Glam & Co. Ltd is one of the largest manufacturer of jewelry in South Africa. The financial
accountant is working on finalizing the accounts for the reporting ended 31 December 2020. The
following balances and transactions appeared in the accounting records of Glam & Co. Ltd on 31
December 2020:
1. On 1 March 2020 Glam & Co. received a loan of R30 000 from Capivex Bank. The terms
of the loan state that interest is charged at 8% per annum. The financial accountant has
not recorded the interest expense. Interest is capitalised against the loan.
2. Insurance premiums are paid at the beginning of each month, except for property
insurance of which the premiums are paid annually on 1 September. The annual property
insurance premium that was paid on 1 September 2020 amounted to R24 000. The full
premium was debited against the insurance expense for 2020. The insurance premium
prepaid on 31 December 2020 still has to be recognised.
3. On the 1 August 2020 Glam & Co. Ltd entered into a lease agreement to rent an office
building at R4 000 per month. On 1 August a payment of R48 000 was made which covers
lease payments for the period 1 August 2020 to 31 July 2021. This amount was recorded
as rent expense for the year ended 31 December 2020.
4. On 28 December 2020 the owner withdrew inventory with a cost price of R14 000 which
he gave to his wife as an anniversary gift. On the same day, the inventory system indicated
that certain inventory items had a cost of R22 000 more than the net realisable value. Both
the drawings and the write-down have been approved by the owner but not yet processed.
5. On 1 July 2020 Glam & Co. purchased a vehicle with a cost price of R220 000 on credit
from BMA Motors. The depreciation on the vehicle amounts R27 500 per annum. The
financial accountant still needs to record both of these transactions.
6. Office supplies on hand was R15 000 on 31 December 2020 and R7 000 on 31 December
2019. This transaction still needs to be processed.
7. Glam & Co. Ltd owns office space which it leases out at R6 000 per month. According to
the lease agreement, this amount is payable on the first day of each month. On 31
December 2020, the rent income account reflected a credit balance of R78 000. The lease
instalment that was payable by the lessee on 1 January 2021 was already paid to Glam &
Co. Ltd on 23 December 2020.
8. The bank statement received on 2 January 2021 for December 2020 reflected interest
expense on bank overdraft of R900 and bank charges of R860. This transaction still needs
to be processed.
9. The telephone statement for December 2020 of R750 was received from Voda-Chat only
on 10 January 2021 and has not yet been recognised.
10. A debtor Mr. K who had an outstanding balance of R4 500 as at 31 December 2020 can
no longer pay his account as he has been declared insolvent. The credit manager has
given authorization to write-off this account as bad debt. The write-off still needs to be
processed.
REQUIRED:
Recognise the above-mentioned transactions and events in the General journal of Glam & Co.
Ltd for the reporting period ended 31 December 2020.
IGNORE VAT for this question.
Note:
 Show all calculations.
 Round off all amounts to the nearest Rand.
 Journal dates and narrations are required.
 Appropriately indicate next to each account in the journal one of the following
abbreviations between brackets: P/L, SCE, SFP.
 The effect of the transactions on the accounting equation (A = L + E), is not required.