BACKGROUND

Tsepho, CEO and founder, decided to establish FlavourBevs (Pty) Ltd, a wholesale distributor of alcoholic beverage products. FlavourBevs has a 28 February financial
year-end. You were assigned as one of the audit team members for the company’s 20X1 financial year-end.

REVENUE AND RECEIPTS CYCLE

You were provided with the following system description of the company’s revenue and receipts cycle.

Orders
All sales are made on credit. Steven Piena, the company’s credit controller approves the initial opening of all accounts after performing a credit investigation.
Thereafter, he creates the new debtor’s record, with the debtor’s details and credit limit on the debtors Masterfile. Steven Piena also updates any other changes to
debtors’ standing data on the debtors Masterfile.
Orders are received by a sales clerk in the call center via telephone or per e-mail. An order is prepared.
Warehouse and Delivery
Sipho Tshabalala, the warehouse manager, prepares pre-numbered delivery notes. These delivery notes are passed to the storemen who pick the relevant goods
and place them into boxes. Goods are delivered to customers by the company’s delivery driver. Once goods have been delivered, the delivery notes, signed by the
customers as evidence of the goods having been received by the customers, are returned by the driver.
Invoicing and Recording
Katlego Nphela, the accounts clerk, generates the pre-numbered invoices based on the signed delivery notes and files the delivery notes sequentially. The system
records the details in the sales journal. He records individual invoice amounts in the appropriate customer’s account in the accounts receivable ledger and the total
of sales per the sales/debtors journal in the sales account and the accounts receivable control account in the general ledger.
 Financial Statements
An abstract of the Statement of Financial Position of FlavourBevs (Pty) Ltd for the
year ended 28 February 20X1
Current assets
Trade and other receivables 1 351 514.16
Cash and cash Equivalents

An abstract of the Statement of Profit/Loss and Other Comprehensive Income of

FlavourBevs (Pty) Ltd for the year ended 28 February 20X1
R
Sales 8 677 742.75
Cost of sales xxx
Gross profit xxx

Notes
Accounting policy

Revenue note

Trade and other receiveables note R

Trade receivables 1 472 407.94
Less: Provision for expected credit losses (120 894)
1 351 514.16

I know that these amounts would have been rounded in the financial statements, but to show you
the connection and flow these amounts were not rounded.
 Trial Balance
An abstract of the Trial Balance of FlavourBevs (Pty) Ltd for the year ended
28 February 20X1

Bank 2 278 034.75

Debtors Control Account 1 472 407.94
Allowance for expected credit losses 120 893.78
Sales 8 677 742.75
 SALES
DEBIT CREDIT
Date Descriptions Folio R Date Descriptions Folio R
31-Mar Debtors control SJ1 815 369.00
30-Apr Debtors control SJ2 425 689.00
31-May Debtors control SJ3 962 487.00
30-Jun Debtors control SJ4 336 589.00
31-Jul Debtors control SJ5 587 499.00
31-Aug Debtors control SJ6 999 847.00
30-Sep Debtors control SJ7 548 668.00
31-Oct Debtors control SJ8 987 785.00
30-Nov Debtors control SJ9 569 984.00
31-Dec Debtors control SJ10 698 745.00
31-Jan Debtors control SJ11 998 548.00
20X1 Closing balance 8 677 742.75 28-Feb Debtors control SJ12 746 532.75

8 677 742.75 8 677 742.75

DEBTORS CONTROL ACCOUNT

DEBIT CREDIT
Date Descriptions Folio R Date Descriptions Folio R
20X1 20X1
01-Feb Opening Balance 1 220 800.00 28-Feb Bank CRJ12 580 126.72

28-Feb Sales SJ12 858 512.66 Settlement Discount DJ 21 100.00

Bad Debts DJ 5 678.00
28-Feb Closing Balance 1 472 407.94

2 079 312.66 2 079 312.66

BANK
DEBIT CREDIT
Date Descriptions Folio R Date Descriptions Folio R
20X1 20X1
01-Feb Opening Balance 4 328 990.55 28-Feb Total payments CPJ12 3 056 356.23

28-Feb Total Receipts CRJ12 1 005 400.43

28-Feb Closing balance 2 278 034.75
5 334 390.98 5 334 390.98
 SJ 12 Sales/Debtors Journal Month: February 20X1
Total Sale VAT Control
02-Feb IV9635 Micro 22 200.75 19 305.00 2 895.75
03-Feb IV9636 Super Tops 117 676.05 102 327.00 15 349.05
04-Feb IV9637 Happy Times 49 969.80 43 452.00 6 517.80
05-Feb IV9638 The Tipsy Barrel 79 202.80 68 872.00 10 330.80
06-Feb IV9639 Spirits & Co 69 139.15 60 121.00 9 018.15
09-Feb IV9640 Cork & Cast 156 975.00 136 500.00 20 475.00
10-Feb CN3451 Cork & Cast (1 962.19) (1 706.25) (255.94)
10-Feb IV9641 The Liquor Loft 37 173.75 32 325.00 4 848.75
11-Feb IV9642 Buzzed and Bottled 26 953.70 23 438.00 3 515.70
12-Feb IV9643 Wine & Vice 95 207.35 82 789.00 12 418.35
13-Feb IV9644 The Boozy Bodega 22 844.75 19 865.00 2 979.75
15-Feb IV9645 Amber Spirits 16 748.60 14 564.00 2 184.60
16-Feb IV9646 Top Shelf Spirits 9 964.75 8 665.00 1 299.75
19-Feb IV9647 Pour Delicious 14 199.05 12 347.00 1 852.05
20-Feb IV9648 Happy Times 9 849.75 8 565.00 1 284.75
22-Feb IV9649 Super Tops 8 572.10 7 454.00 1 118.10
22-Feb IV9650 Johnny’s Liquor 8 978.05 7 807.00 1 171.05
23-Feb IV9651 Cork & Cast 13 114.60 11 404.00 1 710.60
26-Feb IV9652 Johnny’s Liquor 34 730.00 30 200.00 4 530.00
26-Feb IV9653 Mini Liquor 18 794.45 16 343.00 2 451.45
27-Feb IV9654 The Boozy Bodega 27 981.80 24 332.00 3 649.80
28-Feb IV9655 Amber Spirits 20 198.60 17 564.00 2 634.60
TOTAL 858 512.66 746 532.75 111 979.91
 Customer Balances -
Outstanding Report
(Debtors listing)
FlavourBevs (Pty) Ltd

Customer Acc # Total Due

Micro 31943 7 200.75

The drunken giraffe 31956 97 438.78
Super Tops 32003 139 837.15
Happy Times 32121 83 506.55
The Tipsy Barrel 32187 111 226.35
Spririts & Co 32232 116 798.13
Cork & Cast 32501 229 524.92
The Liquor Loft 32567 50 717.42
Buzzed and Bottled 32623 152 953.46
Wine & Vice 32711 206 985.73
Amber Spirits 32796 36 947.20
Top Shelf Spirits 32812 22 509.51
Whiskey Business 32835 27 791.00
Pour Delicious 32865 18 742.71
Johnny’s Liquor 32923 43 708.05
Mini Liquor 32932 21 358.99
The Boozy Bodega 32977 105 161.24
Grand Total 1 472 407.94
 Customer Balances - Days Outstanding Report (Debtors age analysis)
FlavourBevs (Pty) Ltd

Customer Acc # 120+ Days 90 Days 60 Days 30 Days Current Total Due
Micro 31943 - - - - 7 200.75 7 200.75
The drunken giraffe 31956 74 233.45 14 235.33 8 970.00 - - 97 438.78
Super Tops 32003 - - - 13 589.00 126 248.15 139 837.15
Happy Times 32121 - - - 23 687.00 59 819.55 83 506.55
The Tipsy Barrel 32187 - - - 32 023.55 79 202.80 111 226.35
Spririts & Co 32232 - - 47 658.98 - 69 139.15 116 798.13
Cork & Cast 32501 3 589.00 - - 57 698.51 168 237.41 229 524.92
The Liquor Loft 32567 - 13 543.67 - - 37 173.75 50 717.42
Buzzed and Bottled 32623 1 456.00 - 124 543.76 - 26 953.70 152 953.46
Wine & Vice 32711 - 2 657.00 52 574.88 56 546.50 95 207.35 206 985.73
Amber Spirits 32796 - - - - 36 947.20 36 947.20
Top Shelf Spirits 32812 - - - 12 544.76 9 964.75 22 509.51
Whiskey Business 32835 23 455.00 - 4 336.00 - - 27 791.00
Pour Delicious 32865 - - 4 543.66 - 14 199.05 18 742.71
Johnny’s Liquor 32923 - - - - 43 708.05 43 708.05
Mini Liquor 32932 - - - 2 564.54 18 794.45 21 358.99
The Boozy Bodega 32977 - - - 54 334.69 50 826.55 105 161.24
Grand Total 102 733.45 30 436.00 242 627.28 252 988.55 843 622.66 1 472 407.94
Customer Transactions Report
(Detailed debtors record/Debtors masterfile)

FlavourBevs (Pty) Ltd

Customer: Cork & Cast
Category: All Categories  
Date Range: 20X1/01/01 - 20X1/02/28
Reference Transaction Type Description Debit Credit Balance
Date
Opening Balance as at: 20X1/01/01 101 722.48
20X1/01/06 REC8032 Receipt Order #6312 98 133.48 3 589.00
20X1/01/09 INV9489 Tax Invoice Order #6334 100 171.28 103 760.28
20X1/01/13 CN3436 Credit Note Order #6334 7 000.00 96 760.28
20X1/01/25 INV9534 Tax Invoice Order #6399 57 698.51 154 458.79
20X1/02/03 REC8211 Receipt Order #6334 93 171.28 61 287.51
20X1/02/09 INV9640 Tax Invoice Order #6432 156 975.00 218 262.51
20X1/02/10 CN3451 Credit Note Order #6432 1 962.19 216 300.32
20X1/02/23 INV9651 Tax Invoice Order #6445 13 114.00 229 414.32
20X1/02/28 GJ3214 Customer adjustment Interest on arrear account 110.00 229 524.32
Closing Balance as at: 20X1/02/28 - 229 524.32
Movement for the period 127 801.84

Grand Total: 229 524.32

FlavourBevs (Pty) Ltd
Allowance for expected credit losses at 28 February 20X1
R
The drunken giraffe 31956 97 438.78
Whiskey Business 32835 23 455.00
120 893.78
 FlavourBevs (Pty) Ltd
Letter to Confirm Accounts Receivable
27 March 20X1
Buzzed and Bottled
124 Lynnwood Road, Hatfield, Pretoria, 0181

Our auditors, GOA-AWE, are conducting an audit of our financial statements.

Please confirm the balance due on 28 February 20X1, which according to our records and the enclosed
statement is:

152 953.46
Please indicate in the space below whether this is in agreement with your records.
If there are differences, please provide any information that will assist our auditors in reconciling the
differences.
Please sign and date your response and send your reply directly to: GOA-AWE

PLEASE DO NOT MAIL PAYMENTS ON YOUR ACCOUNT TO THE AUDITORS.

Tshepo Mashudu
Mr Tshepo Mashudu
Chief Executive Officer
FlavourBevs (Pty) Ltd

To: FlavourBevs(Pty) Ltd

152 953.46
The balance due from the undersigned to FlavourBevs(Pty) Ltd as indicated above as of 28 February 20X1, is
correct/
The following exceptions are included (if any):
Goods delivered on 15 September 20X0, but not accepted, were not adjusted on the invoice and no credit
note was issued.
Refer to Order #4643
We are also not willing to pay the R110 interest on this invoice, as this adjustment is not due to our doing.
Balance per our records: R151 387.46
Alex Smith
Alex Smith (Chief Accountant)
Buzzed and Bottled
Date: 7 April 20X1
 STATEMENT
FROM: TO:

FlavourBevs (Pty) Ltd Cork & Cast

124 Eastwood, Lynnwood, Pretoria, 0181

Date Reference Description Debit Credit Balance

20X1/01/01 Balance brought forward 159 420.99
20X1/02/03 REC8211 Order #6334 98 133.48 61 287.51
20X1/02/09 INV9640 Order #6432 156 975.00 218 262.51
20X1/02/10 CN3451 Order #6432 1 962.19 216 300.32
20X1/02/23 INV9651 Order #6445 13 114.00 229 414.32
20X1/02/28 GJ3214 Interest on arrear account 110.00 229 524.32
Closing Balance as at: 20X1/02/28 229 524.32

Please examine this statement carefully. If it does NOT fully agree with your records as at 28 February 20X1, please report any
exceptions directly to our auditors, who are conducting an audit of our financial statements.
If no repsonse is received by 31 March 20X1, the balance will be accepted as correct.
GOA-AWE Auditors Incorporated, Hatfield, Pretoria
Email: [email protected]
Cell phone: 082 411 2111
 INVOICE
FlavourBevs (Pty) Ltd

Invoice Number: IV9640

East Business Park, Pretoria, 0856
VAT Reg. No. GB123 123 Company Reg. No. 999999
Tel: +27 (0) 12 347 7528 Fax: +27 (0) 12 347 77529 Delivery Note reference: DN 4643
E-mail: [email protected] Customer Order Number: 6432

Date of Invoice: 9 February 20X1

Customer Account: 32501

Bill to: Cork & Cast Deliver to: Cork & Cast

ITEM CODE ITEM DESCRIPTION VOLUME QUANTITY PRICE AMOUNT

78135 Castle Lager 340 3000 7 21 000
78142 Hansa Pilsner 375 5000 8 40 000
78153 Black Label 340 5000 6 30 000
78181 Hunters Gold 340 7000 7 49 000
Subtotal 140 000
Discount 2.50% (3 500)
VAT 20 475
TOTAL 156 975
 FlavourBevs (Pty) Ltd, East Business Park, Pretoria, 0856 VAT Reg. No. GB123 123 Company Reg. No. 999999
Tel: +27 (0) 12 347 7528 E-mail: [email protected]

Cork & Cast DN Number: DN 4643

124 Eastwood, Lynnwood, Pretoria, 0181 SalesOrder Number: 6432
Date: 09 February 20X1

Customer Account Number: 32501

Delivery Note
ITEM CODE ITEM DESCRIPTION VOLUME QUANTITY
250 CAstle Cans
78135 Castle Lager damaged and not 340 3000
78142 Hansa Pilsner accepted 375 5000
78153 Black Label 340 5000
78181 Hunters Gold 340 7000

Prepared by: Sipho Tshabalala

Received by: Eric Kumalo Reviewed by: Dina Moloke
Delivered by: Johnny Walker

Date: 9 February 20X1

 CREDIT NOTE
FlavourBevs (Pty) Ltd

Credit note Number: CN3451

East Business Park, Pretoria, 0856
VAT Reg. No. GB123 123 Company Reg. No. 999999
Tel: +27 (0) 12 347 7528 Fax: +27 (0) 12 347 77529 Invoice Number: IV9640 Delivery Note
E-mail: [email protected] reference: DN 4643 Customer Order
Number: 6432
Date of Invoice: 10 February 20X1

Customer Account: 32501

Bill to: Cork & Cast Deliver to: Cork & Cast

ITEM CODE ITEM DESCRIPTION VOLUME QUANTITY PRICE AMOUNT

78135 Castle Lager 340 250 7 1 750

Subtotal 1 750
Discount 2.50% (44)
VAT 256
TOTAL 1 962
 FlavourBevs (Pty) Ltd

ORDER
East Business Park
Pretoria, 0856
VAT Reg. No. GB123 123
Company Reg. No. 999999
Tel: +27 (0) 12 347 7528
Fax: +27 (0) 12 347 7752
Order No. 6432
Date 7 February 20X1

Invoice Information:

Account Nr 32501 Delivery Information

Ordered By Jack Daniels Same as Invoice
Company Cork & Cast
Address 124 Eastwood, Lynnwood
City Pretoria
County / State Gauteng
Postcode / Zip 0181
Country South Africa
E-mail [email protected]
Phone (012) 362 4576
Fax (012) 362 4577

Comments

ITEM CODE DESCRIPTION VOLUME QUANTITY PRICE AMOUNT

78135 Castle Lager 340 3000 7 21 000.00
78142 Hansa Pilsner 375 5000 8 40 000.00
78153 Black Label 340 5000 6 30 000.00
78181 Hunters Gold 340 7000 7 49 000.00
Subtotal 140 000.00
VAT 21 000.00
TOTAL 161 000.00
 FlavourBevs (Pty) Ltd
Authorised pricelist
Product Volume Cost Price Selling Price
Product Description
Number (ml) (R) (R)
Beer
78135 Castle Lager 340 5 7
78136 Castle Lager 375 6 8
78137 Castle Lager 500 7 9
78138 Castle Lite 375 6 8
78140 Castle Milk Stout 375 7 9
78142 Hansa Pilsner 375 6 8
78143 Hansa Pilsner 500 7 9
78144 Hansa Gold 340 5 7
78147 Millers 375 4 6
78149 Peroni 375 8 10
78153 Black Label 340 4 6
78154 Black Label 375 5 7
78155 Black Label 500 6 8
Ciders
78160 Smirnoff Spin 375 10 12
78161 Smirnoff Spin 500 13 15
78162 Smirnoff Storm 375 10 12
78163 Smirnoff Storm 500 13 15
78164 Brutal Fruit Litchi 375 9 11
78166 Brutal Fruit Mango 375 9 11
78168 Brutal Fruit Lemon 375 9 11
78170 Brutal Fruit Peach 375 9 11
78172 Brutal Fruit Blackcurrant 375 9 11
78174 Brutal Fruit Strawberry 375 9 11
78176 Reds 375 9 11
78179 Hunters Dry 375 7 9
78181 Hunters Gold 375 7 9
78183 Hunters Extreme 375 8 10

Authorise Signature:
Valid for: 1 January 20X1 – 30 June 20X1
Tsepho