Question 2 Study the information end answer the questions that follow: 1. Show Effects on Owner's equity. Assets and Liabilities 2. Record the transactions in the Cash Payments Journal of Dower Traders. 3. Clase off at the end of month. Oxfard Let's Practise Workbook Page \( 8-9 \) 4. Make provision of the following analysis columus: Bank, Trading stock, Wages and Sundry aecounts. Transactions: June 2021 2. Paid by EFT to the ABC Stores for consurnable goods, R350, 00 3. Bought the following from S. Dower and paid by EFT Cash rogister, R1 500 L Stationery, R300 E 6. Purchased merchandise from M. Mhlanga and paid by EFT, R850,00 is 1. Explain the difference between the goods purchased on the \( 2^{\text {nd }} \) and \( 6^{\text {th }} \) \( \qquad \) \( \qquad \) \( \qquad \) 2. Define the term "trading stock" Explain why you do not calculate the cost of sales in the Cash Payments Journal. \( \qquad \)

To solve the problem, we will follow the steps outlined in the prompt. ### Step 1: Effects on Owner's Equity, Assets, and Liabilities 1. **Transaction on June 2**: Paid R350 for consumable goods. - **Assets**: Decrease (Cash decreases by R350) - **Liabilities**: No effect - **Owner's Equity**: Decrease (Expenses increase, reducing equity) 2. **Transaction on June 3**: Bought cash register (R1,500) and stationery (R300). - **Assets**: Decrease (Cash decreases by R1,800) - **Liabilities**: No effect - **Owner's Equity**: Decrease (Expenses increase, reducing equity) 3. **Transaction on June 6**: Purchased merchandise for R850. - **Assets**: Decrease (Cash decreases by R850) - **Liabilities**: No effect - **Owner's Equity**: Decrease (Expenses increase, reducing equity) ### Summary of Effects: - **Total Assets Decrease**: R350 + R1,800 + R850 = R3,000 - **Total Liabilities**: No change - **Total Owner's Equity Decrease**: R3,000 ### Step 2: Record the Transactions in the Cash Payments Journal | Date | Details | Bank | Trading Stock | Wages | Sundry Accounts | Total | |------------|-----------------------------|-------|---------------|-------|-----------------|---------| | June 2 | ABC Stores (Consumables) | R350 | | | | R350 | | June 3 | S. Dower (Cash Register) | R1,500| | | | R1,500 | | June 3 | S. Dower (Stationery) | R300 | | | | R300 | | June 6 | M. Mhlanga (Merchandise) | R850 | | | | R850 | | **Total** | | R3,000| | | | R3,000 | ### Step 3: Close Off at the End of the Month At the end of the month, the Cash Payments Journal would be closed off by totaling the amounts in each column and preparing for the next month. The total cash payments for the month would be R3,000. ### Step 4: Make Provision for the Following Analysis Columns - **Bank**: R3,000 (Total cash payments) - **Trading Stock**: R850 (Merchandise purchased) - **Wages**: R0 (No wages recorded) - **Sundry Accounts**: R2,150 (Consumables, cash register, and stationery) ### Explanation of Transactions 1. **Difference between Goods Purchased on June 2 and June 6**: - The goods purchased on June 2 (R350) were consumable goods, which are typically used in the day-to-day operations of the business (e.g., office supplies). - The goods purchased on June 6 (R850) were merchandise, which are intended for resale. This means that the June 6 transaction is related to the inventory of the business, while the June 2 transaction is an operational expense. 2. **Definition of "Trading Stock"**: - Trading stock refers to the goods that a business purchases with the intention of reselling them to customers. This includes all inventory items that are held for sale in the ordinary course of business. ### Explanation of Cost of Sales Calculation - The cost of sales is not calculated in the Cash Payments Journal because this journal only records cash transactions. The cost of sales is typically calculated in the income statement, where it reflects the cost of inventory sold during a specific period. The Cash Payments Journal focuses on cash outflows rather than the overall profitability of sales.