NATIONAL SENIOR CERTIFICATE EXAMINATION

SET A 2020

ACCOUNTING: PAPER I

MARKING GUIDELINES

Time: 2 hours 200 marks

These marking guidelines are prepared for use by examiners and sub-examiners,
all of whom are required to attend a standardisation meeting to ensure that the
guidelines are consistently interpreted and applied in the marking of candidates'
scripts.

The IEB will not enter into any discussions or correspondence about any marking
guidelines. It is acknowledged that there may be different views about some
matters of emphasis or detail in the guidelines. It is also recognised that, without
the benefit of attendance at a standardisation meeting, there may be different
interpretations of the application of the marking guidelines.

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 2 of 11

QUESTION 1 INVENTORY CONTROL AND VAT [27 minutes]

Refer to the Information Booklet for information relating to WIN LTD.

PART A

Study the information to do with Win Ltd then answer the following questions:

1.1 Calculate the weighted average of one box of medals on 30 June 2020.

2 034 + 15 190 – 470/395

5 + 34 – 1
Or 250 + 1 700 – 50 (if medals used)

= R440.89

1.2 Complete the trading statement for medals on 30 June 2020.

Sales (27 × 50 × 30) 40 500

Cost of Sales
(13 667.77)
Or (5 + 34 – 1 – 7) × 440.89 (stock count method)
Opening stock 2 034
+ Purchases (15 190 – 470/395) 14 720
– Closing stock (440.89 see 1.1 × 7) (3 086.23)
Carriage on purchases accepted if subtracted from
purchases (2 550)
Gross Profit 26 832.23

1.3 Calculate the rand value of the closing stock for trophies.

550 + 1 420purchases – 92returns – 650 = 1 228 units on hand

(700 – 42) 658 × R300 = 197 400

100 × R800 = 80 000
470 × R400 = 188 000
465 400

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 3 of 11

PART B VAT IS CALCULATED AT 15%

1.4 Refer to the VAT transactions 1–5 in the Information Booklet.

Transaction 1 has been done correctly. Complete transactions 2–5.

Calculate the applicable VAT amount per transaction and then clearly state if this will
increase or decrease the opening balance given.

Increase or
# VAT amount
decrease
Opening balance 33 050(dr)
1 9 900 decrease
2 75 900 × 10 / 90 = 8433 × 15 / 115 =1 100 decrease
3a 270 increase
3b 54 decrease
4 180 increase
5 90 decrease

1.5 Jacorine has recently heard that Start to Finish Ltd is eligible to use the receipt based
method for paying VAT over to SARS. Would you suggest that she make this change,
what impact might this have on Start to Finish Ltd?

Yes, because of the nature of her business (90% of sales are on account and
debtors take 60 days to pay) this will dramatically improve cash flow as VAT will
only need to be paid to SARS once money has been received.
Simpler to record and easier to calculate.
Explain receipts and payments.
Or, No if it was time consuming going back to original invoice.

1.6 After 90 days Start to Finish Ltd charge 12% interest on any amounts still
outstanding from debtors. Explain whether the VAT on the interest income would be
accounted for by the business? Give a reason for your answer.

No, interest income is VAT exempt.

Interest does not add value
Financial costs

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 4 of 11

QUESTION 2 FINANCIAL STATEMENTS [33 minutes]

Refer to the Information Booklet for information relating to HIKE CENTRAL LTD.

All workings need to be shown as part marks will be allocated to them. The number of
lines does not represent the number of entries required.

2.1 Complete the extract of the Statement of Comprehensive Income (Income Statement)
for the year ending 30 June 2020.

HIKE CENTRAL LTD

Extract of Statement of Comprehensive Income for year ending 30 June 2020

Other operating incomes 116 310

Rent Income (133 200 – 18 400) 114 800
Provision for bad debts adjustment 1 510

Gross operating income 310 335

Operating expenses (128 975)
Directors' fees (87 939 +15 222) 103 161
Advertising & Marketing expense (12 400 – 3 450) 8 950
Discount allowed (1 174 – 178) 996
Donations (4 500 × 100 / 60) 7 500
Trading stock deficit 1 078
Depreciation 7 290
Operating profit before interest 181 360

Calculations should be shown in the boxes below or in the statement of

comprehensive income to be awarded part marks.

Rent Income Depreciation on Equipment

133 200 + (550 × 6) / 14 = 9 750 New: 18 000 × 10% × 9 / 12
9 750 – 550 = 9 200 = 1 350
New rental from 1 March = 9 200 Old: 111 000 – 51 600 = 59 400 × 10%
= 5 940
2 × 9 200 = R18 400
Total depreciation = 7 290
133 200 – 18 400 = 114 800
Provision for bad debts adjustment Trading Stock deficit/surplus
169 000 × 3% = 5 070 47 500 – 7 500 – 38 922

6 580 – 5 070 = 1510 = 1 078

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 5 of 11

2.2 Complete the following notes to the financial statements as it would have appeared
on 30 June 2020. All workings must be shown.

TRADE AND OTHER RECEIVABLES AMOUNT

Net trade debtors 163 930

Debtors Control (165 440 + 3 560 (178 + 3 382) 169 000

Provision for bad debts (6 580 – 1 510 (method from I/S) (5 070)

Prepaid expense 3 450

SARS: Income Tax (41 000 – 35 000) 6 000

173 380

CASH AND CASH EQUIVALENTS AMOUNT

Bank (196 480 – 26 480 – 3 382) 166 618

Maturing fixed deposit (396 480 – 196 480) 200 000

366 618

RETAINED INCOME AMOUNT

Retained income at the start of the year 494 885
 72 
Net profit / loss after tax for the year  35 000 
28 
90 000

Repurchase of 13 650 shares at 3,50 above ave (47 775)
Dividends (337 110)

Paid 134 844

Recommended 202 266

Retained income at the end of the year 200 000

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 6 of 11

TRADE AND OTHER PAYABLES AMOUNT

Trade creditors 312 400
Accrued expenses 15 222
Income received in advance 18 400
Shareholders for dividends 202 266
548 288

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 7 of 11

QUESTION 3 CASH FLOW STATEMENT [29 minutes]

Refer to the Information Booklet for information relating to SPEIRS LTD.

• Some figures have been filled in for you, these are correct.
• Any workings must be shown in the brackets provided.
3.1 Complete the note showing the reconciliation of profit before taxation and cash
generated from operations.

Profit before taxation (518 400 + 201 600) 720 000

Adjustment in respect of: 423 600
Depreciation 103 600
Interest expense (316 250 + 3 750)
320 000
100 000 × [3 / 12 × 15%]
Operating profit before changes in working capital 1 143 600
Changes in working capital (78 400)

Increase / Decrease in Inventory (260 000 – 140 000) (120 000)

Increase / Decrease in trade and other receivables
134 600
*balancing*
Increase / Decrease in trade and other payables
(93 000)
(426 420+ 580 – 520 000)
Cash generated from operations 1 065 200

Inventory Trade and other payables

COS / Average stock = 11 426 420 +580 – 520 000
(2 200 000 / 11 = 200 000
½(260 000 + X) = 200 000
X = 140 000
Depreciation
3 683 600 + 1 440 000 – 320 000 – 4 700 000

3.2 Calculate the mortgage bond increase by on 1 February 2020.

5 500 000 × 0.6 = 3 300 000

3 300 000 – (60 000 × 12) – 2 880 000 = 300 000

Alternative answer if candidate drew up a T-Account

Mortgage Bond
2020 29 Bank CPJ 720 000 2019 1 Balance b/d 3 300 000
Feb 60 000 × 12 Mar 5 500 000 × 0.6
29 Balance c / d 2 880 000 2020 1 Bank CRJ 300 000
Feb
3 600 000 3 600 000

Mar 1 Balance b/d 2 880 000

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 8 of 11

3.3 3.3.1 Interest on mortgage bond paid

Workings: 31 625 + 316 250 – 27 600

Amount paid: 320 275

3.3.2 Taxation paid

Workings: 7 000 – 201 600 – 9 250)

Amount paid: 203 850

3.4 Calculate the total dividends paid and declared for the year.

Workings:
450 000 × 20 c = 90 000
75 000 + 450 000 = 525 000 × 25 c = 131 250
= 221 250
Or: 720 000-201 600-297 150 =221 250
Or:1 000 000+518 400-1 297 150=221 250
Amount paid and declared: 221 250

3.5 Complete the Cash Flows From Financing Activities section of the Cash Flow
Statement for the year ended 29 February 2020.

CASH FLOWS FROM FINANCING ACTIVITIES Do not calculate

Proceeds from shares issued (R5 850 000 – 4 500 000) 1 350 000

Proceeds from long term loans and mortgage

400 000
(100 000 +300 000 see 3.2)
Repayment of loan (720 000)

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 9 of 11

QUESTION 4 MANUFACTURING AND ASSET DISPOSAL [31 minutes]

Refer to the information book for details relating to FOOTI FOOTGEAR LTD.

All workings must be shown in the calculation blocks for part marks to be awarded.

4.1 Complete the Tangible Asset note as it would appear in the Statement of Financial
Position as at 30 June 2020. Use information A from the information book.

NOTE 3: TANGIBLE ASSETS VEHICLES

Carrying Value on 1 July 2019 262 700

Cost price 398 000

Accumulated depreciation (135 300)
Movements Do not calculate
Additions -
Disposals at carrying value (141 000 – 63 450 – 17 625) (59 925)
Depreciation (38 550 + 17 625) (56 175)

Carrying value on 1 July 2020 146 600

Cost price 257 000

Accumulated depreciation (110 400)

Disposals at carrying value Depreciation

141 000 – 63 450 – 17 625 [141 000 × 15%] × 10 / 12 = 17 625

= 59 925 398 000 – 141 000 =257 000 × 15%

= 38 550

Total depreciation = 56 175

4.2 Complete the notes to the production cost statement.

Note: Raw Materials

Or
Raw material stock @ beginning of the year 746 829 749 579
Purchases (588 550 – 4 000) 584 550 584 550
Carriage on purchases 11 000 8 250
Raw material stock @ end of year (698 171 – 3171) (695 000) (695 000)
647 379 647 379
No method if recorded carriage on sales (R33 000)

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 10 of 11

Note: Factory Overhead Cost

Indirect labour (294 000 + (294 000 × 15%) 44 100 338 100
Rent 256 000
Consumable Stores (17 600 × 60 / 40) 26 400
Depreciation (from note 3) 56 175
Insurance 12 060
Water and electricity *balancing* 210 266
899 001

Stock loss entry: debit closing stock. Credit trading stock. But ignore if candidates
have included in factory overhead cost.

Rent expense Insurance

(208 000 – 16 000) × 4 / 3 11 000 +1 000 + 60
= 256 000

4.3 Complete the Production Cost Statement for 30 June 2020.

Footi Footgear Ltd:

Production Cost Statement for the year ended 30 June 2020

Prime Costs 1 623 699

Direct Material Cost 647 379
Direct Labour Cost 976 320
Factory Overhead Cost 899 001
Total Manufacturing Cost 2 522 700
Work in process stock @ the beginning of the year 20 000
2 542 700
Work in process @ the end of the year (292 700)
Total production cost of Finished Goods 2 250 000

IEB Copyright © 2020 PLEASE TURN OVER

NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER I – MARKING GUIDELINES Page 11 of 11

# Calculation Final answer

Direct
Labour
R108 000 × 8 = 864 000 + 8 640 + 103 680 R976 320
Prime costs 647 379 + direct labour (976 320) R1 623 699
Total
manufacturin Prime costs + R899 001 R2 522 700
g cost
Work in
process -End
Total manufacturing cost+ 20 000 –Cost of finished goods R292 700
Cost of
+ 2 000 000 COS +840 000 CS – OS 590 000
finished R2 250 000
goods 4 200 000 × 100 / 210 = 2 000 000

4.4 Footi Footgear Ltd outsources their delivery on sales to FastCar and pays for this
service themselves. They are considering employing a driver and using their own
vehicle instead. Discuss two factors that need to be considered before making their
decision.

• In house driver vs outsourcing Labour problems (sick, cost of employment,

leave
• Wear and tear vs outsourcing/Vehicle costs/fuel/maintenance
• Driver training/accidents
*should be comparing in house vs outsourcing*

4.5 Due to a factory worker strike a large amount of work in process has been left on the
production floor. Their current cash flow does not allow management to increase their
wages. Provide one solution which may convince the factory workers to return to
work.

Share incentives
Working conditions/hours
Offer staff discounts on stock they produce/stock giveaway
Monetary items/staff rewards were not accepted

Total: 200 marks

IEB Copyright © 2020