ACCN101: Accounting 1A Exam Notes (DUT, UNISA, CUT & South African First‑Year Accounting)

These study notes provide a comprehensive, exam-focused guide for ACCN101: Accounting 1A and equivalent first‑year financial accounting modules commonly offered at South African universities, especially Durban University of Technology (DUT): National Diploma in Management Accounting, as well as comparable courses at UNISA (FAC1501, FAC1502) and Central University of Technology (CUT: ACCF11A, ACFS11B). The focus is on concepts and formats that repeatedly appear in semester tests, June/November exams, and supplementary exams.

The notes emphasize core principles, standard exam formats, and calculations required for topics such as the accounting equation, double-entry, journals and ledgers, trial balance, financial statements, inventory, VAT, and basic analysis. Wherever possible, examples use South African‑style terminology, VAT treatment, and exam-style figures.

1. The Accounting Environment and Conceptual Framework

1.1 Purpose of Accounting in a South African Business Context

Accounting 1A (e.g., DUT ACCN101, UNISA FAC1501, CUT ACCF11A) starts with the role of accounting in business and the South African regulatory environment.

Purpose of accounting:

To identify, measure, record, and communicate financial information.
To assist decision‑making by owners, managers, creditors, investors and government.
To provide accountability and stewardship over the entity’s resources.

Key users of financial information:

Internal users: management, owners (in sole proprietorships/CCs), employees.
External users: creditors (banks, suppliers), investors, SARS, regulators, unions.

Example: A small retailer in Durban CBD uses accounting information to decide whether to:

Open a second branch (needs profitability and cash flow data).
Apply for overdraft finance (bank will ask for recent financial statements).
Negotiate better credit terms from suppliers (supplier wants to see payment history and financial position).

1.2 Financial Accounting vs Management Accounting

Although ACCN101 is largely financial accounting, DUT’s National Diploma in Management Accounting and similar programmes at UNISA/CUT require clear distinction:

Financial Accounting
- Focus: external reporting (e.g., statement of profit or loss and other comprehensive income, statement of financial position, statement of cash flows).
- Time orientation: historical (past performance).
- Regulation: governed by IFRS, Companies Act, and in South Africa, SAICA guidelines where applicable.
- Exam focus: preparing financial statements from trial balances and adjustments.
Management Accounting
- Focus: internal planning, budgeting, costing, variance analysis.
- Time orientation: future‑oriented and decision‑useful.
- Regulation: less formal; driven by internal needs.
- Appears later in the DUT National Diploma in Management Accounting (e.g. second/third‑year modules) but the foundation is still basic financial accounting understanding.

1.3 Forms of Business Entities in ACCN101 Context

Most South African first‑year accounting exams focus on sole traders, sometimes on partnerships and companies in second semester. Know their basic features:

Sole Trader (Sole Proprietorship)
- One owner.
- Not a separate legal entity.
- Owner’s equity = Capital – Drawings + Profit (or – Loss).
- In exams: often the default entity for service and trading business questions.
Partnership
- Two or more owners (partners).
- Partnership agreement defines profit sharing, salaries, interest on capital.
- In first‑year exams (DUT/UNISA/CUT), simple partnership questions may appear only in second semester or ACCN102 equivalents.
Company
- Separate legal entity.
- Owned by shareholders; managed by directors.
- Equity described as share capital, share premium, retained earnings.
- Requires compliance with Companies Act and IFRS.
- May feature briefly in an ACCN101 exam as conceptual questions, not usually full‑scale IFRS statements at first‑year level.

1.4 The Accounting Equation

The fundamental accounting equation underpins all of ACCN101/ACCF11A:

[
\textbf{Assets} = \textbf{Equity} + \textbf{Liabilities}
]

Assets: resources controlled by the entity from which future economic benefits are expected (e.g., cash, inventory, vehicles).
Equity: residual interest in the assets after deducting liabilities (owner’s claim).
Liabilities: present obligations arising from past events, to be settled by outflows of resources (e.g., bank loans, creditors).

In a sole trader, equity expands to:

[
\textbf{Assets} = \textbf{Capital} – \textbf{Drawings} + \textbf{Profit} – \textbf{Loss} + \textbf{Liabilities}
]

Re‑arranging to show equity clearly:

[
\textbf{Equity} = \textbf{Capital} – \textbf{Drawings} + \textbf{Retained Profit (or Loss)}
]

Exam‑style example:

A DUT first‑semester ACCN101 question might provide:

Assets on 1 March 2026: R240 000
Liabilities: R90 000

Calculate owner’s equity.

Equity = Assets – Liabilities = R240 000 – R90 000 = R150 000.

Then, if additional information is given:

Owner introduces an additional R30 000 capital.
Owner withdraws R10 000 as drawings.
Profit for March 2026: R20 000.

New equity at 31 March 2026:

Opening equity 1 March: R150 000

Additional capital: R30 000 → R180 000
– Drawings: (R10 000) → R170 000
Profit: R20 000 → R190 000 closing equity.

1.5 Basic Accounting Concepts and Principles (IFRS‑Based)

Most ACCN101 exams test conceptual knowledge of basic principles through short questions or multiple choice, especially at DUT, UNISA (FAC1501) and CUT:

Business Entity Concept
- The business is separate from its owner.
- Owner’s personal transactions are not recorded in the business’s books.
- Example: Owner’s personal electricity bill is not an expense of the business.
Monetary Unit Concept
- Only transactions that can be expressed in rands (R) are recorded.
- Non‑monetary events (like staff morale) are not recorded directly.
Historical Cost Principle
- Assets are initially recorded at the cost of acquisition.
- Example: A vehicle bought for R150 000 remains recorded at R150 000 (minus accumulated depreciation) even if its market value changes.
Going Concern Assumption
- Assumes the business will continue for the foreseeable future.
- Important for asset valuation and classification of liabilities.
Accrual Basis
- Income is recorded when earned, not when cash is received.
- Expenses are recorded when incurred, not when cash is paid.
- Central to exam adjustments like accrued income, prepaid expenses.
Consistency
- Methods of accounting (e.g., depreciation method) should be applied consistently from year to year unless justified.
Materiality
- Information is material if its omission or misstatement could influence user's decisions.
- In exams, often tested conceptually: trivial items may be written off as expenses rather than capitalized.
Prudence (Conservatism)
- Do not overstate assets or income; recognize probable losses as soon as they are foreseeable.
- Example: Provision for doubtful debts.
Dual Aspect
- Every transaction has two sides (debit and credit).
- Connects directly to the accounting equation and double‑entry.

Understanding these underpins high‑mark theory questions and helps explain why certain journal entries or adjustments are made.

2. Double-Entry System, Source Documents, Journals and Ledgers

2.1 The Double‑Entry Principle

All ACCN101/ACCF11A style exam questions on journals and ledgers rely on double‑entry bookkeeping:

For every transaction, total debits = total credits.

Each account is either increased or decreased by a debit or credit, depending on its nature.

Account types and normal balances:

Account Type	Examples	Normal Balance	Increase by	Decrease by
Assets	Cash, Debtors, Vehicles	Debit	Debit	Credit
Expenses	Rent, Wages, Telephone	Debit	Debit	Credit
Drawings	Owner’s drawings	Debit	Debit	Credit
Liabilities	Creditors, Bank loan	Credit	Credit	Debit
Income/Revenue	Sales, Service fees, Interest	Credit	Credit	Debit
Owner’s Equity	Capital	Credit	Credit	Debit

In exam memories at DUT, a common mnemonic is D-E-A-L-E-R:

Debit increases: Expenses, Assets, Drawings.
Credit increases: Liabilities, Equity, Revenue.

2.2 Source Documents (Typical South African Context)

Exams often provide source documents and ask for appropriate journal entries or to identify the correct book of first entry.

Common documents:

Tax Invoice (Sales or Purchase Invoice)
- Issued when making credit sales or receiving credit purchases.
- Includes details of VAT (South African VAT at 15%).
Credit Note
- Issued for returns by customers (sales returns) or received from suppliers (purchases returns).
Receipt
- Proof of cash received (e.g., from a debtor or cash sale).
Cheque counterfoil / EFT proof
- Evidence of cash payments.
Deposit slip / Bank statement
- Evidence of cash deposits and bank transactions.

Exam tip: Be able to match each document to the journal:

Sales invoice → Sales Journal.
Purchases invoice → Purchases Journal.
Credit note issued to customer → Sales Returns Journal.
Credit note received from supplier → Purchases Returns Journal.
Receipt → Cash Receipts Journal (CRJ).
Payment (cheque/EFT) → Cash Payments Journal (CPJ).

2.3 Subsidiary Journals (Books of First Entry)

In South African first‑year accounting (DUT, UNISA, CUT), the subsidiary journals are heavily examined:

Cash Receipts Journal (CRJ)
- Records all money received by the business (cash, EFTs, deposits).
- Common columns: Bank, Sales, Debtors Control, Sundry accounts, VAT output (if applicable).
Cash Payments Journal (CPJ)
- Records all payments made by the business.
- Columns: Bank, Creditors Control, Wages, Rent, Sundry accounts, VAT input.
Sales Journal (SJ)
- Records all credit sales of inventory.
- Columns: Debtors, Cost of sales, Sales, VAT output.
Purchases Journal (PJ)
- Records all credit purchases of inventory.
- Columns: Creditors, Purchases, VAT input.
Sales Returns Journal (SRJ)
- Records all returns from debtors (customers).
Purchases Returns Journal (PRJ)
- Records inventory returns to creditors (suppliers).
General Journal (GJ)
- Used for non‑routine or adjusting entries (e.g., bad debts, depreciation, correction of errors, opening entries).

Exam‑style CRJ example:

Assume the following transactions during March 2026 for a DUT ACCN101 trading business registered for VAT at 15%:

5 March: Cash sales R23 000 (VAT inclusive).
10 March: Received R11 500 (EFT) from debtor M Zulu in full settlement of R12 500 owed. Discount allowed is the difference (R1 000).
15 March: Owner introduced additional capital R30 000, deposited into bank.

Prepare CRJ analysis:

Cash sales (VAT inclusive):
- VAT portion = 15/115 × R23 000 = (15 × 23 000) / 115 = R3 000.
- Sales (excl VAT) = R23 000 – R3 000 = R20 000.
Receipt from debtor:
- Bank increases by R11 500 (Debit bank).
- Debtors Control decreases by R12 500 (Credit debtors).
- Discount allowed (expense) R1 000 (Debit discount allowed).
Owner’s capital contribution:
- Bank increases by R30 000.
- Capital increases by R30 000.

CRJ (analysis columns):

Date	Details	Bank	Debtors Control	Sales	Discount Allowed	Capital	Output VAT
05/03	Cash sales	23 000		20 000			3 000
10/03	M Zulu	11 500	12 500 (Cr)		1 000
15/03	Capital	30 000				30 000

In practice, the Debtors Control column would represent debtors reduced via posting to the general ledger, and the credit side is implied.

2.4 Posting from Journals to the General Ledger

Once journals are totaled for the period, totals are posted to the general ledger accounts.

General rules:

Totals in debit columns in the journal are posted as debits to the relevant ledger accounts.
Totals in credit columns in the journal are posted as credits.

Example from CRJ above:

Bank (Dr total) = 23 000 + 11 500 + 30 000 = R64 500 (debit side of Bank ledger).
Sales (Cr total) = R20 000 (credit side of Sales ledger).
Output VAT (Cr total) = R3 000 (credit side of VAT output account).
Discount allowed (Dr total) = R1 000 (debit side of Discount Allowed account).
Debtors Control: net effect is reduction of R12 500 (credit side of Debtors Control ledger).
Capital: R30 000 credited to Capital account.

Ledger T‑account illustration:

Bank Account

Bank (General Ledger)	Debit (R)	Credit (R)
Balance b/d	10 000
CRJ total (March)	64 500
CPJ total (March)		45 000
Balance c/d	29 500
Total	74 500	74 500

Balance b/d (balance brought down) appears at the start, and balance c/d at month‑end to balance the account. The new balance carried down (29 500) becomes the opening balance in the next month.

2.5 Debtors and Creditors Subsidiary Ledgers

In many ACCN101, FAC1501, and ACCF11A exam questions, you must work with:

Debtors Ledger (Accounts Receivable subsidiary ledger)
Creditors Ledger (Accounts Payable subsidiary ledger)

These show individual balances for each debtor/creditor, while the Debtors Control and Creditors Control accounts in the general ledger show total balances.

Example:

If you have three debtors:

A Ndlovu: R6 000
B Naidoo: R4 500
C Dlamini: R3 500

Total Debtors = R14 000. The Debtors Control account will show R14 000 while each debtor’s individual account is in the Debtors Ledger.

Exam tasks often require:

Posting transactions to the Debtors/Creditors Ledger.
Balancing individual accounts.
Agreeing the sum of individual balances to the Debtors/Creditors Control account.

3. Trial Balance, Adjustments and the Accounting Cycle

3.1 The Accounting Cycle (High‑Level Overview)

Understanding the accounting cycle is central to any DUT ACCN101 or UNISA FAC1501 exam question that asks for a full set of financial statements:

Source documents → 2. Journals → 3. Post to General Ledger →
Prepare Trial Balance → 5. Adjustments (Accruals, Prepayments, Depreciation, etc.) →
Adjusted Trial Balance → 7. Financial Statements.

Exams may test any stage, or the entire cycle.

3.2 The Trial Balance

A trial balance (TB) is a list of all general ledger accounts and their balances at a particular date, in debit/credit format.

Purposes:

To test the arithmetic accuracy of the ledger (total debits = total credits).
To provide a basis for preparing financial statements.

Layout example:

Trial Balance of X Traders as at 28 February 2026

Account	Debit (R)	Credit (R)
Capital		150 000
Drawings	20 000
Land and buildings	200 000
Vehicles	80 000
Accumulated depreciation – vehicles		20 000
Inventory (1 March 2025)	40 000
Debtors Control	35 000
Creditors Control		25 000
Bank	15 000
Sales		320 000
Cost of sales	210 000
Rent expense	24 000
Wages	70 000
Telephone	5 000
Insurance	6 000
Bad debts	3 000
Sundry income		6 000
Totals	708 000	708 000

If the totals do not match, an error exists, which may lead to a suspense account in more advanced questions.

3.3 Common Adjustments in ACCN101/ACCF11A Exams

Adjustments are entries made at year‑end (or month‑end) to bring accounts to their correct accrual‑basis balances. These are central to exam questions where you’re given an unadjusted trial balance plus additional information, and you must perform adjustments before preparing statements.

3.3.1 Accrued Expenses and Income

Accrued expenses (outstanding expenses):
- Expense incurred but not yet paid (e.g., wages owed).
- Adjustment (year‑end):
  - Dr Expense
  - Cr Accrued Expense (liability)
Example: Wages of R4 000 are outstanding at year‑end.
- Dr Wages R4 000
- Cr Accrued expenses R4 000.
Accrued income (income receivable):
- Income earned but not yet received (e.g., interest income).
- Adjustment:
  - Dr Accrued Income (asset)
  - Cr Income
Example: Interest income of R1 500 earned but not yet received.
- Dr Accrued income R1 500
- Cr Interest income R1 500.

3.3.2 Prepaid Expenses and Income Received in Advance

Prepaid expenses:
- Expense paid in advance (asset).
- Typical items: insurance, rent.
- Adjustment (year‑end):
  - Dr Prepaid expense (asset)
  - Cr Expense.
Example: Insurance of R6 000 was paid for 12 months on 1 November 2025, year‑end 28 February 2026. Only 4 months relate to current year (Nov, Dec, Jan, Feb).
- Annual insurance R6 000
- Expense for current year = 4/12 × 6 000 = R2 000
- Prepaid portion = 8/12 × 6 000 = R4 000 (relates to next year)
If full R6 000 has been expensed, adjustment:
- Dr Prepaid insurance R4 000
- Cr Insurance expense R4 000.
Income received in advance (deferred income):
- Income received before being earned (liability).
- Example: Rent received for six months in advance.
Adjustment:
- Dr Income
- Cr Income received in advance (liability).

3.3.3 Depreciation

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Two common methods tested:

Straight‑line method:

[
\text{Depreciation per year} = \frac{\text{Cost} – \text{Residual value}}{\text{Useful life in years}}
]

Journal entry:

Dr Depreciation expense
Cr Accumulated depreciation – Asset.

Example:

Vehicle cost: R80 000
Residual value: R8 000
Useful life: 4 years

Depreciation per year:
[
\frac{80 000 – 8 000}{4} = \frac{72 000}{4} = 18 000
]

Annual adjustment:

Dr Depreciation – vehicles R18 000
Cr Accumulated depreciation – vehicles R18 000.

Reducing balance method (diminishing balance):
- Depreciation = Percentage × Carrying amount at the beginning of year.
- Example:
  - Equipment cost R50 000
  - Depreciation rate 20% per year, reducing balance
  - Year 1: Dep = 20% × 50 000 = R10 000
  - Year 2: Dep = 20% × 40 000 = R8 000 (carrying amount = 50 000 – 10 000)

Exams sometimes ask you to calculate a pro‑rata depreciation if asset purchased part‑way through year.

3.3.4 Bad Debts and Allowance for Credit Losses (Provision for Doubtful Debts)

Bad debts:
- Specific debtor balance written off as irrecoverable.
- Journal entry:
  - Dr Bad debts (expense)
  - Cr Debtor (or Debtors Control).
Allowance for credit losses (Provision for doubtful debts):
- Estimated percentage of debtors that may not be collectable.
- The exam style at first‑year level is often:
Example:
- Debtors Control balance after writing off bad debts = R40 000.
- Required allowance: 5% of debtors.
- Current allowance (TB) = R1 500 (credit balance).
Required allowance = 5% × 40 000 = R2 000.

Increase needed = 2 000 – 1 500 = R500.

Journal entry:
- Dr Credit losses (expense) R500
- Cr Allowance for credit losses R500.

If the required allowance was lower than existing, the difference would be a reversal (credit credit losses, debit allowance).

3.4 Adjusted Trial Balance

After posting all adjustments, ledger balances are updated and a new adjusted trial balance is prepared.

This adjusted TB is used for financial statements. In many DUT ACCN101 exams, the question provides:

An unadjusted TB
Additional information (AI)
You are required to:
1. Record year‑end adjustments in general journal form.
2. Prepare adjusted TB.
3. Prepare statement of profit or loss and other comprehensive income and statement of financial position.

Being able to systematically apply adjustments and re‑prepare a TB is key to obtaining high marks.

3.5 Error Detection and Suspense Account (Introductory Level)

At first‑year level, some exams test:

Types of errors (omission, commission, principle, reversal, original entry, compensating errors).
Not all errors are revealed by the trial balance.

Suspense account:

Temporarily opened when trial balance does not balance.
Difference is posted to suspense account so books can be closed while errors are investigated.
Once errors are identified, journal entries are made to correct them and remove remaining balance from suspense.

Example:

TB has a R1 200 excess on the credit side.
Suspense is opened with a debit balance of R1 200 (to make totals equal).
When error found (e.g., an asset purchase posted only on the credit side), corrections will include adjusting suspense.

Some South African first‑year modules leave suspense accounts to second semester, but some exam papers at DUT/UNISA include at least one short question.

4. Financial Statements for Sole Traders and Trading Businesses

4.1 Key Financial Statements in ACCN101/ACCF11A

For sole traders and simple trading entities, ACCN101/ACCF11A exams generally require:

Statement of Profit or Loss and Other Comprehensive Income (Income Statement).
Statement of Changes in Equity (often combined into one note or simple movement).
Statement of Financial Position (Balance Sheet).

Sometimes you are also required to show:

Notes: e.g., Property, plant and equipment; trade and other receivables; trade and other payables; owner’s equity.
Ledger accounts that form part of the working.

4.2 Trading Account: Sales, Cost of Sales and Gross Profit

Trading businesses buy and sell inventory. The trading section of profit or loss statement usually appears as:

[
\text{Sales} – \text{Cost of sales} = \text{Gross profit}
]

Cost of sales is often calculated using:

[
\text{Cost of sales} = \text{Opening inventory} + \text{Purchases} + \text{Carriage inwards} – \text{Closing inventory}
]

Exam‑style example:

Opening inventory: R40 000.
Purchases: R250 000.
Carriage inwards (transport on purchases): R5 000.
Closing inventory: R50 000.

Cost of sales = 40 000 + 250 000 + 5 000 – 50 000 = R245 000.

If sales are R380 000, gross profit = 380 000 – 245 000 = R135 000.

4.3 Statement of Profit or Loss and Other Comprehensive Income (Format)

Generic format for a sole trader trading business:

Statement of Profit or Loss and Other Comprehensive Income for the Year Ended 28 February 2026

Description	R
Sales	xxx
Less: Cost of sales	(xxx)
Gross profit	xxx
Other income (e.g. discount received, rent income, interest income)	xxx
Total income	xxx
Expenses:
– Wages and salaries	(xxx)
– Rent expense	(xxx)
– Electricity and water	(xxx)
– Depreciation	(xxx)
– Insurance	(xxx)
– Telephone	(xxx)
– Bad debts	(xxx)
– Increase in allowance for credit losses	(xxx)
– Bank charges	(xxx)
Total expenses	(xxx)
Profit for the year	xxx

Exam‑style comprehensive example:

From an adjusted trial balance for Y Traders (DUT ACCN101 scenario):

Sales: R400 000
Cost of sales: R260 000
Rent income: R12 000
Discount received: R4 000
Wages: R80 000
Rent expense: R36 000
Depreciation – vehicles: R18 000
Insurance expense: R5 000
Telephone: R6 000
Bad debts: R3 500
Increase in allowance: R500
Bank charges: R1 500

Prepare profit or loss:

Sales: 400 000
Less: Cost of sales: (260 000)
Gross profit: 140 000

Other income:

Rent income: 12 000
Discount received: 4 000
Total other income: 16 000

Total income: 140 000 + 16 000 = 156 000

Expenses:

Wages: 80 000
Rent expense: 36 000
Depreciation: 18 000
Insurance: 5 000
Telephone: 6 000
Bad debts: 3 500
Increase in allowance: 500
Bank charges: 1 500

Total expenses: 80 000 + 36 000 + 18 000 + 5 000 + 6 000 + 3 500 + 500 + 1 500
= 150 500

Profit for the year = Total income – Total expenses
= 156 000 – 150 500 = R5 500

4.4 Statement of Changes in Equity (Owner’s Equity)

For a sole trader, the statement of changes in equity can be summarised as:

Statement of Changes in Equity for the Year Ended 28 February 2026

Description	R
Balance of capital at 1 March 2025	150 000
Add: Additional capital introduced	20 000
Add: Profit for the year	5 500
Subtotal	175 500
Less: Drawings	(30 000)
Balance of capital at 28 Feb 2026	145 500

This closing capital figure appears in the Equity section of the statement of financial position.

Exam tip: Many first‑year scripts lose marks where students forget to subtract drawings or add additional capital. Show all movements clearly.

4.5 Statement of Financial Position (Balance Sheet) – Format and Example

The statement of financial position presents assets, equity and liabilities at year‑end.

Standard format for ACCN101/ACCF11A (sole trader):

Statement of Financial Position as at 28 February 2026

ASSETS

Non‑current assets

Property, plant and equipment (at carrying amount)
Vehicles, equipment, land and buildings, etc.

Current assets

Inventory
Trade and other receivables:
- Debtors Control
- Less: Allowance for credit losses
- Accrued income (if any)
- Prepaid expenses
Cash and cash equivalents:
- Bank
- Cash on hand

Total assets

EQUITY AND LIABILITIES

Equity

Capital (closing balance from statement of changes in equity)

Non‑current liabilities

Long‑term loans (portion due after 12 months)

Current liabilities

Bank overdraft (if applicable)
Trade and other payables:
- Creditors Control
- Accrued expenses
- Income received in advance
- Current portion of long‑term loans

Total equity and liabilities

Exam‑style numerical example:

Continuing with Y Traders:

Land and buildings: R200 000
Vehicles at cost: R80 000
Accumulated depreciation – vehicles (after adjustment): R38 000 (20 000 old + 18 000 current depreciation)
Inventory (closing): R50 000
Debtors Control: R40 000
Allowance for credit losses: R2 000 (after adjustment)
Accrued income: R1 500
Prepaid insurance: R4 000
Bank: R25 000 (debit)
Cash on hand: R2 000
Capital closing balance: R145 500
Long‑term loan: R90 000 (of which R10 000 is payable within 12 months)
Creditors Control: R30 000
Accrued expenses: R4 000
Income received in advance: R3 000

Statement of Financial Position as at 28 February 2026

ASSETS

Non‑current assets:
Property, plant and equipment

Land and buildings: 200 000
Vehicles at cost: 80 000
Less: Accumulated depreciation – vehicles: (38 000)
Carrying amount – vehicles: 42 000

Total property, plant and equipment = 200 000 + 42 000 = 242 000

Current assets:

Inventory: 50 000
Trade and other receivables:
- Debtors Control: 40 000
- Less: Allowance for credit losses: (2 000)
- Accrued income: 1 500
- Prepaid insurance: 4 000
  Total trade and other receivables = 40 000 – 2 000 + 1 500 + 4 000 = 43 500
Cash and cash equivalents:
- Bank: 25 000
- Cash on hand: 2 000
  Total cash and cash equivalents = 27 000

Total current assets = 50 000 + 43 500 + 27 000 = 120 500

Total assets = 242 000 + 120 500 = 362 500

EQUITY AND LIABILITIES

Equity:

Capital: 145 500

Non‑current liabilities:

Long‑term loan (non‑current portion): 90 000 – 10 000 = 80 000

Current liabilities:

Current portion of long‑term loan: 10 000
Creditors Control: 30 000
Accrued expenses: 4 000
Income received in advance: 3 000

Total current liabilities = 10 000 + 30 000 + 4 000 + 3 000 = 47 000

Total equity and liabilities = Equity 145 500 + Non‑current liabilities 80 000 + Current liabilities 47 000
= 145 500 + 80 000 + 47 000
= 272 500

Notice: there is a discrepancy: total assets (362 500) must equal total equity and liabilities. That suggests missing figures or mis‑stated equity. To fix, suppose additional capital or retained profits were different. For exam purposes, ensure all totals match.

Let’s correct by recomputing capital such that Total equity and liabilities = Total assets = 362 500.

Non‑current liabilities: 80 000
Current liabilities: 47 000
Total liabilities: 80 000 + 47 000 = 127 000

Required equity = Total assets – Total liabilities = 362 500 – 127 000 = 235 500.

So capital closing balance should be R235 500 (instead of 145 500). That implies earlier profit or capital movement was higher. For an exam, the TB and changes in equity would be given in a consistent manner so the numbers agree. The principle to remember is:

[
\text{Total assets} = \text{Equity} + \text{Liabilities}
]

and marks are awarded for correct classification and format, not just final totals.

4.6 Notes to the Financial Statements (Introductory Level)

First‑year exam questions often require basic notes, such as Property, plant and equipment and Owner’s equity:

Note: Property, plant and equipment

Description	Land & Buildings (R)	Vehicles (R)
Cost at 1 March 2025	200 000	80 000
Additions	0	0
Disposals	0	0
Cost at 28 February 2026	200 000	80 000
Accumulated depreciation at 1 March 2025	0	20 000
Depreciation for year	0	18 000
Accumulated depreciation at 28 Feb 2026	0	38 000
Carrying amount at 28 Feb 2026	200 000	42 000

This structure may be simplified depending on the module but is common in UNISA FAC1502 and DUT ACCN101 exam papers.

5. Inventory, VAT, Bank Reconciliation and Basic Analysis

5.1 Inventory Valuation Methods

In first‑year accounting (ACCN101, ACCF11A, FAC1502), the focus is on periodic inventory system and fundamental valuation methods:

First‑In, First‑Out (FIFO)
Weighted Average Cost (AVCO)
(Sometimes) Specific Identification for unique items like motor vehicles.

5.1.1 FIFO (First‑In, First‑Out)

Assumes the oldest inventory is sold first.

Exam‑style example:

A trading business has the following inventory movements during March 2026:

1 March: Opening inventory – 100 units @ R20 = R2 000
10 March: Purchase – 200 units @ R22 = R4 400
20 March: Purchase – 150 units @ R25 = R3 750
28 March: Closing inventory – 180 units (counted physically)

Calculate cost of sales and closing inventory using FIFO.

Steps:

Determine units sold: Total available units – closing units
= (100 + 200 + 150) – 180 = 450 – 180 = 270 units sold.
FIFO: sales assumed from earliest purchases first.

Remaining closing inventory 180 units must be from latest purchases:

Start from last purchase:
- 20 March: 150 units @ R25 = 150 × 25 = R3 750
Still need 30 more units (180 – 150 = 30)
- 10 March: next 30 units @ R22 = 30 × 22 = R660

Closing inventory = R3 750 + R660 = R4 410

Cost of goods available for sale:
= Opening inventory + Purchases
= 2 000 + 4 400 + 3 750 = R10 150

Cost of sales = Cost of goods available – Closing inventory
= 10 150 – 4 410 = R5 740

5.1.2 Weighted Average Method

Weighted average cost per unit =
[
\frac{\text{Total cost of units available}}{\text{Total units available}}
]

Using the same data:

Total cost = 2 000 + 4 400 + 3 750 = 10 150
Total units = 100 + 200 + 150 = 450

Average cost per unit = 10 150 ÷ 450 ≈ R22.56 per unit.

Closing inventory (180 units) = 180 × 22.56 ≈ R4 060.80 (round according to exam instructions, often to nearest rand: R4 061).

Cost of sales = 10 150 – 4 061 = R6 089.

Exams may require you to show detailed working and might specify rounding rules. Always label your workings clearly.

5.2 VAT (Value Added Tax) – South African Context

South Africa’s VAT is standard‑rated at 15% (exam assumption unless specified otherwise). ACCN101 and ACCF11A exams often test VAT concepts in journals and simple ledger entries.

Key terms:

VAT output: VAT charged on sales (VAT payable to SARS).
VAT input: VAT paid on purchases/expenses (VAT recoverable from SARS).
VAT control: Net amount owed to or receivable from SARS (Output – Input).

5.2.1 VAT on Cash and Credit Transactions

Example transactions:

Cash sales of R23 000 (VAT inclusive)
- VAT portion = 15/115 × 23 000 = 3 000
- Sales (excl VAT) = 20 000
Credit purchase of inventory for R34 500 (VAT inclusive)
- VAT portion = 15/115 × 34 500 = 4 500
- Purchases (excl VAT) = 30 000

Journal entries (simplified):

Cash sales:
- Dr Bank 23 000
- Cr Sales 20 000
- Cr VAT output 3 000
Purchases on credit:
- Dr Purchases 30 000
- Dr VAT input 4 500
- Cr Creditors Control 34 500

Net VAT payable to SARS = VAT output – VAT input.

If VAT output for the month = R12 000 and VAT input = R8 000:

Net VAT payable: 12 000 – 8 000 = R4 000 (credit VAT control).

5.2.2 Non‑VAT Items

Wages and salaries: No VAT (exempt).
Interest income: No VAT.
Owner’s drawings: No VAT.
Zero‑rated and exempt supplies: at first‑year level, usually conceptual.

Exams may ask you to identify whether VAT applies and whether it is input or output VAT.

5.3 Bank Reconciliation

Bank reconciliation compares:

The business’s Cashbook (Bank account) balance, and
The Bank statement balance,

and explains any differences through reconciling items.

5.3.1 Common Reconciling Items

Outstanding deposits (recorded in cashbook, not yet reflected by bank).
Unpresented cheques (payments recorded in cashbook, not yet cleared by bank).
Bank charges, debit orders, interest, dishonoured cheques (in bank statement, not yet in cashbook).
Errors in either cashbook or bank statement.

5.3.2 Exam‑Style Example

At 31 March 2026, the Cashbook (bank column) of Z Traders shows a debit balance of R18 000. The bank statement shows a credit balance of R15 800 (remember: from the bank’s perspective, your account is a liability, so a credit is positive).

Reconciling items:

Outstanding deposit: R5 000
Unpresented cheque no. 105: R3 200
Bank charges R150 appeared on bank statement only.
Debit order for insurance R250 appeared on bank statement only.
A cheque of R1 000 was incorrectly recorded in the cashbook as R100.

Step 1: Update cashbook.

Starting balance: Debit R18 000

Bank charges R150:
- Dr Bank charges 150
- Cr Bank 150 (reduce bank balance)
Debit order for insurance R250:
- Dr Insurance 250
- Cr Bank 250
Error in cheque recording: cashbook recorded R100 instead of R1 000, so the cashbook under‑stated payment by R900.
- Dr Creditor or purchases 900
- Cr Bank 900

Updated balance:

Initial bank: 18 000
Less: Bank charges (150) → 17 850
Less: Debit order (250) → 17 600
Less: Additional payment for error (900) → 16 700

Updated cashbook balance (debit) = R16 700.

Step 2: Prepare Bank Reconciliation Statement

Balance as per updated cashbook (debit) 16 700
Add: Outstanding deposit 5 000 → 21 700
Less: Unpresented cheque 3 200 → 18 500

Expected balance as per bank statement should be R18 500 (credit). But bank statement shows 15 800. That suggests there might be a missing reconciling item in the given data. In a full exam question, figures are consistent; for practice, the key is knowing structure:

Bank Reconciliation Statement as at 31 March 2026

Description	R
Balance as per cashbook (debit)	16 700
Add: Outstanding deposits	5 000
	21 700
Less: Unpresented cheques	(3 200)
Balance as per bank statement (credit)	18 500

Marks are given for correct identification and plus/minus direction.

5.4 Basic Ratio Analysis (Introductory ACCN101 Level)

DUT ACCN101 and CUT ACCF11A sometimes introduce basic financial ratios, although deeper analysis is often done in second‑year modules. Know the basic formulas:

5.4.1 Profitability Ratios

Gross profit percentage:

[
\text{Gross profit %} = \frac{\text{Gross profit}}{\text{Sales}} \times 100
]

Example: Gross profit = 140 000, Sales = 400 000
Gross profit % = (140 000 / 400 000) × 100 = 35%

Net profit percentage:

[
\text{Net profit %} = \frac{\text{Net profit}}{\text{Sales}} \times 100
]

If net profit = 5 500, sales = 400 000
Net profit % = (5 500 / 400 000) × 100 ≈ 1.38%

A low net margin suggests either high expenses or pricing issues.

5.4.2 Liquidity Ratios

Current ratio:

[
\text{Current ratio} = \frac{\text{Current assets}}{\text{Current liabilities}}
]

Example (using earlier adjusted, consistent numbers):

Suppose current assets = 120 500 and current liabilities = 47 000
Current ratio = 120 500 / 47 000 ≈ 2.56 : 1

A ratio above 2:1 is often considered comfortable for a trading business, but depends on context.

Quick ratio (acid‑test):

[
\text{Quick ratio} = \frac{\text{Current assets} – \text{Inventory}}{\text{Current liabilities}}
]

Using same figures:
Quick ratio = (120 500 – 50 000) / 47 000 = 70 500 / 47 000 ≈ 1.50 : 1

If quick ratio is below 1, the business may struggle to meet short‑term liabilities without selling inventory.

5.4.3 Efficiency Ratios (If Covered)

At some institutions, you might be asked to compute inventory turnover:

[
\text{Inventory turnover} = \frac{\text{Cost of sales}}{\text{Average inventory}}
]

Where average inventory = (Opening inventory + Closing inventory)/2.

Better performance is indicated by a higher turnover (inventory sold more quickly).

5.5 Exam and Study Strategy for ACCN101 / FAC1501 / ACCF11A

To succeed in exams at DUT, UNISA, CUT and similar institutions:

Master the Basics of Double‑Entry
- Practise T‑accounts until debits and credits feel natural.
- For every transaction, identify which accounts are affected and their type (asset, liability, equity, income, expense).
Practice Full Accounting Cycles
- From source documents → journals → ledger → trial balance → adjustments → financial statements.
- Work through at least 3–5 full questions (past papers) per topic.
Use Past Exam Papers
- For DUT: ACCN101 past June/November, supplementary exams.
- For UNISA: FAC1501 and FAC1502 past papers and tutorial letters.
- For CUT: ACCF11A test and exam practice questions.
Memorise Key Formats
- Statement of profit or loss layout.
- Statement of financial position categories.
- Journal column headings for CRJ, CPJ, SJ, PJ.
Time Management in the Exam
- Allocate marks ÷ 1.5 = minimum minutes per question.
- Attempt easy questions first (often theory and journals).
- Show all workings clearly, even if final answer seems obvious.
Common Exam Pitfalls
- Forgetting to adjust for accruals and prepayments.
- Treating drawings as an expense instead of equity reduction.
- Omitting VAT entries or applying VAT to wages and other non‑VAT items.
- Not balancing T‑accounts and trial balance.
- Misclassifying assets/liabilities (e.g., current portion of long‑term loan).
Link to Later Modules (National Diploma in Management Accounting at DUT)
- Solid performance in ACCN101 builds the foundation for:
  - Costing (material, labour, overhead).
  - Budgeting and variance analysis.
  - Management accounting techniques (CVP analysis, decision making).
- Understanding the income statement and balance sheet is crucial when evaluating budgets and performance later.

By consolidating the topics above—accounting equation, double‑entry, journals and ledgers, trial balance, adjustments, financial statements, inventory methods, VAT, bank reconciliation, and basic ratios—students in DUT’s ACCN101, UNISA’s FAC1501/FAC1502, and CUT’s ACCF11A/ACFS11B should be well positioned to handle the structure and calculations of first‑year accounting exams in South Africa.