Gr 10 accounting study notes

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ACCOUNTING STUDY NOTES Grade 10

A member of the FUTURELEARN group

Accounting Study notes

1810-E-ACC-SN01

Í2*È-E-ACC-SN01pÎ

Grade 10

CAPS aligned

Study Notes G10 ~ Accounting

CONTENTS PREFACE ............................................................................................................................. 3 INTRODUCTION ................................................................................................................... 3 1.

Timetable and time management .................................................................................. 4

2.

Assessment requirements ............................................................................................. 4

3.

Formal assessment per term......................................................................................... 5

4.

Let’s look at it again ..................................................................................................... 6

5.

Study methods .............................................................................................................. 6

6.

Year programme ........................................................................................................... 8

7.

Lesson by lesson additional information ....................................................................... 9

8.

Tips for tests and tasks ............................................................................................... 24

9.

Where to get previous question papers ....................................................................... 25

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Study Notes G10 ~ Accounting

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Study Notes G10 ~ Accounting

PREFACE PRESCRIBED BOOK Your prescribed book for this year is New Era Accounting Grade 10 (New Era publishers with T Hall, D. Woodroffe, P. Singh, J. Ramsamy and H. Aboobaker). Any other recommended books can be used for supplementary purposes to improve understanding of the content or for extra exercises.

INTRODUCTION Welcome to the wonderful world of Accounting. This subject does not have to be a nightmare.

The goal of the study notes are to make you as comfortable as possible with the subject and to help you to master Accounting for Grade 10.

Congratulations with your choice to continue with Accounting. You will never be sorry that you chose this very valuable subject. This subject can be used in a wide variety of fields such as B.Com Accounting, Marketing, Law, Hotel management, etc. if you choose to study further. If you choose not to study further, you will still find that accounting knowledge is valuable to use in your household and personal budget.

The curriculum for Grade 10 will demand a great deal of effort and time from you, because the scope for Accounting is big, but if you keep to the year plan, you will be able to complete all your assignments and tests on time.

Here are a few important points to take note of: • The modules in your textbook are not necessarily in the same order as the work that you must complete. Make sure that all your modules are done in accordance with the year plan.

• Make sure that you refer to the year plan as your guide of what information is relevant to cover.

• Ethics and Internal Control are done continuously throughout every topic.

• According to the year plan, you must start with Final Accounts in the second term.

• The June examination will consist of content covered during term 1 and 2.

• Concepts such as VAT, budgets and definitions relating to costs are explained only briefly. These concepts will be covered in detail in Grade 11 and 12.

• There are many tasks in every module. Choose the tasks you do wisely in order to achieve the goals set in the curriculum.

• Here follows an indication of the tasks for every subject:

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Study Notes G10 ~ Accounting

Subject Revision Indigenous and Informal systems Internal control and Ethics Cash journals

Tasks 1.1 , 1.5 Bookkeeping 2.5, 2.7 Done continuously in every chapter.

3.3, 3.5, 3.9, 3.10, 3.12, 3.13, 3.14, 3.16, 3.17, 3.20 4.1, 4.4, 4.5, 4.7, 4.8, 4.11, 4.13, 4.14, 4.16 5.1, 5.5, 5.7, 5.8, 5.9, 5.10, 5.12, 5.13, 5.14, 5.18, 5.20, 5.21, 5.23, 5.24, 5.25 6.2, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.13, 6.14, 6.16 7.2, 7.3, 7.8 9.1, 9.2, 9.3, 9.4, 9.8, 9.19, 9.20, 9.21, 9.23, 9.24, 9.26, 9.29, 9.31, 9.33 10.7, 10.8, 10.9, 10.10, 10.11, 10.12, 10.14, 10.16, 10.17, 10.19, 10.20, 10.24, 10.29, 10.30, 10.31, 10.35, 10.37 11.11, 11.12, 11.13, 11.15, 11.16, 11.17, 11.18, 11.20, 11.31, 11.32, 11.33, 11.35, 11.37, 11.38, 11.39 12.2 13.4

Credit sales and allowances Credit purchases and allowances General journal Value Added Tax (VAT) Salaries and Wages Final Accounts

Financial statements

Manufacturing Budgets 1.

Timetable and time management

The compulsory study time for Accounting is 4 hours per week. It is always good to do your work throughout the week in such a way that you don’t have to do all of it at once. This will help you to keep a sharp mind and remember all the new concepts learned. Remember, the more time you spend on this subject, the easier it becomes.

2.

Assessment requirements

According to the curriculum, these are the things that are expected of you: 1. Financial information: You should be able to demonstrate knowledge, understanding and the application of financial information according to Accounting practice and concepts. This outcome will equip you with the necessary knowledge and skills to collect, analyse, organise, record and critically evaluate financial information from source documents to financial accounts and statements. You will be able to organise, apply and manage financial activities and data in a responsible and effective manner in your everyday life and environment.

2. Managerial accounting: You should be able to demonstrate knowledge, understanding and application of managerial accounting. The focus in this outcome is to equip you with skills to manage activities and to report it by using specific management, organisational and leadership skills. These skills enable you to

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Study Notes G10 ~ Accounting

effectively manage yourself and your business activities. The reason why you have to be able to interpret financial and management information is to make informed decisions and to communicate them to relevant stakeholders.

3. Management of resources: You should be able to demonstrate knowledge and understanding of how to use different financial and management strategies in order to manage resources in a responsible way. You will be equipped with skills to use financial and management strategies to determine the financial impact on management and resources. The focus of this outcome is to account for all ethical behaviour in relation to management and resources.

3. Formal assessment per term The table below will give you an indication of what assessment tasks, tests and examinations have to be completed per term, during the year.

Form of assessment Topic

Total marks Form of assessment Topic

Total marks Form of assessment Topic

Total marks Year mark 100

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TERM 1: FORMAL ASSESSMENT TASK 1: PRESENTATION TASK 2: MARCH TEST Indigenous bookkeeping Concepts, Cash and credit Cash journals transactions, accounting equation Consists of content covered in term 1.

50 marks 100 marks, one hour TERM 2: FORMAL ASSESSMENT TASK 3: PROJECT TASK 4: JUNE EXAMINATION You have to start with your project Consists of content covered during the first term and it must be in term 1 and 2. completed in the second term.

Bookkeeping 50 marks 200 marks, two hours TERM 3: FORMAL ASSESSMENT TASK 5: CASE STUDY TASK 6: SEPTEMBER TEST Financial statements of a sole Consists of term 3 content trader • Financial statements of a sole trader • GAAP principles • Internal control • Ethical behaviour 50 marks 100 marks, one hour TERM 4: FORMAL ASSESSMENT TASK 7: NOVEMEBER All the work covered EXAMINATION throughout the year 300 marks, 3 hours 400

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Study Notes G10 ~ Accounting

4.

Let’s look at it again Term 1

Term 2

Task 2 March test

Task 4 June examination

Task 1 Presentation

Task 3 Project

Term 3

Term 4

Task 6 September test

Task 7 November examination

Task 5 Case study

5.

Study methods

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Be sure that you are familiar with the basic Accounting definitions. A large part of this subject is basically just work that you can study.

The accounting equation Assets = Owner’s equity + Liabilities is the foundation of the General Journal. You have to be familiar with the classifications of Assets, Owner’s Equity and Liabilities.

Make sure that you know the formats of the General Journal, financial statements, etc. When it comes to any formats in Accounting, make sure that you know them by heart.

Accounting is a subject that has to be studied and practised. You will be able to understand the subject and identify patterns through repetition.

First attempt the exercises in the textbook that test your knowledge and basic understanding of every subject. This will give you a good idea of how well you understand the specific module or subject.

Start with the easier exercises then move on to the more difficult ones.

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Study Notes G10 ~ Accounting

• •

Try to do accounting as frequently as possible. Then, when it is time to complete an assignment, you will already be well acquainted with what is expected of you.

Train yourself to be as neat and quick in your work as possible, as this is what is required in the exam.

Resources • A non-programmable calculator. Make sure that you always use the same one, so that you will be familiar with it.

• You can purchase an 8-column creditors ledger, and a General Ledger book to do your exercises in.

• The New Era Accounting Grade 10 Textbook • The New Era Accounting Grade 10 Workbook that is used to complete the exercises in the textbook Additional books • Grade 10 Accounting-The Answer series. Choose the 3-in-1 version of the book as it contains the notes, questions and answers.

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Study Notes G10 ~ Accounting

6.

1-4

Year programme

Term 1 Week Week 2 1 Indigenous bookkeeping

Week 3

Week 4

Week 5

Indigenous bookkeeping

Internal control (intro)

Bookkeeping of sole trader: Recording of cash transactions General Ledger, Trial Balance, Accounting equation

Bookkeeping of sole trader recording of cash and credit transactions (combined)

Presentation

Informal

Bookkeeping of sole trader recording of credit transactions, Ledgers, Debtor’s and Creditor’s lists, Trial Balance, Accounting equation March test

Week 3

Week 4

Week 5

Week 8

Week 9

Week 10

Topic

Week 1 VAT

Revision

Examination

Assessment

Project (bookkeeping)

Topic

Assessment

Week 6

Week 7

Week 8

Week 9

Week 10

Term 2 Week 2

Salaries and wages

Week 6

Week 7

Final accounts – sole trader Year-end adjustments, General Ledger including Final Accounts Section, Trial Balances Informal

June Examination

Term 3 Week 1 Topic

Assessment Term 4

Topic

Assessment

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Week 2

Week 3

Week 4

Week 5

Week 6

Week 7

Financial statements – sole trader Adjustments, closing transfers, General Ledger, Income Statement, Balance Sheet Notes to financial statements Case study Week 1

Week 2

Cost Accounting: Manufacturing concepts Informal

Budgeting

Week Week Week Week 3 4 5 6 Revision and examination preparation

Week 7

Week 8

Week 9

Analysis and interpretation of financial statements and notes

Revision

September test Week 8

Week 9

Week 10

Examination

Administration and planning for following year

November Examination

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Week 10

Study Notes G10 ~ Accounting

In your textbook the terms’ content as indicated in the year plan can be found on the following pages: Term 1: Page 13 – 197 Term 2: Page 198 – 345 Term 3: Page 356 – 422 Term 4: Page 423 – 501 7. Lesson by lesson additional information The goal of this additional information is to give you extra help to understand the more difficult and important modules of the textbook. Each aspect in the textbook is not explained in the same detail, and every module is not included in this section, as some of the modules can be studied by simply working through the relevant parts in the textbook. As you work through the additional information, page through the modules in you textbook and use the additional information with the information in you textbook.

MODULE 1: REVISION PAGE 13-50 This module deals mainly with previous knowledge that you should be able to master before you attempt to start with Grade 10 content. The aim of this module is to freshen your memory and to make sure that you are confident with the content that was previously covered.

Let’s look at the Personal Spreadsheet and Statement of Net Worth (Task 1.2) Page 14 in the textbook.

Firstly, it is very important to know what exactly assets and liabilities are. The test here is to see if you know how to classify items.

In this section there are three things you have to take note of: 1.

Put all the transactions on the spreadsheet.

2.

Do the statement of Net Worth.

3.

Give comments on the financial position.

Tips: • •

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When you do a spreadsheet, always start with the totals that were given to you by writing them in the correct columns.

When you go through the transactions, ask yourself if you are working with an asset or a liability. Then determine if it became more or less. If it, for instance became more, write a + in front. If it became less, write a –. When you are done writing the amounts in the right spaces, determine the Net Worth by using the formula below:

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Study Notes G10 ~ Accounting

ASSETS – LIABILITIES = NETT WORTH / OWNER’S EQUITY •

•

Now do the Statement of Net value. List all of the assets (which you listed in the spreadsheet) with the total as calculated at the end of the spreadsheet. Then list all your liabilities and their totals. Take note of the layout of the statement. The total of liabilities and net worth must be calculated.

Comments: Compare the assets and liabilities with each other. Comment on how the totals at the end of the spreadsheet differ from the opening balances given to you at the beginning. Has it become more or less? What are the reason (s)?

The expanded accounting equation A+E+D=L+C+I Although this may look like a lot of information, it is important to take note of the following: 1.

Know the equation by heart.

2.

Know what every symbol in the equation stands for.

3.

Know where the information in the equation comes from and where you need to apply it.

Sometimes, for example, you have to be able to use the information from a statement.

You have to know that Bank is an asset. You add all the appropriate assets and replace them into the equation where “A” is. * Assets and Liabilities are found in the Balance Sheet and are used to determine Net Worth. * Expenses and Income are found in the Income Statement and are used to determine Net Profit/Loss. * Drawings and Capital give us information on how much the owner invested and withdrew in the business.

How to work with Cost of Sales and Sales It is very important to remember the following formula: COS + GP = S Cost price of sales + Gross profit + VAT= Sales This formula will help you to determine the Cost of Sales, Gross Profit or Sales.

There are a couple of different methods to determine Cost of sales. Turn to page 24–25 in the textbook.

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Study Notes G10 ~ Accounting

The General Ledger The General Ledger reflects everything that happens in the business.

The following is important to remember: 1.

There is a good example of what exactly happens to Assets, Liabilities, Income and Expenses in the General Ledger on page 40. For example: Know that when an asset increases it will be debited. dr

Assets

cr

dr

Liabilities cr

dr Income/ Expenses cr

cr

+

-

-

+

-

+

2.

For every account in the General Ledger, there is another account that has been influenced. This means that if the one account is debited, the other account has to be credited. Always keep in mind the classification of the account you are working with. This is referred to as the Double Entry Rule. Remember, if you work with cash, the bank account is almost always involved. The other account that will be influenced is for example, what we spend the money on, e.g. advertising, or where the money comes from, e.g. rental income.

3.

Just like other formats in Accounting, it is very important to know the formats of the General Ledger accounts.

4.

The General Ledger is divided into two parts: • Balance sheet accounts section (folio reference B will be for example B1) • Nominal accounts section (folio reference N will be for example N1)

Take a look on page 41-42 to see what accounts are classified in which section.

5.

Always start with the balances given to you at the beginning of the financial period.

MODULE 2: INDIGENOUS AND INFORMAL BOOKKEEPING SYSTEMS PAGE 51-58 In this module there are three things that you should know: 1.

2.

3.

Know what is classified as an income Know what is classified as an expense Know how to determine the profit (Income – Expenses)

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Study Notes G10 ~ Accounting

You have to be able to put all the expenses together and all the income together. After you have done that, you will be able to determine the profit/loss by using the totals of both the income and expenses.

You should then be able to comment on the above-mentioned, for example whether it is a large profit and what attributed to it.

MODULE 3: CASH JOURNALS PAGE 59-92 In this module we are going to look at every aspect of the Cash Journals (CRJ and CPJ) that is important.

•

• • •

Source documents: For every transaction, there is a source document. This is your first clue of which journal you are going to work in. If, for example, you pay with a cheque it will always go to the Cash Payment Journal (CPJ), but if you issued a receipt, you will work in the Cash Receipts Journal (CRJ).

Journals: Every transaction will first be done in the journals before it goes to the Ledgers.

This is why we say the journals are “Books of first entry”.

Cash journals: Remember, these are ONLY cash transactions. (Cash Receipt Journal and Cash Payment Journal) CRJ, CPJ and petty cash (for transactions that are too small to pay in Bank every day)

Documentation: The bank statement This is the summary of everything that happened in your account. The credits represent all the money that came into your account, while the debits represent everything that went out.

It is important not to confuse the debits and credits in the Bank Statement with the Bank Account in the General Ledger. They are not the same. Debit entries are negative in a Bank Statement, but they are positive in the Bank Account (General Ledger). The same applies to credits.

Bank charges When we get to bank charges, it is very important to know what is considered to be bank charges, as they are given to you in various different and smaller charges. Together they are listed as bank charges. The different bank charges are for example service fees, cheque books, etc. Make sure you know what these charges are. *Interest on current accounts (CRJ) and interest on overdraft (CPJ) are not considered as bank charges, but as interest received or paid due to positive or negative balances.

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Study Notes G10 ~ Accounting

Interest on a loan It is very important to know that when your loan changes in any way, for instance you paid part of it or you borrowed more money, as it has a direct effect on your interest. Every time when something happens to your loan, interest is calculated differently. An easy way to do this is to use a time line!

1 Feb +10 000

30 March +5 000

(new loan is made)

(More money is borrowed on your loan)

31 Jul -15 000 (Your loan is paid in full)

Every time something happens to your loan, write it on the time line. It will be easier to determine your interest, for example, if interest is calculated at 10% it will be calculated between 1 Feb and 30 March as indicated on the time line.

1 Feb – 30 March: 10 000 x 10/100 x 2/12 = 167 (rounded off) 30 March – 31 July: 15 000 x 10/100 x 4/12 = 500 (rounded off)

MODULE 4: CREDIT SALES AND ALLOWANCES PAGE 93-126 In this module, we no longer work with cash sales and purchases, but with stock and services that are bought and sold on credit. We now work in the Debtors Journal and Debtors Allowances Journal.

The Debtors Journal The source document: Invoice issued.

Look at the differences between Cash sales and Sales on Credit on page 95 in your textbook.

Cash sales Sales on credit Cash Receipts Journal Debtors Journal Bank + (dr) Debtors + (dr) Trading stock – (cr) Trading stock – (cr) Cost of sales – (dr) Cost of sales – (dr) Sales + (cr) Sales + (cr) *The only difference is that Bank is replaced by Debtors.

Debtors Ledger Every debtor is recorded separately.

Look at the following example on page 98 in your textbook: • The source document number is used. This will be the invoice number.

• The Debit column is used for sales on credit to a debtor.

• The Credit column is used for money paid by our debtor.

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Study Notes G10 ~ Accounting

Debtors List All the debtors with their totals are listed.

The Debtors Allowances Journal In this journal we work with transactions where our debtors sent trading stock back to us, because they were unhappy with it.

The source document used is a Debit Note received, or Credit Note issued.

TIP: When a Debit Note is received or a Credit Note is issued, note that you are working in the Debtor’s Allowances Journal.

We are introduced to a new account in the General Ledger: Debtors Allowances. The relevant accounts will look like the following: Debtors Control

Debtors Allowances

x cr

x dr

Trading Stock

Cost of Sales

x dr

x cr

The Debtors Control account is credited because the debtor doesn’t owe the money anymore.

Trading stock is debited, because it has been sent back to us and cost of sales is credited.

Discounts Allowed When our debtors pay their accounts on time (usually within 30 days), a certain amount of discount can be given. This transaction is recorded in the Cash Receipt Journal. In the Debtors Control Column you will write the total amount owed by the debtor. In the Discount Allowed Column you will write only the discounted amount. In the Bank column you will write the amount received by the debtor.

Dishonoured cheques Read up on the reasons why cheques don’t always go through successfully. We will only discuss how to handle a dishonoured cheque.

When we originally receive a cheque from a debtor, it is written in the Cash Receipt Journal, because money was paid in to our bank account. Now, in the case of a dishonoured cheque, we are going to cancel the transaction by writing it in the Cash Payment Journal. The amount is written in the Bank as well as the Debtor Control Column. ***Always remember, when something happens to a debtor, you have to make the change in their personal accounts in the Debtors List as well. This is very important when it comes to adjustments in the financial statements later.

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