Question 2 (Marks: 50)
Brew Haven is a newly established sole proprietorship owned by Mr. Jacobs. The coffee shop specializes in
serving premium coffee and light snacks, catering to both walk-in customers and corporate clients. Brew
Haven is located in a vibrant business district, making it a popular spot for professionals and coffee
enthusiasts.
Brew Haven offers a variety of products and services including:
Coffee & Beverages: Espresso, cappuccino, lattes, iced coffee, and specialty teas.
Snacks: Muffins, croissants, sandwiches, and cookies.
Coffee Beans & Equipment: Packaged coffee beans, grinders, and French presses.
Corporate Orders: Bulk coffee and snack orders for offices.
Consultation: Advice on coffee brewing techniques and equipment selection.
The business uses the perpetual inventory system to keep track of its inventory. Below are the transactions
that Brew Haven entered into during April 2024 (IGNORE VAT):
Date Details
1 The owner, Mr. Jacobs, made a capital contribution of R250 000 to his business via electronic
transfer.
3 Purchased coffee beans and supplies on credit for R18 000.
6 Sold coffee and snacks for R8 000 cash. Goods were sold at a mark-up of 120% on cost.
10 Purchased a new espresso machine and paid R40 000 by cheque.
13 Paid staff wages of R20 000.
17 Sold goods on credit to Office Perks Ltd for R15 000. Goods were sold at a mark-up of 25% on
selling price.
20 Purchased cleaning supplies and takeaway cups for R750 from petty cash.
25 Acquired a loan of R50 000 from City Bank.
Q.2.1
Calculate Mr. Jacobs’ equity in the business on 30 April 2024, by showing the effect of each transaction on the
accounting equation.
For each transaction show:
The account debit and credit
Whether assets, equity, or liabilities will increase (+) or decrease (-), and by what amount.
Ensure that after each transaction your accounting equation A = OE + L is true.
Example: Pay a creditor outstanding balance of R25 000.
No Account Debit Account Credit Assets = Owner’s + Liabilities
. Equity
E.g Creditor Bank -25 000 -25 000
.
Q.2.2
Calculate the profit or loss derived from Brew Haven during April 2024. Show all workings. (7)
Here’s the full solution for the coffee shop version:
✅ Solution for Brew Haven
Q.2.1 – Effect on Accounting Equation
No. Date Account Account Credit Assets = Owner’s + Liabilities
Debit Equity
1 1 Apr Bank Capital +250 000 +250 000
2 3 Apr Inventory Creditors +18 000 +18 000
3 6 Apr Bank Sales +8 000 +8 000
Cost of Sales Inventory -3 636 -3 636
4 10 Apr Equipment Bank +40 000 -40 000
5 13 Apr Salaries Bank -20 000 -20 000
6 17 Apr Debtors Sales +15 000 +15 000
Cost of Sales Inventory -5 000 -5 000
7 20 Apr Stationery Petty Cash -750 -750
8 25 Apr Bank Loan +50 000 +50 000
Q.2.2 – Profit or Loss Calculation
Sales:
Cash Sales = 8 000
Credit Sales = 15 000
Total Sales = 23 000
Cost of Sales:
For cash sale: Mark-up 120% on cost → Selling Price = Cost + (120% of Cost)
So, Selling Price = Cost × (1 + 1.2) = Cost × 2.2
Cost = 8 000 ÷ 2.2 = 3 636
For credit sale: Mark-up 25% on selling price → Cost = Selling Price × (1 - 0.25) = 15 000 × 0.75 = 11
250
(The question says “mark-up of 25% on selling price” which means cost is 75% of selling price.)
So, Cost = 15 000 × 0.75 = 11 250
Total Cost of Sales = 3 636 + 11 250 = 14 886
Gross Profit = Sales - Cost of Sales = 23 000 - 14 886 = 8 114
Expenses:
Salaries = 20 000
Stationery = 750
Total Expenses = 20 750
Net Profit (Loss) = Gross Profit - Expenses = 8 114 - 20 750 = (12 636) LOSS