LAW BUSINESS FINANCE (MODULE 3) – ASSIGN- LBF 101

2025 ASSIGNMENT

Take note:

This assignment consists of Four (4) questions.

All questions are compulsory and have to be answered in full.

Compile your answers neatly, preferable making use of spreadsheet software (such as
Microsoft Excel) to set up account columns in which you type your answers.

The assignment counts out of 100 marks

In order to obtain a mark for a transaction entry, all of the following should be in place:

• the accounting entry has to appear under the correct account name;

• the accounting entry has to be correctly allocated to the debit or credit side;

• the date has to be correct; and

• the Rand amount of the entry should be correct.

If any of these aspects is incorrect, no mark will be awarded for the specific answer provided.

Where specifically indicated that Value Added Tax (VAT) is applicable, a VAT rate of 15% should
be used for calculations.
QUESTION 1 (15 marks)

Your business cashbook reflected an overdraft balance on 31 October 2024 of R25,000.00. The
bank statement reflected a negative balance of R178,626.00. A comparison of the two revealed
the following:

1. A debit order payment of R57,500 in respect of your monthly office lease is not reflected in
the cashbook.

2. A cash deposit of R15,700.00 made by client A on 31 October 2024 is not reflected on the
bank statement.

3. Overdraft interest of R950.00 is not reflected in the cashbook.

4. A direct deposit of R24,000.00 made by client B does not appear in the cashbook.

5. Bank charges in the amount of R2,350.00 has been debited to your bank account.

6. A deposit of R57,226.00 made by client C has been incorrectly entered into the
cashbook as R5,722.00.

7. The bank erroneously debited your business account with an amount of R2,000.00.

8. A payment made by you to Change Stationers in the amount of R921.00 has been
incorrectly entered in the cashbook as R291.00.

9. A payment of R150,000.00 made by you from your trust account appears on the
business bank statement.

You are required to prepare:

a. The supplementary cashbook for October 2024.

b. The bank reconciliation statement as at 31 October 2024

On 1 July 2024 your trust cashbook balance was R5 million made up of R2m for Mr Rice and
R3m for Mr Brown, the Section 86(4) investment account balance for Mr Pilson was R1 million
and the business cashbook reflected an overdraft amounting to R102 000.00.

The following transactions take place during July 2024:

1. 2 July 2024: You purchase a notebook from the Appel iStore in the amount of R17
250.00. (inclusive of input VAT of R2 250.00).

2. 5 July 2024: You are appointed as the transferring Attorney to effect transfer of your
client, Mr Edwell’s farm, sold to Mr Mnguni, at the agreed purchase price of
R8,000,000.00.

3. In terms of the agreement Mr Mnguni must pay a deposit of R1,000,000.00.

4. You receive the written agreement from the Property Practitioner who requests you to
confirm that you will pay his commission in the amount of R500,000.00 on date of
transfer.

5. 7 July 2024: Mr Mnguni pays the agreed deposit into your trust account per EFT.

6. 9 July 2024: Mr Mnguni instructs you to invest R1,000,000.00 with Red Bank in a Section
86(4) account.

7. 9 July 2024: You receive a bank guarantee from Green Bank for the balance of the
purchase price.

8. You draft the transfer documents and on signature thereof by Mr Mnguni, you render
your pro-forma statement of transfer costs to him as follows:

Transfer fees R 80,000.00

VAT on fees @ 15% R 12,000.00

Transfer duty R696,000.00

TOTAL R788,000.00

9. 10 July 2024: Mr Mnguni pays the transfer costs.

10. 11 July 2024: Mr Edwell pays an amount of R9 000 for the clearance figures to the local
Municipality. You pay the Municipality and receive the clearance certificate.

11. 11 July 2024: You pay the transfer duty to SARS and receive a transfer duty receipt.

12. 15 July 2024You purchase stationary from PNA in the amount of R5,750.00 (VAT
inclusive).
 13. 25 July 2024: The transfer is registered.

14. 26 July 2024: The investment account is closed and interest amounting to R8 000 is
credited by the Bank which immediately pays 5% to the LPFF. The balance is transferred
to the trust account. Green Bank also pays the Guarantee.

15. 27 July 2024: You pay the Property practitioner, Mr Edwell and Mr Mnguni what is due to
them

16. 27 July 2024: Transfer whatever you are entitled to. It is not necessary to prepare final
statements of account to Mr Mnguni and Mr Edwell.

17. 31 July 2024: You pay the amount to SARS in respect of your VAT liability.

You are required:

To record all the transactions in books of prime entry and post the entries to your books of
secondary entry.

Calculate your Trust cashbook and Business cashbook balances at the end of July 2024.
QUESTION 3 (20 marks)

On 5 September 2024, a correspondence firm Driel Inc has instructed you to collect
R100 000 owed to his client ABC Motors by Mr Chess. The following is the statement of account:

6 September 2024 Instruction fees 2 500

Vat on Instruction fees 375

10 September 2024 Fee Summons 1 000

Vat on Summons 150

15 September 2024 Sheriff fees 395

20 September 2024 Payment from Chess 50 000

25 September 2024 Collection commission 1 000

Vat on collection commission 150

27 September 2024 Your 1/3 allowance 1 500

Vat on allowance
225

EFT herewith 46 155

__________________

51 725 51 725

__________________

You are required to:

Transfer whatever is entitled to the firm, to the business account and record the above
transactions fully in your Books of Account.
QUESTION 4 (15 marks)

In preparing your Budget and Cash Flow for the year ended 31 December 2025 the following
information was received from your Accountant.

Monthly Expenses:

Salaries and wages R80 000

Director salary R50 000

Rent R15 000

Telephone & internet expenses R 3 450

Monthly Rental – Copier R 2 300

Office Expenses R7 500

Office Equipment depreciation R2 000

Salaries will increase by 6% in March 2025 including that of the Director.

Rent will be increased by 7% in August 2025.

Expected invoicing

January – March 2025 165 000

April 2025- Oct 2025 180 000

Nov 2025 and December 2025 200 000

Professional fees invoiced during the month are collected as follow:

40% in month of invoicing.

60% in following month.

Your bank balance on 1 January 2025 is R45 000 and outstanding debtors are R130 000.

You are required to draw up an Income Statement (Profit and loss) budget and a Cash Flow
forecast for January to December 2025 in column format. List each income and expense item
separately. (15)

January February*

Income

Expenses

* Insert column for each month of the year.