.
Balance The section of the general ledger and trial balance that includes all
sheet the accounts that will end up in the balance sheet, i.e. the
section proprietary accounts (capital and drawings), asset accounts and
liability accounts.
Balancing The month-end process of totalling the accounts.
Bank Supporting document used as proof that cash was banked.
deposit slip
Bank Statement drawn up by the bank that shows all the transactions
statement affecting the business’s bank account.
Break-even Describes a situation where neither a profit nor a loss is generated.
Budget Responsible for holistic policy matters relating to the budget
committee programme.
Budget Guidelines for the budget, based on the firm’s strategic goals and
guidelines long-term plan.
Budget Period for which the budget has been drawn up.
period
Budget The difference between the actual and budgeted figures.
variance
Budgets Used as a tool for future planning as well as a tool for exercising
control over cash receipts and payments.

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Business The question of how managers decide what is right or wrong in

ethics conducting the business of their organisation and how they aim to
achieve the “right” and to “avoid the wrong”.
Capital Account used when the owner makes contributions of cash or other
account assets to the business.
Carrying The book value or depreciated value of a non-current asset. The
value carrying value is equal to the cost of the asset less its accumulated
depreciation.
Cash A document that indicates that the sale has taken place and been
invoice paid for immediately.
Cash The journal in which transactions that decrease the balance of the
payments current bank account are recorded.
journal
Cash Any transaction that causes a decrease in the bank account
payments balance.
transaction
Cash Source document used to record the receipt of cash in cases where
receipt no VAT should be charged.
Cash The journal in which transactions that increase the balance of the
receipts current bank account are recorded.
journal
Cash Any transaction that causes an increase in the bank account
receipts balance.
transaction
Cash slip An abridged tax invoice that may be used only for sales that do not
exceed R3 000.
Cheque “Stub” that remains in the cheque book after issuance of a cheque;
counterfoil used as source document for the recording of cheque payments
from the cheque book.
Code of Document outlining the common set of values and morals for
conduct management and employees within an organisation.
Contra- The opposite account that is debited or credited as the opposite
account double entry.
Credit The credit column in a debtor’s individual account is used to enter
column the amount of the transaction in cases where the particular
transaction decreases the amount owing to our business by the
debtor. The converse applied for a creditor’s individual account
Credit A document that indicates that a sale has taken place, but that
invoice money owed for the transaction is still outstanding.
Credit note Document that records the cancellation of a sale or part thereof.
Creditor A person or entity our business owes money to. The modern term
for creditors is “accounts payable”.
Creditors Journal used to record the returns/rebates with regard to
allowances transactions previously entered into the Creditors journal (CJ).
journal

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Creditors A general ledger account used as a control mechanism for accounts

control payable.
account
Creditors for A temporary liability account held in the books of account reflecting
salaries the net remuneration payable to all salaried employees.
account
Creditors for A temporary liability account held in the books of account reflecting
wages the net remuneration payable to all employees that are remunerated
account in the form of wages.
Creditors Journal used to record credit purchases and other transactions with
journal creditors.
Creditors A subsidiary ledger that includes all the individual creditors’
ledger accounts.
Creditors list A list of the individual balances in the creditors ledger.
Current Resources that are cash or likely to be turned into cash within one
assets year. Also referred to as short-term assets
Current Short-term debts
liabilities
Debtor A person or entity that owes our business money. “Accounts
receivable” is a modern term for debtors.
Debtors Journal used to record the returns/rebates with regard to
allowances transactions previously entered into the Debtors journal (DJ).
journal
Debtors Journal used to record credit sales.
journal
Discounts Discounts are reductions in selling prices offered to customers/
clients. Discounts usually take the form of either a trade discount (a
discount offered at the point of sale) as well as a settlement
discount (a discount offered for early settlement of account by a
debtor).
Double A system whereby the total value of the debits in a transaction must
entry equal the total value of the credits.
system
Drawings Account used when the owner withdraws valuables from the
account business.
EFT Proof of Electronic Funds Transfer (EFT).
confirmation
slip
Electronic Electronic transfer of money from one bank account to another.
Funds
Transfer
Ethics Thinking about or pondering a certain kind of behaviour.
Exempt Non-taxable supplies.
supplies
Expense Accounts used to record decreases in equity.
accounts

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Final These are accounts used to facilitate the year-end accounting

accounts procedures, where income and expense accounts are closed off
and owner’s equity is updated at the financial year-end. There are
two final accounts used in the books of a sole trader, namely the
trading account and the profit-and-loss account.
Financial Discipline involving recording of transactions that have happened in
accounting the past.
Financial A process involving the effective planning, organizing, co-ordinating
managemen and controlling of the financial activities of a venture.
t
Financial These are reports set up by an accountant outlining the financial
statements position and performance of the business for a specific financial
period.
Financial 12-month reporting period for a business.
year
Fixed costs Expenses which do not vary with production and are incurred
irrespective of the volume of production.
Full tax Required from a VAT vendor whenever a supply total exceeds R3
invoice 000.
General Journal used to record sundry transactions that cannot be recorded
journal in any of the above seven journals.
General The general ledger summarises the subsidiary journals, and
ledger accumulated running balances that are listed on the trial balance.
The general ledger is also the official records of account as it is the
book in which business transactions are ultimately recorded.
General A statement showing corrective debits and credits to ensure the
ledger balancing of a trial balance.
reconciliatio
n statement
Gross profit The difference between the selling price and the cost price of a
product.
Imprest A system employed in petty cash that requires the restoring of a
system standard cash float at regular intervals by replacing cash that has
been taken from the petty cash box.
Income Accounts used to record increases in equity.
accounts
Income Statement of financial performance. The modern term for an income
statement statement is the “statement of profit or loss and other
comprehensive income”.
Input VAT VAT charged to a registered vendor on purchases of goods or
services from another registered vendor.
Internal A system of controls – a set of methods and procedures which can
control be auctioned to ensure that the objectives and goals of the
organisation are achieved.
Invoice A document that records that a sale of goods or services has taken
place, either for cash or on credit.

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Invoice The basis according to which VAT is accounted for upon the issue
basis and receipt of invoices, regardless of whether they’ve been paid.
Journal A book of prime entry, in tabular form.
Journal Internal source document from which transactions are recorded in
voucher the general journal.
Language of Accounting is often referred to as the language of business, an
business “international” language that crosses many borders.
Legal Companies, Close Corporations, trusts and deceased estates.
persons
Liabilities The debts of the business.
Managemen Accounting records that report on the current trading status of the
t accounts business.
Managerial Discipline involving management and strategic input, linked to
accounting operational outputs. Reporting based on future expectations and
strategic decision-making.
Marginal The sum of all variable costs, irrespective of whether these costs
cost comprise manufacturing, selling or administrative costs.
Marginal An expression of marginal cost as a fraction.
cost ratio
Marginal The difference between sales and variable/ marginal costs.
income
Marginal An expression of marginal income as a fraction.
income ratio
Mark-up The amount added to the cost price of a product to arrive at its
selling price.
Master The integrated, holistic budget – the comprehensive, all-
budget encompassing budget for the enterprise.
Morals Standard rules of behaviour.
Net profit The difference between the total income and total expenses of a
business.
Net working The net difference between the current assets and current liabilities
capital of a business.
Nominal The section of the general ledger and trial balance that includes all
accounts the accounts that will end up in the income statement, i.e. the
section income and expense accounts.
Non-current Resources that are not expected to be turned into cash within one
assets year.
Non-current Long-term debts.
liabilities
Normal time Legislation governs the total number of hours an employee may be
required to work during a period. This is known as normal time. It is
also the point at which an employer should start paying employees
at an overtime rate.
Original Source documents used to record credit purchases in the creditor’s
credit journal.
invoices

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Original Source documents used to record returns to/ rebates on goods or

credit notes services previously recorded in the creditor’s journal.
Output VAT VAT charged to customers by a VAT vendor.
Overtime The number of hours worked and remunerated over and above the
set number of hours for normal time as governed by legislation.
Owner’s Wealth of the owner in his or her business. Assets less liabilities =
equity Owner’s equity.
Payments The basis according to which VAT is accounted for upon receipt of
(cash) basis the actual cash from customers, or when suppliers are paid in cash.
Pension A group scheme formed for the employees of a company, aimed at
Fund providing much needed retirement savings, life cover and disability
cover.
Pension Contributions by the employer to the pension fund for the benefit of
fund employees
contribution
s
Perpetual A system of inventory keeping whereby stock levels are updated at
inventory the point of sale. Perpetual inventory has two main benefits. It
system improves record-keeping practices, making it simple to calculate
cost of goods sold in a certain period. Secondly, it allows
businesses to see accurate inventory at a given moment, making it
easier to know when to order more. This higher degree of control
can make companies more dynamic, and helps keep up with
customer demand. Its major disadvantage is the upfront cost of
implementation.
Personal A budget of expected personal income and expenditure for the
budget future.
Petty cash Journal to record purchases from the petty cash box.
journal
Petty cash Any transaction that causes a decrease in the cash on hand in the
transaction petty cash box.
Petty cash Internal source document used to record payments out of the petty
voucher cash box.
Post-closing Index of accounts in the general ledger that outlines the financial
trial balanceposition of the business as at the last day of the financial year. With
closing entries all nominal accounts and drawings are closed off and
only balance sheet accounts remain open. The post-closing trial
balance is prepared after closing entries and therefore only consists
of balance sheet accounts, excluding drawings.
Pro- forma Not the actual tax invoice, but rather an additional document to
invoice confirm an order.
Profit The amount by which the total income exceeds the total expenses
for a financial period.
Profit and A final account that is used in the manual system of accounting to
loss account facilitate the closing transfers needed to close off additional income
and expense accounts.

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Projected A budgeted income statement showing projected items of income

income and expenditure.
statement
Rules of The rules whereby assets, drawings and expenses are debited
double entry when they are increased; whereas liabilities, income and capital are
credited when they are increased.
Salaries A subsidiary journal used to account for the monthly payroll
journal creditors for salaries.
Sales The starting point in setting up the master budget, outlining the
budget expected sales for the budget period.
Skills A levy that has been introduced to assist with the shortage of skilled
Developme labour in South Africa.
nt Levy
Source The original records of transactions. Normally completed in
documents duplicate.
South Established by legislation to collect tax revenue and to ensure that
African individuals and businesses comply with tax laws.
Revenue
Service
Standard The normal VAT rate charged on standard-rated goods and
rate services (currently 14%).
Standard Goods or services on which the vendor charges VAT and on which
rated the consumer can claim the full VAT amount back if they are a VAT
supplies vendor themselves.
Statement Modern term for “balance sheet”. This is a statement of equity,
of financial assets and liabilities and measures financial position.
position
Statement Modern term for “income statement”. This is a statement of income
of profit or and expenditure and measures financial performance.
loss and
other
comprehens
ive income
Sundry Used when there is no column available for the contra-account in a
accounts journal.
Sundry These columns are use when there is no designated column for the
columns contra-account in a journal.
T-account A structure used for general ledger accounts, clearly showing a left-
hand side (debit) and a right-hand side (credit)
Timing These differences occur when the bank is not aware of a particular
differences transaction recorded by the business.
Trading A final account used in the manual system of accounting to facilitate
account the closing transfers of all accounts related to the calculation of
gross profit for the financial year.
Trading The merchandise sold by a trading business. This is the modern
inventory term for “trading stock”.

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Trading The traditional term used as a synonym for trading inventory.

stock
Trial List of the totals or balances on the accounts in the general ledger
balance (index of accounts). The trial balance must be in balance to prove
that the rules of double entry have been applied throughout.
UIF Contributions made by the employer towards the unemployment
contribution insurance fund.
s
Unemploym UIF – A fund established to assist people that are temporarily
ent unemployed for reasons ranging from maternity and structural
Insurance unemployment (individuals that find themselves between jobs), to
Fund temporary disability.
Value Indirect tax levied by vendors on the supply of certain goods and
Added Tax services.
(VAT)
Variable Expenses which will vary (more or less proportionally) with
costs production.
VAT The amount excluding VAT, constituting the true cost price
exclusive (expense) of selling price (income) of the product or service.
amount
VAT The amount including VAT, being the amount which the client or
inclusive customer pays at the point of sale.
amount
VAT vendor Person or business that is registered for Value Added Tax.
Wages A subsidiary journal used to account for the monthly payroll
journal creditors for wages.
Working This refers to the current assets of the business.
capital
Zero-rated Goods and services on which a VAT rate of 0% is charged.
supplies

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Icons Used in Learn

The following icons are used in all your modules in Learn:

Icon Description

A list of what you should be able to do after working through

the learning unit.

Specific reference to sections in the prescribed textbook (if

the module has one) or the printed manual (if the module has
one).

Questions to help you recognise or think about the

application of the theory in the world around you or in the
world of work.

Sections where you get to grapple with the content/ theory.

This is mainly presented in the form of questions which focus
your attention and are aimed at helping you to understand
the content better. You will be presented with online
resources to work through (in addition to the textbook or
manual references) and find some of the answers to the
questions posed.

Opportunities to make connections between different chunks

of theory in the module or to real life.

More real life or world of work information or examples of

application of theory, using online resources for self-
exploration.

You have to log onto Learn to:

 Access online resources such as articles, (interactive
graphics, explanations, video clips, etc. which will assist
you in mastering the content; and
 View instructions and submit or post your contributions to
individual or group activities which are managed and
tracked on Learn.

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Learning Unit 1: Introduction to Business,

Bookkeeping and Accounting
Learning Unit 1 lays the foundation for the rest of the module. We take a look at
the origin and role of accounting in the business environment, identify the main
users and uses of financial information, and explain how this language of business
is used by different types of entities to make their business run more efficiently.

No of activities: 1
Time on task for activities: 1 hour

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Provide a brief overview of the history of accounting;

 Outline the users and uses of accounting information;
 Explain the principles of International Financial Reporting Standards;
(IFRS);
 Illustrate the accounting cycle graphically;
 Contrast financial and management accounting;
 List the various types of transactions that can occur during the ordinary
course of business.

Theme 1: WHAT IS ACCOUNTING

 Did you know that Accounting was the first form of

primitive language?

Click here for a brief overview of the history of Accounting.

Think about when you last visited a grocery store.

 What did you buy?

 How much did it cost?
 How did you pay?
 What proof of payment did you receive?
 Did you pay tax?
 Who gets the money you paid?

Look at these examples of till slips from Pick n Pay. Notice how
all information pertaining to each purchase is contained on the till
slip (e.g. date, price, tax etc.).

 What is the significance of keeping record of the

information?

Read Learning Unit 1, Section 1.2 of the textbook and learn

more about the users and uses of financial information.

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 Which users of financial information do you think make

use of Pick n Pay’s financial information?

Click the link below to learn more about the users of financial
information:
http://accountingexplained.com/financial/introduction/

Theme 2: WHY WE RECORD FINANCIAL INFORMATION

Think about the game of soccer. In order

to play the game of soccer, you need to
know the rules. Without rules there
would be no winners or losers.

In the Soccer World

Cup of 2014, we saw
that Luis Suarez was
banned from playing
soccer for a number of
months because he had
bitten an Italian soccer
player. He was
banned because it is
against the rules of
soccer to bite
someone!

Accounting also has many rules that you need to follow! Imagine
if we did not have rules in Accounting, this could create many
problems for businesses!

Have you ever heard of the Enron scandal? Click here to read
more about it.

 Which accounting rules did the company not abide by?

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The rules that govern the field of accounting

Read Learning Unit 1, Section 1.3 of the textbook to learn
about the rules that govern the field of accounting. Pay specific
attention to Generally Accepted Accounting Practice (GAAP)
and International Financial Reporting Standards (IFRS).

Complete Question 1.2 in Learning Unit 1, Section 1.5 of the

textbook so that you can reinforce your understanding of the
GAAP principles.

! Your lecturer will release proposed solutions.

Proposed Solution: Question 1.2 in the textbook

Compare your answer to Question 1.2 in Learning Unit 1, Section 1.5 of the
textbook to this proposed solution.

 How many types of accounting are there?

Watch this video clip to find out:

https://www.youtube.com/watch?v=aVcs5CgsnfI

Read Learning Unit 1, Section 1.5 of the textbook so that you

can have a better understanding of the different fields of
Accounting.

 Complete Question 1.3 in Learning Unit 1, Section 1.5

of the textbook. This Question will assess whether you
understand the difference between Financial
Accounting and Management Accounting.
 Complete Question 1.4 in Learning Unit 1, Section 1.5
of the textbook. This activity will assess whether you
understand the Learning Unit so far.

! Your lecturer will release proposed solutions.

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The accounting cycle

Transactions and source documents are only the first two steps in
the accounting cycle.

 What do you think happens next in the accounting cycle?

When you buy an item at Pick n Pay, your purchase becomes part
of Pick n Pay’s accounting cycle.

When you purchase an item(s):

 The purchase itself is known as a transaction.
 The till slip you received is called a source document.

Click here to learn more about the major steps in the accounting
cycle and then work through this interactive summary of the
accounting cycle.

 Can you now answer the question about what happens next
in the accounting cycle?

The purpose of any business is to make profit.

How will Pick n Pay determine if they have made a profit?

Activity 1.2.1: Accounting systems

Unemployment is one of the major macroeconomic problems facing South Africa.

Many workers are unable to find employment in the formal sector and hope to
find some income from work in the informal sector.

An accounting system is primarily a system of controlling money, which is often

referred to as a ‘scarce resource’. In an established business, a
comprehensive accounting system will be in use.

Not only is such a system compulsory, but it is also a control measure which
ensures that all receipts and payments are accounted for and that source
documents exist to verify each transaction. In most businesses the accounting
system is managed by a qualified person, either an accountant or a
bookkeeper.

In South Africa, as in most other countries in the world, we also find businesses
operating in what is called the informal business sector. Examples of such
businesses are:
 Street vendors selling fruit and vegetables
 Persons selling local artefacts at flea markets
 Car guard services
 Housewives baking cakes and selling them to home industries
 Existing farmers

These businesses mostly generate very small profits which mean that they are
not liable for tax and the people who run the businesses mostly have little

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knowledge of the formal accounting system. Yet they need to exercise a

measure of control in order to survive.

Time on task: 1 hour

Concepts covered in this learning unit

Complete Question 1.5 in Learning Unit 1, Section 1.6 of the

textbook to revise all the concepts that you have learned in
Learning Unit 1.

! Your lecturer will release proposed solutions.

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Learning Unit 2: The Accounting Equation and Double

Entry System
In this learning unit you will discover the reason why accounting has become
known as the language of business. We delve into the intricacies of an equation
which holds all financial information together – the accounting equation. You will
discover how the accounting equation can be used in everyday life, and how the
same principles of balancing the books of your own household can be applied in a
business environment to draw up a statement of financial position.

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Analyse transactions under the accounting equation;

 Define assets, non-current assets and current assets;
 Define liabilities, non-current liabilities and current liabilities;
 Explain what is meant by a ‘proprietary account’;
 Define income and expenses;
 Discuss the profit motive and demonstrate how gross profit
and net profit are derived;
 Explain and apply the rules of double entry.

Theme 1: THE BUILDING BLOCKS

Did you know that Beyonce Knowles is worth 265
million US Dollars!

 How do we know this? How do they calculate

this amount?

How much do you think you are worth?

Discover how to calculate Beyonce’s wealth by studying Example

2.1 in Learning Unit 2, Section 2.1 of the textbook.

It all culminates in a trial balance

! Later in this module, we shall see how the books of

accounts culminate in a trial balance at month-end.

You might already know more about a trial balance than

you think though!

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Have a look at the trial balance of Letsema Furnishers in

Learning Unit 5 of your textbook, Question 5.5. Did you
notice the following?

1. The proprietary accounts are listed in this trial balance.

2. The capital account has a credit balance and the drawings
account has a debit balance. (Have a quick look at the rules
of double entry on pp. 43 to 45 - do these balances make
sense? Theme 3 in this learning unit focusses on the doubly
entry system).
3. Per the trial balance of Letsema Furnishers there are:

seven (7) asset accounts …and debit balances

three (3) liability accounts they credit balances
sixteen(16) expense accounts all debit balances
five (5) income accounts have… credit balances

 The diagram in Learning Unit 2, Section 2.3 (page 44) of

the textbook summarises your building blocks for
Accounting.

 Now that you have your building blocks, how does Andrew
use them? Study the examples on pp. 30 to 34 of the
textbook.

 How do the examples on pp. 30 to 34 link to the diagram on

p. 44 of the textbook?

1. Complete Question 2.5 in Learning Unit 2, Section 2.2 of

the textbook. How does a transaction affect the
accounting equation?

2. Test your knowledge on the types of accounts of a

business by completing Question 2.6 in Learning Unit 2,
Section 2.3 of the textbook.

! Your lecturer will release proposed solutions.

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Theme 2: WHAT IS PROFIT?

 What is profit?
 How do you calculate profit?
 What are the different types of profit?

Watch this video clip to learn more about the different types of
profit:
https://www.youtube.com/watch?v=v5hdJkDhp6A

Profit and the accounting equation

Read Learning Unit 2, Section 2.1 of the textbook. Can you
answer the following questions?

 What do you think forms part of the accounting

equation?
 Are there other ways in which the accounting equation
can be expressed?

1. Complete Question 2.7 in Learning Unit 2, Section 2.3 of

the textbook. This question focuses on the effect individual
transactions have on the accounting equation.

2. Assess your understanding of gross profit, net profit,

mark up percentages and gross margins by completing
Question 2.10 in Learning Unit 2, Section 2.3 of the
textbook.

! Your lecturer will release proposed solutions.

Theme 3: HOW THE DOUBLE ENTRY SYSTEM WORKS

Remember the example about the game of soccer and how
important it is to have rules?

 What do you think are the rules of double entry?

Debit and credit

Study the examples in Learning Unit 2, section 2.3 of the
textbook. Note how individual transactions are recorded in
the accounting equation.

 Why is it important that the accounting equation balances?

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Did you know?

 ‘Debit’ is a Latin word that means ‘left hand side’ and that
it does not mean increasing or decreasing;
 ‘Credit’ quite simply means ‘right’ and is the name given to
the right hand side of an account.

The rules of double entry

Explore the infamous rules of the double entry in Learning
Unit 2, Section 2.3 of the textbook.

Once you have worked through the infamous rules of double entry
in your textbook, reinforce your understanding by watching the
following video clips:

1. Double entry accounting system:

https://www.youtube.com/watch?v=y0KvQ0CXxw8

2. Debits and credits:

https://www.youtube.com/watch?v=cd_8L-zgZ3U

Remember Andrew, the small business owner in the textbook?

 How will he apply the double entry principle in his

business?

Work through Example 2.9 in Learning Unit 2, Section 2.3

of the textbook.

Work through Example 2.11 in Learning Unit 2, Section 2.3

of the textbook. Make sure that you understand the concept of
‘cross-referencing’.

Complete Question 2.9 in Learning Unit 3, Section 2.3 of the

textbook. This activity will test your understanding of basic
double entries.

! Your lecturer will release proposed solutions.

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Inventory systems
Why do businesses do a stock take?

Did you know that McDonalds:

 Serves 1% of the world's population every

day.
 Sells more than 75 hamburgers every second.
 $24 billion in revenue makes it the 90th-
largest economy in the world.
 Hires around 1 million workers in the US every
year.
 Is the world's largest distributor of toys, with
one included in 20% of all sales.
McDonald's' iconic golden arches are recognised by
more people than the cross which symbolises the
Christian religion.

 Why do businesses do a stock take?

 How important is it for McDonald’s to manage
stock? (Remember how they sell 75
hamburgers every second!)

If you want to know more, read this article which

contains information on how McDonald’s manages
its stock.

Study Example 2.13 in Learning Unit 2, Section 2.4 of the

textbook. Ensure that you are able to record entries for both a
perpetual and periodic inventory system.

Prove your understanding of the concepts of perpetual and

periodic inventory systems by completing Question 2.13 in
Learning Unit 2, Section 2.4 of the textbook.

! Your lecturer will release proposed solutions.

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Learning Unit 3: Value Added Tax and Source

Documents
In this learning unit, you will gain a greater understanding about Value Added
Tax (VAT). VAT is a tax that is levied on almost all goods and services
provided. A few goods and services are VAT exempt or zero rated, though. In
addition to understanding the theory regarding VAT, you will also learn how to
complete various calculations connected to VAT.

No of activities: 5
Time on task for activities: 4 hours

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Explain what Value Added Tax (VAT) is, and how the system works;
 Compare the VAT system to the traditional General Sales Tax (GST)
system;
 Identify standard rated, zero-rated and exempt supplies, as well as non-
allowable items;
 Compare the two bases according to which vendors may be registered for
VAT;
 Explain what a valid tax invoice looks like;
 Differentiate between the various source documents used by the business to
record various transactions;
 Perform basic VAT calculations.

Theme 1: WHY PAY VALUE ADDED TAX?

DID YOU KNOW?

 VAT was first introduced in South Africa in its current form in September 1991 at a rate
of 10%. Prior to 1991, South Africa implemented a General Sales Tax (GST) system.

 In 2013, SARS (the South African Revenue Services) collected R813.8 billion in tax
revenue, of which 26.4% (R215.02 billion) was income collected from VAT. (Source:
2013 Tax Statistics. South African Revenue Service. October 2013, accessed 8 September
2014,
<http://www.treasury.gov.za/publications/tax%20statistics/2013/TStats%202013%20WEB.pdf>)

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What is VAT?

Take another look at the Pick n Pay till slips from Learning Unit 1.

 What type of tax has been paid as per the till slips?
 Is this the only type of tax that we pay in South Africa?

Read this document on tax in South Africa and visit the website
of the South African Revenue Services (SARS). Can you now
answer the abovementioned questions?

VAT supply categories

In both transactions reflected in these Pick n Pay till slips, the

customer was charged 14% VAT on the items purchased.

However, in this slip from SPAR, zero % VAT was charged for
the items purchased. Why would this be?

Study Learning Unit 3, Section 3.3. Focus on how the different

VAT supply categories affect a transaction.

Test your knowledge on the different VAT supply categories

by completing Question 3.3 in Learning Unit 3, Section 3.4.

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Activity 3.1.1: VAT supply categories

In South Africa the standard VAT rate is currently

14%. However, certain goods and services are
exempt from VAT, while for others, VAT is charged
at zero percent. There are also goods and services
for which VAT cannot be charged.
SARS’s website
provides extensive
support and information
regarding VAT.

Time on task: 1 hour

VAT registration

(Source: 2013 Tax Statistics. South African Revenue Service. October 2013, accessed
8 September 2014,
<http://www.treasury.gov.za/publications/tax%20statistics/2013/TStats%202013%20
WEB.pdf>)

Who may charge VAT for goods and services?

Activity 3.1.2: Payments basis

You have been approached by a friend who has started a wholesale business called
Kitchen Kandy. The business sells kitchen appliances (e.g. kettles, toasters, hot
plates etc.). Your friend has estimated that the turnover of the business will be in
the region of R3 million a year. Your friend knew that his business has to first
register as a VAT vendor before they can charge VAT on items sold and has
indicated that he would like to register his business with SARS on the payments
(cash) business.

Time on task: 30 minutes

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Activity 3.1.3: Payments vs invoice basis

In the light of the reasons provided in Activity 3.1.2 as to why your friend cannot
register his business using the payments (cash) basis, you have advised him to
register his business on the invoice basis.

Your friend has now asked you for assistance in understanding what the
difference is between the two types of basis is.

Time on task: 45 minutes

Theme 2: TAX INVOICES AND SOURCE DOCUMENTS

An invoice is a document that records that a sale of goods or

services has taken place, either for cash or on credit. What do
you think are the important details which should be included on
an invoice?

Read through Learning Unit 3, Section 3.5 of the Accounting

1A textbook, to learn more about a tax invoice.

Click on the following link to explore the details included on an

invoice:

http://fspbusiness.co.za/articles/vat/do-you-really-need-a-tax-
invoice-1522.html

Activity 3.2.1 Tax invoices: Part 1

Your friend has asked you to assist him with creating an invoice for his
business.

Click the link above the red arrow to open the Self-Assessment Tool and
complete the activity under Question 1.

Time on task: 1 hour

Activity 3.2.2 Tax invoices: Part 2

Your friend has now asked for assistance in generating an invoice for a client.

Time on task: 45 minutes

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Source documents

A tax invoice is not the only source document that is used to

record various transactions in a business.

Can you name all the source documents used by a business?

Read through Learning Unit 3, Section 3.5 of the textbook to

find out more about the source documents used in a
business to record various transactions. Make sure you can
differentiate between them.

Theme 3: HOW IS VAT CALCULATED?

How do vendors calculate VAT?

In both transactions reflected in the Pick n Pay till slips, the

customer was charged 14% VAT on the items purchased. Pick n
Pay does not make the Coca Cola themselves, so a sales
transaction between them and The Coca Cola Company preceded
the one reflected in the till slip. Being a business, Pick n Pay has
to cover their expenses and make a profit on the sale. Where
does VAT fit into the picture?

Watch this video lecture on VAT in South Africa and how it is

calculated:

https://www.youtube.com/watch?v=x9ze_zwZKpU

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Calculating VAT

In Theme 2, Activity 3.2.1 of this learning unit, you had to create

a tax invoice for Kitchen Kandy. You would have noted that the
tax invoice contained amounts that were exclusive as well as
inclusive of VAT:

 The unit prices on an invoice are listed as exclusive of

VAT.
 However, at the bottom of the invoice, the total is listed
as inclusive of VAT.
 Furthermore, when you charged VAT on the invoice, this
would be regarded as ‘output’ VAT.

Explore these notes to learn more about VAT:

XXXXX

Mark-up and profit

It is every entrepreneur’s priority to make as much profit as

possible without losing any clientele due to excessive
mark-ups. The mark up is the amount added to the cost price
of a product to arrive at its selling price. The terms mark-up and
gross profit are different terms for the same amount.

Click the hyperlinks below and read through the notes to learn
more about mark-up and profit:

 Cost based and sales based mark-up:

XXXXX

Calculating mark-up percentage and gross margin

Work through the information presented below to learn more

about calculating mark-up percentage and gross margin:

XXXXX

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Practice makes perfect!

 Complete Question 3.6 in Learning Unit 3, Section 3.6.
Are you able to calculate VAT amounts as well as VAT
exclusive and inclusive prices?

 In the previous activity, you calculated VAT amounts.

Complete Question 3.7 in Learning Unit 3, Section 3.6
which focusses on cost price, selling price and profit
calculations.

 Apply your knowledge on cost and sales based mark-up

as well as mark-up percentage and VAT in Question
3.8 in Learning Unit 3, Section 3.6 of the textbook.

! Your lecturer will release proposed solutions.

A person or a business has to first register as a VAT

vendor before they can charge VAT on items and when
businesses calculate VAT amounts they incorporate profit mark-
up into these amounts.
From now on when you receive either an invoice or a till slip
from a business, you will be able to understand
the importance of the details listed on these source
documents.

Source documents are essential and must be accurate since

they provide evidence that financial transactions
occurred. Never underestimate your role in the success of a
business if your main responsibility is around the generation
and checking of invoices!

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Learning Unit 4: Recording Cash Transactions

The main purpose of a business is to make a profit, and to increase the level of
the owner’s equity in the process. Hence, the monitoring of cash movements into
and out of the business is critical in order to ensure that the flow of money, referred
to as cash flow, is adequate, effective and efficient at all times.

In this learning unit, you will be introduced to the various journals that are used
to record cash transactions. You will also learn about posting to the General
Ledger.

No of activities: 3
Time on task for activities: 4 hours 15 minutes

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Explain the accounting process/cycle with respect to

specified time periods;
 Recognise and define the types of source documents and
provide related journal entries for basic cash transactions.
 Identify the different subsidiary cash journals and explain
what they are used for;
 Record source documents in appropriate subsidiary cash
journals;
 Post the cash journals to the General Ledger;
 Prepare a simple trial balance.

Theme 1: SOURCE DOCUMENTS AND JOURNALS

Imagine you want to start a business of your own. You know that
you will probably need to submit a tax return for your business
each year.

What documents will the taxman expect you to submit to prove

that your tax return is accurate?

Read this article to learn more.

 Now that you have read the article above, do you believe you
know enough about accounting to be able to complete, right
now, the documents required to complete a tax return for
your imaginary business?

o What else do you need to know before you can do so?

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How much do you know about accounting journals,

transactions and source documents?

Work through the table on pp.99-100 of the textbook.

Activity 4.1.1 Source documents

How much do you know about accounting journals, transactions and source
documents? Let us find out...

Refer to the table in Learning Unit 4, Section 4.2 of your textbook to assist
you.

Theme 2: RECORDING SOURCE DOCUMENTS IN

JOURNALS
Now that we have looked at the basic concepts relating to accounting, it is time to
explore how these are used to manage and record cash flows in a business.

In Learning Unit 1, you learnt about the accounting cycle. Thus

far, you have dealt with the first two steps of the accounting cycle,
i.e. transactions and source documents.

In Learning Unit 3 you were introduced to different types of

source documents. The recording of transactions on source
documents is a critical part of the accounting cycle and the
information contained on a source document will be utilised
throughout the cycle.

During the third step of the accounting cycle, all the information
contained in the source documents, are recorded in a journal.

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Remember the invoice which you created for Kitchen Kandy in

Learning Unit 3?

You will notice that the invoice provides you with the:
1. date of the transaction
2. document (invoice) number
3. name of the debtor and
4. cost of the items that were sold (excluding and including
VAT).

During the third step of the accounting cycle, all these details
are essential as it would then be recorded in a journal.

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Activity 4.2.1: Recording source documents

Before we begin posting to the journals, it is essential that you know how to
record transactions in different source documents.

Time on task: 2 hours

The cash journal

 Did you notice how many different source documents there
were to complete in Activity 4.2.1?

 If transactions are recorded in a variety of source

documents, are they all then posted to one/the same
journal?

! Journals are called books of first entry (also known as

subsidiary journals).

The type of transaction the business enters into, determines

the type of source document required to reflect the
transaction, which in turn determines the type of journal in
which the transaction is recorded.

Look at Example 4.1 in Learning Unit 4, Section 4.3 of your

textbook. Make sure you can answer the following questions:

 How do we draft a cash journal?

 What information must the cash journal contain?
 What determines the type of information recorded in a
cash journal?

Test your new found knowledge on cash journals by completing

Question 4.5 in Learning Unit 4, Section 4.3 of your textbook.

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Theme 3: POSTING TO THE GENERAL LEDGER

What is the difference, if any, between a journal and a general
ledger?

Watch the clip below to refresh your knowledge of journals and

to learn more about the general ledger:

https://www.youtube.com/watch?v=SPDigFJnhSc

Learn more about the structure of a general ledger and the

rules for balancing an account in Learning Unit 4, Section
4.4 of your textbook.

The General Ledger

By now, you should know that one way to monitor cash flow in
your new business is to add up the columns in the subsidiary
journals and ‘post’ the totals to the general ledger at the end of
each month. These should balance if the entries have been
posted correctly. Let’s take a closer look at how this is done.

Study Example 4.2 in Learning Unit 4, Section 4.4 of your

textbook. Pay particular attention to the balancing of the
general ledger accounts.

This video may help you to understand how journals are posted
to the general ledger even further.

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Activity 4.3.1 The General Ledger

It is now time to find out whether or not you are able to balance the accounts
posted to a general ledger.

Time on task: 1 hour 30 minutes

THE TRIAL BALANCE

You may remember from the accounting cycle that the next step is to compile
the trial balance.

 What is the primary purpose of a trial balance?

 Where do we find the information needed to compile a trial
balance?

The trial balance is an index of all the accounts listed in the

general ledger, with their respective balances. It is divided
into two sections. Hover over the image below to learn more
about them:

xxxxxxx

The trial balance is divided into two sections:

 the balance sheet section which holds the proprietary
accounts, as well as the assets and the liabilities, and
 the nominal accounts section, which lists the income and
expense account balances.

Refer to Example 4.3 in Learning Unit 4, Section 4.5. See if

you can answer these questions:

 What do you notice about the totals of the debit and

credit columns?
 What does it mean if the totals of the debit and credit
columns in the trial balance are different?

The working of the double entry system becomes clearly visible

in a trial balance, as total debits should ALWAYS equal total
credits. In other words, like the accounting equation, the trial
balance should always balance.

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Activity 4.3.2 The Trial Balance

Practice makes perfect!

Go back to the general ledger for Question 4.8 in Learning Unit 4, Section 4.5
the textbook which you completed earlier in Activity 4.3.1 and post the
information from the general ledger to the trial balance and see if the
totals balance.

Time on task: 45 minutes

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Learning Unit 5: Recording Credit and Sundry

Transactions
Most businesses today do not trade on a ‘cash only’ basis as was the case with the
examples we used in Learning Unit 4. The benefits of extending a credit line to
customers should never be overlooked. By allowing customers to buy products on
a ‘buy-now-pay-later’ basis, a business can achieve more sales revenue and
repeat business.

No of activities: 5
Time on task for activities: 4 hours

Learning Unit Objectives

On completion of this learning unit, you should be able to:
 Explain why offering credit can benefit a business;
 Explain the risks associated with offering credit to customers;
 Record credit sales in the debtors journal from duplicate credit invoices;
 Record duplicate credit notes in the debtors allowances journal;
 Record credit purchases in the creditors journal from original credit invoices;
 Record original credit notes in the creditors allowances journal;
 Record sundry transactions in the general journal;
 Complete a comprehensive exercise in which all eight (8) subsidiary journals
are combined;
 Account for VAT in the journals by recording a variety of different
transactions that involve standard rated, zero-rated, exempt and non-
allowable items;
 Explain how the rules of double entry are adhered to when making a journal
entry;
 Post a completed set of subsidiary journals to the general ledger;
 Balance the ledger accounts and draft a trial balance;
 Analyse a variety of different transactions under the accounting equation.

Theme 1: WHY DO WE NEED CREDIT?

Buying and selling goods on credit has its advantages and

disadvantages.

Look at this website. It lists some advantages and

disadvantages of buying on credit for an individual. Now,
complete this activity!

 What do you think would be the advantages and

disadvantages of buying and selling goods on credit from a
business perspective?

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Credit and sundry transactions

Watch the two videos from The Independent Institute of

Education below. They will provide you with background
knowledge on the recording of credit and sundry
transactions.

Part one:
https://www.youtube.com/watch?v=lx8TzcLMkkM

Part two:
https://www.youtube.com/watch?v=T_1DCnGUoN0

Theme 2: Purchasing on credit and returning goods

purchased on credit

A business has to record EVERY financial transaction, even if

payment has not yet been made. But what if the goods are
returned to the supplier before payment has been made?

Let’s say Pick n Pay purchases a batch of electrical home

appliances from a supplier, on credit. The tax invoice issued by
the supplier serves as the source document and the transaction
is recorded.

 If some of these appliances have defects and are returned to

the store by some of Pick n Pay’s customers and Pick n Pay
in turn, returns these to their suppliers, how/where would
this be recorded if Pick n Pay has not yet paid the
supplier?

Creditors Journal vs Creditors Allowances Journal

Compare the information sheets on the creditors journal and

the creditors allowances journal below.

Xxxx

xxxxx

Study Learning Unit 5, Section 5.2 of the textbook to

reinforce your understanding of the creditors and creditors
allowances journals.

Now watch part three of the series on credit and sundry

transactions below:

https://www.youtube.com/watch?v=SKuLOeI_jXg

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Activity 5.2.1: Creditors and Creditors Allowances Journals

Assess your knowledge of the Creditors and Creditors’ Allowances journals in the
application below:
xxxxxx

Theme 3: Selling on credit and return of goods sold on credit

Let us use the Pick n Pay example from Theme 1 again. As

already discussed, the credit transactions between Pick and Pay
and its supplier (i.e. credit purchase and return of goods) are
recorded in Pick n Pay’s credit and credit allowances journals
respectively.

 If a similar transaction occurred between the consumer and

the business (i.e. goods were purchased and then returned
by the consumer) and the customer purchased the
goods on credit, how/where would this be recorded?

Study Learning Unit 5, section 5.2 of the textbook to

reinforce your understanding of the debtors and debtors
allowances journals.

Thereafter, watch part four of the lectures presented by the

Independent Institute of Education:

https://www.youtube.com/watch?v=ZG3071fqICM

Compare the information sheets on the debtors journal and the

debtors allowances journal below. See if you can identify the
difference(s) between these two journals.

Xxxx

xxxx

Theme 4: SUNDRY TRANSACTIONS

As mentioned earlier in this module: A business must record

all transactions!

 So far, you have been introduced to cash and credit journals.

However, what happens when you have a transaction that
cannot be recorded in any of the cash or credit
journals?

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Watch part five of the lectures presented by the Independent

Institute of Education:

https://www.youtube.com/watch?v=cu3nAxBsRK8

The general journal is used to record any transaction that

is not recorded in any of the three cash journals
(described in Learning Unit 4) or the four credit journals
(described in this learning unit).

The general journal is completely different in structure to

any of the journals discussed before - there are no specific
columns for collecting similar transaction amounts. There is
simply a debit column and a credit column for amounts to
be posted. Click here to see how to post to the general journal.

Run through the application below and see how to post to the
general journal:

xxxx

Activity 5.4.1: Example of a General Journal

You have now had an opportunity to explore how we journalise a transaction in

the General Journal.

Work through the application below and complete a General Journal entry in
the example:

xxxxxx

Activity 5.4.2: Analysing and recording a range of transactions

We have looked at the different records of credit transactions as well as the

General Journal.

However, these records do not work in isolation. It is important that you are able
to analyse a range of cash and credit transactions and record them in the
various cash and credit journals.

Time on task: 45 minutes

Activity 5.4.3: Revision

Test your knowledge on all the previous concepts by completing the attached
revision question. (Once you have completed answering the question you may
open the attached solution in order to assess your understanding.)

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Theme 5: DEALING WITH ERRORS AND OMISSIONS

The manual bookkeeping system is often characterised by a

magnitude of possible discrepancies and errors that can creep in.
This necessitates the bookkeeper to verify applicable transactions,
identify and correct discrepancies, errors, incorrect double entries,
misallocations, missing entries or incorrect calculations.

 How do you think a bookkeeper is able to correct all these

different types of errors?

Study Example 5.2 in Learning Unit 5, Section 5.3 to learn

about how to correct errors in the records of a business.

Check that you understand the process of correcting errors

by completing Question 5.6 in Learning Unit 5, Section 5.3
of your textbook.

! Your lecturer will release a proposed solution.

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Learning Unit 6: Inventory (stock) systems

When inventory (stock) is sold, this leads to a large expense on the income
statement (statement of comprehensive income). Similarly, payments to suppliers
of inventory (stock), represents a large cash outflow on the statement of cash flows
of the business. In this learning unit, we look at how the cost of inventory is
calculated and explore the impact of the perpetual and periodic systems on
recording of information in the cash and credit journals as well as the general
ledger.

No of activities: 3
Time on task for activities: 3 hours

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Explain why some businesses choose not to use a perpetual inventory

system, but a periodic system instead;
 Calculate cost of sales using a periodic inventory system;
 Demonstrate the working of the purchases and purchases returns accounts
under a periodic inventory system;
 Demonstrate the working of the carriage on purchases and similar accounts
that affect the calculation of cost of sales under a periodic inventory system;
 Analyse inventory related transactions under the accounting equation when
using a periodic inventory system;
 Record the inventory related transactions in the subsidiary journals when
using a periodic inventory system;
 Explain which one (1) of the two inventory systems is most desirable in the
world in which we live.

Theme 1: HOW TO CALCULATE THE COST OF INVENTORY

In Learning Unit 2 you were briefly introduced to the concept of

inventory and you learnt about two types of inventory systems.
In this learning unit, we will:

 Look at how the cost of inventory is calculate and

 Explore the impact of the perpetual and periodic
systems on recording of information in the cash and credit
journals as well as the general ledger.

Inventory (stock) is a significant line item for retailers and manufacturers in

particular, and comprises a large asset on the statement of financial position
(balance sheet) of such enterprises.

xxx

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Updating inventory

Retailers in the clothing industry are renowned for their end-of-

season sales – a golden opportunity for us to buy clothes at
great discounts and for the businesses to get rid of existing
stock. (What’s in fashion this summer, may not be in fashion
next year).

 How often does a big retailer such as Mr Price update its

inventory?
 Are their merchandise inventory and the cost of the goods
they sell, updated and recorded simultaneously? Why/why
not?

Learn about the calculation of the cost of inventory by

studying Example 6.1 in Learning Unit 6, Section 6.2 of the
textbook.

Activity 6.1.1: Calculating cost of inventory

Rainbow Traders imports desk chairs and assembles them locally. The periodic
inventory system is used.

The following extracts of balances appeared in the records at 30 June 2014, the
end of the financial year:

R
Inventory: 1 July 2013 65 000
Cash purchases (before a 5% trade discount) 90 000
Credit purchases 125 000
Freight on purchases 10 000
Import duties 6 000
Assembling costs of chairs 12 000
Insurance(while in transit) 2 500
Purchases returns 7 500
An inventory count at year-end revealed that there was inventory to the value of
R60 000 on hand.

Theme 2: PERPETUAL FOR SOME, PERIODIC FOR OTHERS

Before we explore the impact of inventory systems on the

records of a business, you will need to recap your knowledge on
the perpetual and periodic inventory systems.

Watch the clip below and study this comparison between

perpetual and periodic inventory systems.

https://www.youtube.com/watch?v=s9DQ7aAi-hs

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 Which system do you think is the best – perpetual or

periodic?

 Study Example 6.2 in Learning Unit 6, Section 6.3.

Focus on the differences that occur in the various
journals.

 In addition to this, study the various effects of the

inventory systems on the general ledger.

Activity 6.2.1: Recording in journals in perpetual and periodic systems

Click the link above the red arrow and test your knowledge on the differences
between journals in the perpetual and periodic inventory systems.

Activity 6.2.2: Recording in journals in a periodic system

You may ask a friend to join you in completing this particular activity.

You and your friend are bookkeepers. The owner of a business by the name of
Siyard Books has requested you to assist him with the recording of the
transactions for the month of August 2007.

As a business, Siyard Books:

- Uses the periodic inventory system;
- Is a registered VAT vendor and trades only with registered VAT vendors;
- Charges 14% VAT on all its sales and all amounts provided are inclusive of
VAT unless VAT is not applicable.

Click here for a list of all the transactions for Siyard Books for the month of
August 20.7
 As you will see, the names of the source documents are abbreviated in the
above-mentioned transaction document. The following descriptions may be
useful when you prepare the journals specified below:

DC = duplicate invoices
DCT = duplicate credit notes
DCS = duplicate cash slips
RT = duplicate receipts
JR = journal vouchers
PV = petty cash vouchers

The owner of Siyard Books specifically requested that you complete these journals
and that you use the column names as provided below:

1. Debtors journal (DJ8) with analysis columns for debtors control, VAT and
sales.
2. Debtors allowances journal (DAJ8) with analysis columns for debtors control,
VAT and sales returns.
3. Cashbook receipts (CBR8) with analysis columns for bank, debtors control,
VAT, sales and sundries. Note that cash is banked on a daily basis.

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4. Petty cash journal (PCJ8) with analysis columns for petty cash, postage &
stationery, staff refreshments, VAT and sundries.
5. General journal (GJ8)

In line with your professional approach to bookkeeping, you will complete the
above-mentioned journals using Microsoft Excel. A template for the journals
can be accessed by clicking here.

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Learning Unit 7: Debtors (Accounts Receivable) and

Creditors (Accounts Payable)
So far, we have dealt with the entire accounting cycle up to trial balance.

In Learning Units 1 - 6, we looked at how:

 Transactions are summarised on source documents;
 Source documents are summarised in journals;
 A completed set of journals is posted to the general ledger; and how
 The trial balance is drafted.

There is only one important link in the cycle that we have not discussed:
individual debtors & creditors accounts. In this learning unit we will deal
specifically with the individual accounts receivable and accounts payable.

Learning Unit Objectives

On completion of this learning unit, you should be able to explain:

 Why it is important to have separate debtors’ accounts in a separate ledger;

 How the individual account of a debtor works;
 Why a trial balance will not include individual debtors’ or creditors accounts;
 Why it is important to have separate creditors’ accounts in a separate ledger;
 How the individual account of a creditor works.

No of activities: 2
Time on task for activities: 2 hours

Theme 1: Debtors (accounts receivable)

Edgars is a clothing store and many

people in South Africa purchase
clothes on credit from them.

 How does Edgars keep track of all

the people who purchase on credit
from them? Granting credit to debtors
 How do they know how much is risky for ANY business.
money is owed to them? Click the link below and
read more about the
amounts of money banks
loose annually as a result
of bad debt and find out
how the losses incurred by
African Bank Investment
Limited (Abil), resulted in a
major crisis.

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The debtors ledger

People (or businesses) that buy goods or
services from a business on credit and
subsequently owe the business money, are
called debtors.

Granting credit to debtors is

quite risky. That is why it is important How does
! for any business to be pro-active and to
check whether prospective clients will be
Edgars do this?
Click the link
good debtors!
below and
work through
Example: their online
How does Edgars check whether or not their
account/credit
prospective clients will be good debtors? Click
here and work through their online application
account/credit application process. Can you see process. Can
that they have certain criteria for selecting you see that
debtors, built into their application process? they have
certain
You saw in the previous learning units how the criteria for
debtors control account in the general
selecting
ledger summarises all the transactions
that involve debtors. debtors, built
into their
Because it is only a summary, the debtors process?
control account does not tell us anything about
the amount of money that any individual debtor
owes to the business. If we want to know who
owes the business money and how much,
we have to prepare individual debtor
accounts. These accounts make up the
debtors ledger.

Run through the application below and explore

the debtors ledger:
xxxxx

Study Example 7.1 in Learning Unit 7, Section 7.2 of the

textbook to learn more about the debtors ledger.

Pay specific attention to the codes that are used to identify

certain types of transactions in the business.

Activity 7.1.1: Debtors ledger and debtors list

It is time to apply your knowledge of the debtors’ ledger.

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Theme 2: Creditors (accounts payable)

Businesses that sell goods or provide services on

credit to individuals or other businesses, are called
creditors.

 Toolquip & Allied is an importer and distributor

of engineering tools and parts in South Africa.
Many engineering, manufacturing and mining
companies purchase items on credit from them.
This means that Toolquip & Allied is a creditor.

 It is understandable why it is usually a very

stringent process to apply for credit with a
creditor.

Click here to see the credit application form from

Toolquip & Allied.

Notice how much information a creditor

! requires before granting a customer credit!

Recording transactions in the creditors ledger

Study Example 7.2 in Learning Unit 7, Section 7.2 of the
textbook to learn more about the recording of transactions in the
creditors’ ledger.

! Note how the column headings of the creditors ledger are exactly the
same as the headings of the debtors ledger.

Have you noticed that there are many similarities between the
debtors and creditors ledger?

 Codes:
Just as in the debtors’ ledger, we also make use of codes to
describe different types of transactions in the creditors
ledger.

 Posting:
Posting to the creditors ledger works in exactly the same
way as posting to the debtors ledger.

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Activity 7.2.1: Posting to creditors ledger

It is time to for you to practise posting to the creditors ledger.

Activity 7.2.2: Posting to creditors and debtors ledgers

It is now time to assess whether you are able to utilise a number of

transactions to complete accounts in debtors and creditors ledgers.

Complete Question 7.6 in Learning Unit 7, Section 7.2 of

your textbook.

The range of journals and source documents that you will need
are in Learning Unit 7, Section 7.2.

OBJECTIVE: You have to match each of the source documents with the
correct transaction and then fill in the missing figures,
words and/or descriptions in the ledgers provided below in
order for all the transactions entered into, to be
recorded correctly.

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Learning Unit 8: Salaries and Wages

When starting a business, every business owner is faced with the daunting
prospect of getting the paperwork and administrative procedures of the enterprise
up and running.

Due to a lack of funds, the entrepreneur often has to deal with all these issues
themselves – until such time as sufficient working capital has been accumulated
to make outsourcing a viable alternative.

One specific area which will need to be addressed, is the administering of the
payroll function. The payroll administrator will need to keep all the necessary
documents, authorisations and records to control this payroll process (this can be
done manually by using a computer spreadsheet package such as Microsoft Excel,
or by using a payroll software package like Pastel, Sage VIP Payroll & HR, Payday
or Quickbooks).

No of activities: 5
Time on task for activities: 4 hours

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Explain how a payroll accounting function operates;

 Calculate gross wages, selected deductions and net wages;
 Record all payroll components in the appropriate wages or salaries journal;
 Post the wages and salaries registers as well as the cashbook payments to
the general ledger to affect the double entries for payroll;
 Prepare the EMP201 return for remittance.

What is payroll?
Imagine that you are the owner of a small business.

 When you pay your employees, would you pay them

salaries or wages?
 How do you think you would be able to manage the
payment of your employees?

 What is the difference between a salary and a wage?

 What are the advantages of using a payroll
program/software package?

This article explains the difference between salary and

wages.

Watch the video clip below on the advantages of using a

payroll program/software package:

https://www.youtube.com/watch?v=euGPFih1IiA

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Gross and net salaries/wages

You know the difference between salaries and wages and have
already been introduced to the terms ‘gross’ and ‘net’ in some
of the previous learning units.

 What do you think is the difference between gross

salaries/wages and net salaries/wages?

Read in Learning Unit 8, Section 8.2 of the textbook to learn

more about how fair wages/salaries are determined and
also what the term ’deductions’ means.

Cost of labour
While a worker (employee) is only interested in the amount of
money that he receives for his work, the employer will look at
the cost of labour from another perspective.

The term ‘cost to company’ (ctc) refers to the total cost the
employer has with relation to the employment of the worker.
These costs will be:

1. The salary or wage of the worker;

Plus
2. The employer’s share of contributions to funds;
Plus
3. The amount payable to the Skills Development Fund.

Activity 8.1: Calculating net salary and cost to company

Adam Xosa is in the process of negotiating an offer of employed with Best

Manufacturers, a business in South Africa. The following information relating to
the salary they are offering him, was communicated over the telephone:

Salary: R10 000

Pension fund contribution: 7.5% of his salary
PAYE: 28% of salary net of pension fund
contributions
UIF: according to statutory rate
Medical aid: Contribution R800 (the employer contributes
on a Rand for Rand basis)
Contribution towards trade union: R50

It is important for Best Manufacturers to know if they can afford to pay for
Adam’s labour. Adam, on the other hand, has to decide whether or not to accept
the offer. So, he has to know how much money will be paid into his bank account
at the end of every month.

As a group, calculate the following:

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1. The net salary of Adam Xosa

2. The cost to company of employing Adam Xosa

Time on task: 45 minutes

SARS and the employees of a business

Read in Learning Unit 8, Section 8.3
and get a better understanding of
payroll calculations by studying the
example in Learning Unit 8, Section
8.3 of the textbook.
In South Africa, a monthly
salary register of all the
Pay specific attention to
benefits and deductions for
how both the employee and
all employees must be
employer contribute to
! the Unemployment Insurance
Fund (UIF), whereas only the
prepared by each
employer and used to
employer contributes to the Skills complete the monthly
Development Fund (SDL). EMP201 return.

This return, accompanied

by the payment of PAYE,
SDL and UIF, must reach
the South African Revenue
Services (SARS) by the 7th
of every month for the
previous month’s payroll

Activity 8.2: Salaries and wages

Test your knowledge by clicking on the link above the red arrow and completing
the crossword puzzle.

EMP201 returns
In South Africa, all employees of a business need to submit
their monthly PAYE, UIF and SDL contributions to SARS, using a
so-called EMP201 form.

Explore the guide to submitting EMP201 returns on the SARS

website to learn how to complete, submit and pay an EMP201.

Activity 8.3: The EMP201 process

In this activity, you will fill out an EMP201 form.

Time on task: 45 minutes

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Recording salaries transactions

 Study Example 8.3 on pages 218 to 221 of the textbook to
learn about the salaries journal and the posting to the
related general ledger accounts.

 Reinforce your understanding of the salaries journal and

related general ledger accounts by working through the
comprehensive Example 8.4 on pages 223 to 226.

Activity 8.4: Recording salaries transactions

Check your understanding of the salaries journal and related

general ledger accounts by completing Question 8.4 in
Learning Unit 8, Section 8.5 of the textbook.

Time on task: 30 minutes

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Recording wages transactions

 Study the section ‘Payroll for wages’ in Learning Unit 8,

Section 8.5 of the textbook. Notice how salaries journals are
completed once a month whereas wages journals are
completed four or five times a month.

 Learn how to complete a wages journal and related

general ledger accounts by working through the
comprehensive Example 8.5 in Learning Unit 8, Section
8.5.

Activity 8.5: Recording wages transactions

Check your understanding of the wages journals and their

related general ledger accounts by completing the following
activity. Refer to Question 8.7 in Learning Unit 8, Section
8.5 of the textbook.

Time on task: 2 hours

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Learning Unit 9: Year-End Procedures

Basic knowledge of bookkeeping and accounting is paramount to the
successful running of a business. Knowledge of source documents and what
they tell us, subsidiary journals and their purpose, the general and the subsidiary
ledgers are essential if an entrepreneur wishes to engage in financial conversation
with stakeholders.

In Learning Units 4 – 8 we explored the intricacies of accounting and the

recording of transactions in the books of a business. It is very important to realise
that these financial records are not merely a legal requirement – they are
strategic tools. Most of the strategic accounting tools can be found in the ‘post-
trial balance’ set of records. This is precisely what this learning unit is about:
post trial balance events in the books of a business. We will look at what
happens in the books at the end of a financial year. We will demonstrate how
the bookkeeper makes use of the information accumulated in the journals,
ledgers and trial balance to determine the financial performance and position
of the enterprise.
No of activities: 4
Time on task for activities: 6.5 hours

Learning Unit Objectives

On completion of this learning unit, you should be able to:

 Demonstrate how a ‘year-end’ procedure is run in the books of a business;

 Explain the purpose and working of a trading account;
 Explain the purpose and working of a profit and loss account;
 Journalise closing transfers;
 Explain the difference between “gross” and “net” profit;
 Prepare the final accounts for a small business;
 Balance the capital account of a sole trader to determine the owner’s equity
at the end of a financial period.
 Prepare a post-closing trial balance.

Theme 1: YEAR-END PROCEDURE

Click here for a report on Pick n Pay’s profit in 2014 compared to

that in 2013.

 In previous learning units you learnt about the difference

between ‘gross’ and ‘net’ profit. How do you think these two
types of profit are calculated?

Read in Learning Unit 9, Section 9.1 of the textbook to gain

an understanding of how gross profit and net profit are
calculated. Pay specific attention to the meaning of ‘running a
year end’.

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The link between the trading account and the profit

and loss account
Now that you are aware of what ‘running a year end’ means, it
is important that you understand the difference between
‘temporary’ and ‘permanent’ accounts.

Watch this video clip to learn more about these two important
concepts:

https://www.youtube.com/watch?v=qT3b69wUlQ8

Have you noticed how, in the manual bookkeeping system,

balance sheet account balances are described as ‘balance
b/d’, but nominal accounts are described as ‘total b/d’?

 What do you believe is the reason for this difference?

Theme 2: HOW THE YEAR END PROCEDURE WORKS

SECTION 1: GENERAL LEDGER ENTRIES

Learn about year-end procedures by studying Example 9.1 in

Learning Unit 9, Section 9.1 of the textbook. Pay specific
attention to how we ‘close off’ an account.

Activity 9.2.1: Closing transfers in the general ledger accounts

In this activity, you will test your knowledge of closing transfers in the
general ledger accounts.

Activity 9.2.2: Trading and Profit & Loss accounts

Using the information provided in Question 9.3 in Learning

Unit 9, Section 9.1 of the textbook, complete the trading
account as well as the profit and loss account of Letsema
Furnishers.

Time on task: 2 hours

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SECTION 2: GENERAL JOURNAL ENTRIES

 Before any entries can be made in the general ledger,
transactions must first be entered into subsidiary journals.
 Closing transfers are always entered into the general
journal.

Refer back to Example 9.1 in Learning Unit 9, Section 9.1 of

the textbook.

 How do you think the closing transfers would have been

journalised in the general journal of Tuscany Dealers?

Activity 9.2.3: Closing transfers in the general journal

Refer to Question 9.4, sub-question (i) in Learning Unit 9,

Section 9.1 of the textbook.

In this activity, you are required to journalise the closing

transfers.

Time on task: 1 hour 30 minutes

Theme 3: POST-CLOSING TRIAL BALANCE

The accounting cycle has a definite beginning and a definite end.

The last thing that takes place at the end of the accounting cycle
is to prepare a post-closing trial balance.
 What do you think is the purpose of a post-closing trial
balance?

Watch the video below on the preparation of a

post-closing trial balance (hover over the That’s
Life icon for important information):

https://www.youtube.com/watch?v=rlMu4vfIR0
M

Refer to your answers/the solution for Activity 9.2.2: Trading

and Profit & Loss accounts where you had to complete the
trading account and profit and loss accounts for Letsema
Furnishers.

Now open this document and explore how a post-closing trial

balance is completed.

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Activity 9.3.1: Post-closing trial balance

In Activity 9.2.3: Closing transfers in the general journal (in Theme 2 of this
learning unit), you journalised the closing transfers for Dama Enterprises (in
Learning Unit 9, Section 9.1 of the prescribed textbook).

Now use this information to complete the post-closing trial balance as at 28

February 20.9.

Time on task: 1 hour

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Intellectual Property
Plagiarism is any use of the words, ideas or images of another person without
acknowledging the source using the required conventions. Below is a description of
plagiarism and referencing. Please make sure that you are familiar with this information
before attempting your assignment.

Introduction to Referencing and Plagiarism

What is ‘Plagiarism’?

‘Plagiarism’ is the act of taking someone’s words or ideas and presenting them as your
own.

What is ‘Referencing’?

‘Referencing’ is the act of referring to or consulting. A ‘reference’ is a publication or

passage from a publication that is referred to.

Referencing is the acknowledgment of any work that is not your own, but is used by
you in an academic document. It is simply a way of giving credit to and acknowledging
the ideas and words of others.

When writing assignments, students are required to acknowledge the work, words or
ideas of others, through the technique of referencing. Referencing occurs in the text at
the place where the work of others is being cited, and at the end of the document, in
the bibliography.

Cumming (2007) describes the bibliography as a list of all the work (published and
unpublished) that a writer has read in the course of preparing a piece of writing. This
includes items that are not directly cited in the work.

A reference is required when you:

 Quote directly: when you use the exact words as they appear in the source;
 Copy directly: when you copy data, figures, tables, images, music, videos or
frameworks;
 Summarise: when you write a short account of what is in the source;
 Paraphrase: when you state the work, words and ideas of someone else in your
own words.

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It is standard practice in the academic world to recognise and respect the ownership
of ideas through good referencing techniques. However, there are other reasons why
referencing is useful.

Good Reasons for Referencing

It is good academic practice to reference because:

 It enhances the quality of your writing;
 It demonstrates the scope, depth and breadth of your research;
 It gives structure and strength to the aims of your article or paper;
 It endorses your arguments;
 It allows readers to access source documents relating to your work, quickly and
easily (Neville, 2007, p.7).

Sources

The following would count as ‘sources’:

 Books,
 Chapters from books,
 Encyclopaedia,
 Articles,
 Journals,
 Magazines,
 Periodicals,
 Newspaper articles,
 Items from the Internet (images, videos, etc.),
 Pictures,
 Unpublished notes, articles, papers, books, manuscripts, dissertations, theses,
etc.,
 Diagrams,
 Videos,
 Films,
 Music,
 Works of fiction (novels, short stories or poetry).

What You Need to Document from the Hard Copy Source You are Using

(Not every detail will be applicable in every case. However, the following lists provide
a guide to what information is needed.)

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You need to acknowledge:

 The words or work of the author(s),
 The author(s)’s or editor(s)’s full names,
 If your source is a group/ organisation/ body, you need all the details,
 Name of the journal, periodical, magazine, book, etc.,
 Edition,
 Publisher’s name,
 Place of publication (i.e. the city of publication),
 Year of publication,
 Volume number,
 Issue number,
 Page numbers.

What You Need to Document if you are Citing Electronic Sources

 Author(s)’s/ editor(s)’s name,

 Title of the page,
 Title of the site,
 Copyright date, or the date that the page was last updated,
 Full Internet address of page(s),
 Date you accessed/ viewed the source,
 Any other relevant information pertaining to the web page or website.

Referencing Systems

There are a number of referencing systems in use and each has its own consistent
rules. While these may differ from system-to-system, the referencing system followed
needs to be used consistently, throughout the text. Different referencing systems
cannot be mixed in the same piece of work.

A detailed guide to referencing, entitled Referencing and Plagiarism Guide is available

from your library. Please refer to it if you require further assistance.

When is Referencing Not Necessary?

This is a difficult question to answer – usually when something is ‘common knowledge’.

However, it is not always clear what ‘common knowledge’ is.

Examples of ‘common knowledge’ are:

 Nelson Mandela was released from prison in 1990;
 The world’s largest diamond was found in South Africa;
 South Africa is divided into nine (9) provinces;
 The lion is also known as ‘The King of the Jungle’.
 𝐸 = 𝑚𝑐 2
 Jan Van Riebeeck was the first person to settle in the Southern Cape.

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Usually, all of the above examples would not be referenced. The equation 𝐸 = 𝑚𝑐 2 is
Einstein’s famous equation for calculations of total energy and has become so familiar
that it is not referenced to Einstein.

Sometimes what we think is ‘common knowledge’, is not. E.g. the above statement
about Van Riebeeck is only partly true – he was the first European to settle in the Cape.
It was, however, not an ‘uninhabited’ area when he got there. The Khoisan, the original
inhabitants of the Cape, had been living in the area for some time. It is not entirely
accurate then to claim that Van Riebeeck was the first inhabitant. (Crampton, 2004,
p.57)

It is thus generally safer to always check your facts and try to find a reputable source
for your claim.

Important Plagiarism Reminders

The IIE respects the intellectual property of other people and requires its students to
be familiar with the necessary referencing conventions. Please ensure that you seek
assistance in this regard before submitting work if you are uncertain.

If you fail to acknowledge the work or ideas of others or do so inadequately this will be
handled in terms of the Plagiarism Policy (available in the library) and/ or the Student
Code of Conduct – dependent on whether or not plagiarism and/ or cheating (passing
off the work of other people as your own by copying the work of other students or
copying off the Internet or from another source) is suspected.

This campus offers individual and group training on referencing conventions – please
speak to your librarian or ADC/ Campus Co-Navigator in this regard.

Reiteration of the Declaration you have signed:

1. I have been informed about the seriousness of acts of plagiarism.

2. I understand what plagiarism is.
3. I am aware that The Independent Institute of Education (IIE) has a policy
regarding plagiarism and that it does not accept acts of plagiarism.
4. I am aware that the Plagiarism Policy and the Student Code of Conduct prescribe
the consequences of plagiarism.
5. I am aware that referencing guides are available in my student handbook or
equivalent and in the library and that following them is a requirement for
successful completion of my programme.
6. I am aware that should I require support or assistance in using referencing guides
to avoid plagiarism I may speak to the lecturers, the librarian or the campus ADC/
Campus Co-Navigator.
7. I am aware of the consequences of plagiarism.

Please ask for assistance prior to submitting work if you are at all unsure.

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