Accounting T1 - Companies Memo-1

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ACCOUNTING

GRADE 12: REVISION STUDY GUIDE

TERM ONE

SOLUTION BOOKLET

JENN TRAINING: GRADE 12 ACCOUNTING TERM ONE 1


Activity 1
HAROLD LTD
Notes to the financial statements on 28 February 2018
Ordinary share capital

3 400 000 ✓ Beginning of the year ✓ 7 972 000


1 200 000 ✓ Shares issued during the year at R5,24  each  6 288 000
(R6 288 000 / 1 200 000 = R5,24) Check operation (balancing figure)
(180 000) ✓ Repurchase of shares at R3,10  each  (558 000)
check average: 13 702 000 / total shares
4 420 000  Repurchased must be deducted, one part correct 13 702 000 9

Retained income
Balance beginning of the year 1 704 000
Net profit after tax (5 569 400 ‒ 1 469 400) ✓ 4 100 000
Repurchase of shares (180 000 ✓ x R2,30 ✓)  (414 000)
, one part correct
Ordinary share dividends one part correct  (2 410 000)
Paid ✓ 951 400
Declared (4 420 000  x 0,33✓ ) one part correct  1 458 600

Balance end of the year  2 980 000 10


Activity 2
ORDINARY SHARE CAPITAL
AUTHORISED
5 000 000 Ordinary shares
ISSUED
3 000 000 Ordinary shares in issue at the
beginning of the year @ R6.00 18 000 000
1 000 000 Ordinary shares issued on 30 August 2016 7 800 000
Balancing figure
Balancing figure

*(200 000) Ordinary shares repurchased for R6,45


1 290 000/AVS in October 2016 (1 290 000)
3 800 000 Ordinary shares at the end of the year 24 510 000
7

RETAINED INCOME
Balance at the beginning of the year 1 370 000
Net profit after tax 3 250 800
Ordinary shares repurchased (200 000 x 2.55) (510 000) 
see 4.1 Share capital note (R9,00 – ASP) one part correct
Dividends one part correct and in brackets (3 100 000)
Paid 1 200 000
Recommended (3 800 000 x R0,50) one part correct 1 900 000
Balance at the end of the year operation 1 010 800
6
2
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 3
Retained Income
Balance at beginning of year (1 207 000 + 110 000)  1 317 000

Funds used for shares repurchased (100 000 x R1,10)  (110 000)
Net profit after tax (1 900 000  – 532 000) 1 368 000
1 900 000 one mark × 72 % one mark one part correct

Ordinary share dividends operation one part correct


(1 300 000)
must be in brackets

Interim 420 000

Final (2 000 000 x 44/100) 880 000


one part correct

Balance at end of year 1 275 000 10


one part correct

Activity 4

ORDINARY SHARE CAPITAL


AUTHORISED
Number of authorised ordinary shares: 400 000 shares

ISSUED R
160 000 Ordinary shares at the beginning of the year 4 000 000
50 000✓ Ordinary shares repurchased at the average  (1 250 000)
share price *R25✓✓ any one part correct
9
100 000 ✓ Ordinary shares issued during the financial 1 750 000
year at @R17,50 each✓ operation
210 000 Ordinary shares in issue at the end of the year  4 500 000
one part correct operation

3
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
RETAINED INCOME R
Balance at the beginning of the year 540 000
Net profit after tax for the year see 3.2.1  720 000
Repurchase of 50 000 ordinary shares @R5,00 ✓✓  (250 000)
one part correct
Dividends on ordinary shares operation  (264 000)
Paid ✓ 96 000 10
Recommended one part correct  168 000

Balance at the end of the year one part correct  746 000

Summative Assessment
SO-FINE LTD

ORDINARY SHARE CAPITAL

AUTHORISED SHARE CAPITAL


1 200 000 ordinary shares

ISSUED SHARE CAPITAL


Ordinary shares on 1 September 2016
900 000 Balancing figure; 4 725 000 
check that repurchase added back and issue deducted back

150 000 Issued on 1 May 2016 at R6,30 each 945 000 


(378 000)
Ignore brackets
Re-purchased 30 August 2017
(70 000) one part correct 
(ASP: R5,40) 5 292 000/980 000 no part marks i.e.70 000 or R5,40;
do not accept 437 500 as
final answer

980 000  Ordinary shares on 31 August 2017 5 292 000 7

RETAINED INCOME
Balance on 1 September 2016 147 370
Net profit after income tax 438 130
Shares repurchased (437 500  – 378 000 ) (59 500) *
70 000 x 0,85 Or 70 000 x (6,25 – ASP) OSC above Ignore brackets
437 500/70 000

Ordinary share dividends one part correct


(276 000) *
Ignore brackets

• Interim dividends (900 000  x 0,12) one part correct 108 000 
• Final dividends 168 000 

Balance on 31 August 2017 one part correct;


250 000 *
*both figures must be subtracted 9

4
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 2

2.1 MUSICA LIMITED


INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2015

Sales (8 412 000 – 112 000 ✓– 1 600✓)One part correct 8 298 400 
Cost of sales (4 595 000 – 900✓) (4 594 100) 
Gross profit 6 3 704 300 
Other income Check operation 166 380 
Commission income 64 140
Rent income(87 720✓+ 6 000 ✓+ 8 520✓✓) 102 240 
Gross income7 3 870 680 
Operating expenses Check operation (2 775 880) 
Sundry expenses 257 400
Bank charges 41 905
Audit fees 75 600
Packing material(15 400 ✓– 2 400✓) 13 000 ✓
Repairs and maintenance(107 500✓+ 6 000✓) 113 500 ✓
Director's fees(736 000✓+ 32 000✓✓)Check operation 768 000 
Salaries and wages(1 020 000 ✓+ 18 500 ✓✓)
Check operation 1 038 500 
Employer's contributions (156 000✓ + 5 050 ✓) 161 050 
Bad debts(17 600✓ + 2 475✓)Check operation 20 075 
Provision for bad debts adjustments 850 ✓✓
Trading stock deficit (376 000 ✓+ 900✓ – 369 100✓) 7 800 
Depreciation 30 278 200 ✓✓
Operating profit Check operation 1 094800 
Interest income 3 000
Profit before interest expenseCheck operation 1 097800 
Interest expense (540 800 + 100 800 – 601 600)One part correct (40 000) ✓✓
Net profit before tax 1 057 800 
Income tax (300 300)
Net profit after tax Check operation7 757500 

50

5
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
2.2 TRADE AND OTHER RECEIVABLES
Debtors' control(125 000✓–1600 ✓– 2 025 ✓– 2 475✓)
(4 500 2 marks) 118 900 
One part correct
Provision for bad debts (8 000) ✓
110 900
Accrued income/Receivable see Rent income 8 520 
SARS – Income tax 14 700 ✓✓
One part correct 134 120  10

2.3 AUDIT REPORT

2.3.1 The audit report is an example of a/an (qualified/unqualified/disclaimer


of opinion) audit report.

Disclaimer of opinion

2.3.2 Who is the audit report addressed to? Give a reason for your answer.

Shareholders
They are the owners of the company and have appointed the auditors

2.3.3 Explain why it is likely that this audit report will have a negative effect
on the value of the shares of this company on the JSE.
Any valid explanation
• The value of the shares will decrease
• Shareholders lose confidence in the company and might sell their shares
• Potential shareholders would not want to invest in this company 2

TOTAL MARKS

65

6
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 3

3.1 CONCEPTS

3.1.1 limited 
3.1.2 receivables 
3.1.3 liability 
3.1.4 internal 
4

3.2 PIXIE LTD

3.2.1 NOTES TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 2018

ORDINARY SHARE CAPITAL


AUTHORISED
400 000 ordinary shares
ISSUED
Ordinary shares in issue on
300 000 1 275 000
1 March 2017
(85 000)
Ignore brackets
shares repurchased during the year (x
(20 000) one part correct 
R4,25 ✓✓) do not accept
120 000 as final
answer

40 000 shares issued during the year 220 000 ✓✓


Ordinary shares in issue on operation
✓✓ 320 000 1 410 000 
28 February 2018 8

RETAINED INCOME
Balance at the beginning of the year 28 900
See Inc St
Net profit after tax 288 000 
Ignore brackets
Shares repurchased (120 000 ✓ - 85 000  see OSC)
(35 000) 
Ignore brackets
Dividends on ordinary shares (86 000) 
one part correct
Interim dividends paid (300 000 ✓ x 0,1) 30 000 
one part correct
Final dividends declared (280 000 ✓ x 0,2) 56 000 
Balance at the end of the year Operation, one part correct 195 900 
10

7
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.2.2 PIXIE LTD
INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018
Sales 1 800 000
Cost of sales (1 000 000) ✓✓
Operation
800 000 
Gross profit 3
Other operating income Operation 21 710 
1 750 x 10 1 925 x 2
Rent Income (17 500  + 3 850 ) 21 350 *
Provision for bad debts adjustment 360 ✓✓
Gross operating income 6 821 710
Operating expenses GOI - OP (425 710) 
Consumable stores 2 750 ✓
Advertising (62 545 ✓ – 28 800 ✓✓) 33 745 *
Audit fees (5 720 x 100/40) 14 300 ✓✓
Director’s fees (67 350 ✓ + 60 000 ✓✓) 127 350 *
Salaries and wages (128 450  + 2 700 ) 131 150 *
Sundry expenses missing figure 7 165 
Bad debts (2 900 + 600) 3 500 ✓
Loss due to water damage 4 000 ✓#
Trading stock deficit 23 400 ✓#
Depreciation 78 350 ✓
Operating profit 24 396 000 ✓✓
Interest income 13 180 ✓
Net profit before interest expense Operation 409 180 
Interest expense (76 500 – 12 500 – 73 180) (9 180) ✓✓
Net profit before tax Operation 400 000 
Income tax (19 500 ✓ + 64 650 ✓ + 27 850 ✓) (112 000) *
Operation
288 000 
Net profit after tax 10
Foreign items -1 max -2 *one part correct
#can be combined

43

8
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.3 AUDIT REPORT

3.3.1 What is the main role of the independent auditor?

Any valid explanation ✓✓ Part marks can be awarded for partial answers

The independent auditor expresses an opinion on the fair presentation of the


financial statements. They look after the interest of the shareholders.
2

3.3.2 What type of audit report did Steinfeld Ltd receive: qualified, unqualified or
disclaimer of opinion?

Qualified ✓✓
2

3.3.3 If the debtors are adjusted, it will have a negative effect on the financial
results and position of the business. Because of the fact that the debt is not
written off the asset value in the books is higher than it should be.

• List TWO liquidity ratios that will be affected by the decision not to write
off the debt.
Any TWO ✓ ✓

Current ratio

Acid-test ratio

Debtors collection period

• The CEO argues that the debtor should rightfully remain in the books
until the lawsuit has been concluded. However, the auditor believes that
the amount should have been written off. Give TWO reasons why the
auditor feels this way.

Any TWO valid reasons to do with matching and materiality respectively

The debt or providing for bad debts should take place in the same year when
the debt was incurred. (Matching principal) ✓✓

The directors should disclose the information which had a relevant/material


effect on the financial statements. (Concept of materiality) ✓✓
6

TOTAL MARKS

75

9
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 4
4.1 CONCEPTS

4.1.1 Gives the business financial performance/results for the year/calculates the net
profit of the business
4.1.2 To protect the investing public
Any acceptable answer 
4.1.3 Relates income and expenditure to the relevant financial year
4.1.4 Receipts, relate to all amounts received during the year while income relates to
amount relevant to the year or year under review

5
4.2 PJF LTD
4.2.1 INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2014
Sales (3 640 000 – 20 000 + 32 000 – 65 000) if one part correct 3 587 000
Cost of sales (2 730 000 + 30 000 – 48 750) if one part correct (2 711 250)
Gross profit check operation 875 750
Other income if one part correct 162 420
Rent income (168 000 – 12 000) 156 000
Bad debts recovered (3 400 + 1 800) 5 200
Provision for bad debts adjustment (21 985 – 20 765) 1 220
Gross operating income check operation 1 038 170
Operating expenses check operation (589 220) 
Insurance (53 800 + 4 600) check operation 58 400
Salaries and wages (260 000 - 18 000) 242 000
Packing material (52 000 + 3 000 – 15 000) 40 000
Bad debts (14 000 + 4 800 – 1 800) if one part correct 17 000
Pension fund contributions (36 200–2 880) check operation 33 320
Depreciation (100 000 + 50 000) 150 000
Trading stock deficit 48 500
Operating income 448950
Interest income 108 000
Profit before interest expense check operation 556 950
Interest expense (90 000 + 144 000) if one part correct (234 000) 
Profit before income tax check operation 322 950
Income tax if 30% of net profit before tax (96 885) 
Net profit for the year check operation 226 065
Foreign items -1 maximum -2;
Misplaced items mark wrong only do not penalise. 42

10
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
4.2.2 TRADE AND OTHER RECEIVABLES
Net trade debtors check operation 394 535
Debtors control (458 500 + 32 000– 65 000– 12 000+ 1 800)
operation if one part correct 415 300
Provision for bad debts (21 985 – 1 220) see 3.2.1 operation if one part correct (20 765) 
SARS (Income tax) (100 000 – 96 885) see 3.2.1 operation if one part correct 3 115
Prepaid expenses (18 000 + 2 880) check operation 397 650

11
4.2.3 CALCULATE THE FOLLOWING ON 28 FEBRUARY 2014
The rate at which depreciation on equipment is written off

950 000 – 450 000= 500 000 (2 marks)

500 000 x x_ = 50 000  / 100 = 10%operation if one part correct


100  5

The value of trading stock on hand as per physical stock count

740 900 – 30 000 + 48 750 – 3 000 – 48 500


= 708 150 Operation if one part correct
Trading Stock
740 900 30 000
48 750 3 000
48 500 6
708 150

4.2.4 Refer to Information C and comment on the profitability and/or


operating efficiency of PJF Ltd. Quote TWO relevant financial indicators
with figures to support your opinion.

Financial indicator Trend  Figure 


It is on the decline and is not looking good because:
• The gross profit percentage on turnover, declined from 26,5% in 2013 to
24.4% in 2014.
• The percentage net profit on turnover also decreased from 11% in 2013
to 9% in 2014.
• The percentage operating expenses increased from 14,8% in 2013 to
16,4% in 2014, signifying an increase in operating expenses.

6
TOTAL
MARKS
75

11
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 5

5.1
5.1.1 D 
5.1.2 C 
5.1.3 A 
5.1.4 B 
4

5.2 MTOMBENI LTD

5.2.1 Calculate: Carrying value of the vehicle sold on 30 November 2016


100 500 three marks
190 000  – (72 000  + 28 500 ) = 89 500  one part correct
5
Calculate: Total depreciation on equipment on 28 February 2017

New:
32 000  x 6/12  x 10% = 1 600  one part correct but not for 10%

Old:
133 000 two marks
= (218 000 ✓– 85 000✓) x 10% = 13 300  one part correct but not for 10%
(250 000 – 32 000) one mark

Total = 14 900  one part correct


7

12
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
5.2.2 MTOMBENI LTD
Income Statement (Statement of Comprehensive Income) for the year ended
28 February 2017: *one part correct

Sales (5 500 000 – 32 500 ✓+15 000 ✓) 5 482 500 *


Cost of sales (3 150 000 + 9 375 ✓) (3 159 375) 
Gross profit 6 2 323 125  Sales
- COS

Other operating income 198 950 *


Rent income (169 500 + 16 500 ✓) 186 000 *
Bad debt recovered 4 750 ✓
** Profit on sale of asset (97 700 ✓– 89 500 see 4.2.1 ) 8 200 *
Gross operating income 10 2 522 075 *
Operating expenses (1 356 075) *
Directors' fees 380 000
Audit fees 54 000
Bad debts (13 600 ✓+ 1 900 ✓) 15 500 
Salaries and wages 488 500 two marks 1 755 two marks
490 255 *
(475 000  + 13 500 + 1 620  + 135 
Consumable stores 61 700 
Insurance (19 220 + 1 780) 21 000 
Bank charges (7 760 ✓ + 870 ✓) 8 630 
Sundry expenses 140 085 ✓
** Trading stock deficit (386 500 – 9 375  – 374 000 ✓) 3 125 *
R12 500 two marks only see cost of sales
** Provision for bad debts adjustment (4 030 – 3 650) 380 
Depreciation (28 500  + 138 000 ✓ + 14 900) 181 400 *
see 4.2.1 see 4.2.1

Operating profit 30 GOI-


1 166 000 OExp
Interest income Missing figure NP after Interest income – Operating profit
178 000 
Cannot work out to be a negative figure

Net profit after interest income NPBT + Interest expense 1 344 000 
Interest expense (144 000) 
Net profit before tax NPAT + Income tax 1 200 000 
Income tax (336 000) ✓✓
Net profit after tax 8 864 000
Foreign items -1 max -2 ** Award marks to workings if item misplaced; -1 for placement; max -2
All other misplaced items marked as incorrect
54

13
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 6
WONGALETHU LTD.
6.1.1 INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2017
39 000 – 1 mark – 5 850 – 2 marks 5 620 550
Sales (5 590 000 + 33 150 – 2 600)one part
correct
Cost of sales (4 300 000 + 30 000– 2 000)
one part correct (4 328 000) 
Gross profit (9) operation 1 292 550
Other income operation 387 350
Rent income (414 000 – 33 000) one part 381 000
correct
Bad debts recovered 4 350
Provision for bad debts adjustment
(11 940 – 9 940✓) or check 3.1.2 one part 2 000
correct

(12) operation 1 679 900


Operating expenses operation (606 440)
Rates and taxes (69 800✓ + 11 800✓) 81 600
Bad debts (13 700 + 6 000✓) one part 19 700
correct
Insurance (21 000 + 1 750✓) one part 22 750
correct
Salaries and wages 256 760
Depreciation 104 700✓
Trading stock deficit one part correct
(246 500 – 30 000 + 45 000– 251 500) 10 000
Sundry expenses balancing figure 110 930
Operating profit 1 073 460
Interest income (26 000 + 52 000✓) one part 78 000
correct

Profit before interest expense (25) 1 151 460


Interest on loan (251 460)
Profit before income tax 900 000
Income tax (2) (270 000)✓
Net profit for the year 630 000 48
Foreign items –1 (max –2)
Trading stock surplus – Award (246 500 + 45 000 – 271 500 = 20 000 four marks

14
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
6.1.2 Trade and other receivables
Net trade debtors 188 860
operation
Debtors see 3.1
(174 250 + 33 150 – 2 600– 6 000) 198 800
one part correct
Provision for bad debts (11 940 – 2 000) see 3.1 (9 940) 
Or 5% of the debtors control balance above for two method marks
Accrued income (Interest) 52 000
240 860
10

6.1.3 Calculate the following financial indicators on 30 June 2017:


Net profit percentage on turnover

630 000 x 100 = 11.2% one part correct


5 620 550 See 3.1

Debt-equity ratio
8 500 300
2 651 460 ✓ : (7 960 000 + 540 300)
2 651 460 : 8 500 300
0,3:1 one part correct

6.1.4 The board of directors wants to acquire an additional loan to fund


expansions within the company. Comment on why you think this is a
good idea or not. Quote TWO financial indicators (with figures) to
support your opinion.
see 3.2.2
Debt-equity ratio improved from 0,4:1 in 2016 to 0,3:1 in 2017 signifying
low risk. 

Percentage return on total capital employed increased from 18.9% in 2016


to 23.1% in 2017 and much more than the interest on the loan of 10.5%.
This is positive gearing. 
4

15
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
6.2 Explain each audit opinion underlined in the extract below.

Audit report Description (audit opinion)   


Any reasonable explanation

Qualified Financial statements fairly present except for


something that cannot be properly accounted
for (can be relied upon except for a few items
that need attention)

Unqualified Financial statements fairly present in all


material respects
(positive – can be relied upon)

Disclaimer Unable to express an opinion


(negative – cannot be relied upon)

TOTAL MARKS

75

16
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
LEARNER/TEACHER MANUAL
TOPIC: Company Financial Statement: Notes to Balance Sheet & Balance Sheet

Activity 1

1A MAFUSA LTD

(a) 2 3 640 000 – 2 002 000 = 1 638 000  No part marks

750 000 x 15% x 4/12


(b) 5 750 000  – (491 750  + 37 500 ) = 220 750 
one part correct
529 250 3 marks

(Sold): 37 500  refer (b)


(New): 900 000 x 15% x 5/12 = 56 250 

(c) 7 (Old): 2 890 000  x 15% = 433 500  one part correct
(3 640 000 – 750 000)

Total: 527 250  one part correct

(d) 2 3 640 000 + 900 000 – 750 000 = 3 790 000  one part correct

16

B FINANCIAL STATEMENTS: NOTES

(a) FIXED ASSETS


BUILDING VEHICLES EQUIPMENT
750 000
Cost (1/3/2014) 0  375 500

Accumulated Depreciation (1/3/2014) (0) (450 000) (141 500)


300 000 234 000
CARRYING VALUE (1/3/2014) 0  

MOVEMENTS:
2 500 000 24 800
Additions  - 
(56 250)
Disposals -  -
(48 040)
Depreciation - (103 125) 

140 625 210 760


CARRYING VALUE (28/2/2015) 2 500 000  

Cost (28/2/2015) 2 500 000 562 500 400 300


(421 875)
Accumulated depreciation (28/2/2015) (0)  (189 540)

17
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
C. NO. CALCULATIONS AMOUNT
(i) R900 000 – R224 000 R676 000 
(ii) R3 200 000 – R2 500 000 R700 000 
(iii) Vehicle 1: R240 000 x 25% = R60 000 R92 999 
Maximum permitted: R15 000 – R1 = R14 999  One part correct

Vehicle 2: R312 000 x 25% = R78 000  7

ASSET DISPOSAL
2014 30 Equipment ✓ 9 200 ✓ 2014 30 Accumulated
Nov Nov depreciation on
equipment ✓ 6 820 
Any one part
# (6 400 ✓+ [9 200  correct
– 6 400  x 20% 
x 9/12 )
Loss on disposal of 250 ✓
asset ✓
Balancing
figure
Bank ✓
2 130
9 200 # 2 800 – 2 marks 9 200
4 200 – 4 marks 13

(a) Explain how the Fixed Assets Register will assist you in your
duties as internal auditor. Provide ONE point.

Any valid point 

• Physical count should agree with register.


• The internal auditor has to verify the physical presence of items listed in
the Fixed Assets Register.
• The internal auditor will be able to follow the lifespan of the item of fixed
asset and make recommendations for timeous replacements.
• Calculations of depreciation amounts can be checked. 2

(b) The stock of trolleys and baskets is classified as a fixed asset.


Give ONE suitable reason for this.
Any valid point 

• A trolley/basket is expected to have a lifespan of more than 12 (twelve)


months.
• The trolleys are not part of trading stock. 2

18
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
(c) Identify and explain THREE major problems (with figures)
relating to the control of the trolleys and baskets. In EACH case,
provide a valid, practical solution to improve the control over
these assets.

PROBLEM WITH FIGURES PRACTICAL SOLUTION TO


Problem ✓✓✓ IMPROVE INTERNAL CONTROL
Figures ✓✓✓ Solution relating to the problem ✓✓✓
(Do not accept improvement of control as a
solution.)
Number of trolleys stolen is (148 + All trolleys used should be returned
112 – 14 – 210) = 36. Cost of this to the business./Can introduce a fee
theft (36 x R2 000) = R72 000. for the return of a trolley./Secure
trolleys when not in use.
A large amount of R16 000 has been Before doing repairs to baskets,
spent on repairs of baskets./Instead consider whether it would be more
of repairing baskets, 64 new baskets cost-effective to replace old baskets
could have been bought. with newer ones.
On a busy day there is not enough Buy more baskets as they are easier
trolleys and baskets. For the 420 to control and cheaper to replace
customers there are only 210 trolleys (R250).
and 95 baskets (total 305/short of
115).
14 damaged trolleys were written Monitor usage of trolleys to ensure
off.(cost of replacement R28 000). that customers do not abuse them. 9

D. MTOMBENI LTD

Calculate: Carrying value of the vehicle sold on 30 November 2016


100 500 three marks
190 000  – (72 000  + 28 500 ) = 89 500  one part correct
5
Calculate: Total depreciation on equipment on 28 February 2017

New:
32 000  x 6/12  x 10% = 1 600  one part correct but not for 10%

Old:
133 000 two marks
= (218 000 ✓– 85 000✓) x 10% = 13 300  one part correct but not for 10%
(250 000 – 32 000) one mark

Total = 14 900  one part correct


7

19
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
E. Fixed Asset Note
Land & Vehicles Equipment
Buildings
Carrying value at the 1 100 000 364 500 234 000
beginning of the year  
Cost 1 100 000 500 000 390 000

Accumulated depreciation (0) (135 500) (156 000)
(50 000 + 45 000 + 40 500) 
Movements
Additions 400 000 240 000 120 000

Disposals (0) (0) (39 000) Any
figure
(60 000 – [6 000 +6 000 + 6000 + 3 000] 21000 * ( )
Depreciation (0) (44 450) (42 000)
(36 450 + 8 000) # #
(See Current Vakue in beginning) Operation 1 part Operation 1 part
(3 000 + 33 000 + 6 000) correct correct

Carrying value at the end of 1 500 000 560 050 273 000
the year  
Cost 1 500 000 740 000 450 000

Accumulated depreciation 0 (179 950) (177 000) 20


 

20
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Summative Assessment 1

5.1 ASSET DISPOSAL

Accumulated
depreciation on
2013 2013 34
Aug
31 Equipment  90 000 Aug
31 equipment 
920*
(28 800 + 6
120)
Bank  55 080

* Any figure

5.2 FIXED ASSET NOTE

Land and
Vehicles Equipment
Buildings
Carrying value at the beginning of
2 000 000 880 000 410 000
the year
Cost 2 000 000 1 600 000 800 000

Accumulated depreciation 0 (720 000) (390 000)

Movements

Additions (at cost) 1 315 000 500 000 100 000


(55 080)
Disposals (at carrying value) 0 0 
(See 5.1)
Equipment (6 120 + 10 000 + 69 760)
(265 000) (85 880)
(See 5.1) 0
Depreciation
240 000 + 25 000 *
Carrying value at the beginning of
3 315 000 1 115 000 369 040
the year
Cost 3 315 000 2 100 000 810 000

Accumulated depreciation 0 (985 000)  (440 960) 


* Any figure
16

16

21
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 2

A) TRADE AND OTHER RECEIVABLES


Debtors' control(125 000✓–1600 ✓– 2 025 ✓– 2 475✓)
(4 500 2 marks) 118 900 
One part correct
Provision for bad debts (8 000) ✓
110 900
Accrued income/Receivable see Rent income 8 520 
SARS – Income tax 14 700 ✓✓
One part correct 134 120  10

B) TRADE AND OTHER RECEIVABLES


Net trade debtors (118 370  – 6 100  + 11 700 ) 123 970 
operation, one part correct
SARS: Income tax (320 900  – 316 400 ) (813 600 x 28/72) 4 500 
operation, one part correct

Prepaid expenses 12 430 


TOTAL operation, one part correct 140 900  10

C) Trade and other receivables.

Debtors control 63 000


Provision for bad debts (3% of debtors control) (1 890)
Net trade debtors 61 110
Prepaid expenses (insurance) 3 920
Accrued income (rent income) 8 650
SARS (Income Tax) (170 000 – 162 800) 7 200
Operation (One part correct above) 80 880 7

D) Trade and other receivables


Net trade debtors 188 860
operation
Debtors see 3.1
(174 250 + 33 150 – 2 600– 6 000) 198 800
one part correct
Provision for bad debts (11 940 – 2 000) see 3.1 (9 940) 
Or 5% of the debtors control balance above for two method marks
Accrued income (Interest) 52 000
240 860
10

22
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 4

A) TRADE AND OTHER PAYABLES

Creditors control 203 900 ✓

Accrued expenses 19 220 

Shareholders for dividends Refer note above (final dividends) 217 600 

SARS: Income tax 25 500 


✓ 12 ✓ 
Short term portion of loan 159 500 x /11 174 000
Operation (one part correct above) 640 220 

B) TRADE AND OTHER PAYABLES


Creditors control 786 800✓ – 10 000✓ ✓ 776 800

SARS (Income tax) ✓ 17 000

SARS (PAYE) 44 800✓ + 2 880✓ ✓ 47 680

Pension fund 15 800✓+ 1 950✓ + 3 900✓ ✓ 21 650

Shareholders for dividends  337 500

Creditors for salaries ✓ 10 538

Accrued expense  12 000

Income in advance  48 990

 1 272 158 16

C) Trade and other payables


Trade creditors 660 000
Income received in advance 26 400
Accrued expenses 32 000
Creditors for salaries 10 500
Pension fund (1950+ 3 900 + 45 400) 51 250
SARS- PAYE (64 100 + 2880) 66 980
SARS – Income Tax (252 000 – 100 000) 152 000
Shareholders for dividends 168 000
operation one part must be correct 1 167 130

23
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 1

1.1 1.1.1 SHARE CAPITAL

AUTHORISED SHARE CAPITAL

750 000 ordinary shares

ISSUED SHARE CAPITAL

Ordinary shares in issue on


350 000  3 215 000 
1 March 2013
Ordinary shares issued during
80 000 760 000 
the year
Ordinary shares re-purchased operation
(75 000) (average price of R7,50) if answer is correct and (562 500) 
R7,50 omitted, allocate 3 marks to final answer
Operation; one
5 000 more than part correct
Ordinary shares in issue on
opening figure OR shares x 
455 000  28 February 2014 avg price used
3 412 500 9

3.1.2 RETAINED INCOME

Balance on 1 March 2013 322 500


Net profit after tax 812 700 
Shares repurchased operation one part correct and in brackets (217 500)
217 500 2 marks 
75 000 x 2,90 if R10,40-avg price above; must be at ≥R0,01 per share Zero 0 marks
Ordinary share dividends operation one part correct and in brackets (482 000) 
Interim dividends / Paid 270 000 
Final dividends / Declared one part correct
530 000 see 3.1.1 x 40 cents  212 000 
Balance on 28 February 2014 operation 435 700  11
Foreign entries -1 (-2 max)

OR For candidates who leave out interim dividends of R270 000 or


combine with final dividends

Balance on 1 March 2013 322 500


Net profit after tax 812 700 
Shares repurchased operation one part correct and in brackets (217 500)
217 500 2 marks 
75 000 x 2,90if R10,40-avg price above; must be at ≥R0,01 per share Zero 0 marks
Ordinary share dividends operation one part correct and in brackets (212 000) 

Final dividends / Declared one part correct


530 000 see 3.1.1 x 40 cents  212 000 
If figure of 482 000 shown here, allocate 4 in total
Balance on 28 February 2014 operation 705 700  11
Foreign entries -1 (-2 max)

24
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
1.2 VIJAY LIMITED
BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) ON
28 FEBRUARY 2014

ASSETS
Non-current assets operation
3 884 000  2
(total assets – current assets)
Fixed assets operation 3 234 000 
Financial asset: Fixed deposit 650 000

Current assets operation 863 100  5


Inventories 275 400
Trade and other receivables (243 500  + 7 600 ) 251 100 
Cash and cash equivalents 336 600

TOTAL ASSETS transfer total equities and liabilities 4 747 100 

EQUITY AND LIABILITIES

Shareholders' equity operation 3 848 200  3


Ordinary share capital see 1.1.1 3 412 500 
Retained income see 1.1.2 435 700 

Non-current liabilities 451 200 4


Loan : William Bank
(482 600 + 81 400  – 112 800 ) one part correct 451 200 
OR (482 600 + 81 400) x 80%

Current liabilities operation 447 700  12


Trade and other payables(62 460+ 12 120)
one part correct 74 580 
Refer 1.1.2
Shareholders for dividends OR 482 000 #
212 000 
SARS : Income Tax delete ’one part correct’
48 320
(348 300  – 299 980  must be deducted under CL)
Current portion of loan 112 800 
check that loan has been reduced by this
*all amounts can be included in Trade and other payables
TOTAL EQUITY AND LIABILITIES operation 4 747 100 
26
Foreign entries -1 (max -2)
Presentation / Placement / Incorrect or incomplete details -1 (max -2)
SARS 348 300 – 299 980 may be shown under T&OR: penalise -1 for placement
Other misplaced BS items are not foreign – simply mark as wrong
# If included under CL, all subsequent totals will differ by R270 000

25
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
1.3 Calculate the return on average shareholders' equity for 2014.
812 700  see 1.1.2 x 100 = 22,0%  operation, %, one part correct
½  (3 537 500+ 3 848 200) see 1.2
3 692 850 3 marks
5

1.4 From 2013 to 2014 the directors made a deliberate decision to change
the policy on the distribution of profits in the form of dividends.
Comment on this change. Quote financial indicators or figures to
support your answer.
They paid out 100% (all)  of their earnings in 2013 compared to 59% 
of their earnings (100÷170 cents) in 2014. The business is retaining funds
for future expansions / development / support equalising dividends in future
/ to improve NAV. 
OR
They did not retain any earnings in 2013 (1 mark). In 2014 they retained
70 cents (41%) of EPS (2 marks). The business is retaining funds for future
expansions / development / support equalising dividends in future / to
improve NAV. (1 mark).

For 1 mark:
The DPS increased from 82 cents to 100 cents (18 cents) and the EPS
increased from 82 cents to 170 cents (88 cents) (1 mark: did not compare DPS to EPS)
For 1 mark:
The directors decided to pay the interim dividends for 2014 in the 2015
financial year. 4

1.5 Comment on whether the shareholders should be satisfied with the


percentage return and the market price of their shares. Quote TWO
relevant financial indicators (actual figures/ratios/percentages) and
their trends. Give an additional comment in each case.

Indicators   Trends & figures   Extra comment  


ROSHE (1 mark):
Increased from 18,3% to 22% (1 method mark) / by 3,7% points. (see 1.3)
This exceeds the return on alternative investments (of 9%). (1 mark)
Must mention NAV as the indicator; Allocate 1 mark for trend of either the NAV or market price
NAV (1 mark) is 846 cents
NAV increased by 60 cents (from 786c to 846c)
Market price decreased by 28 cents (from 1060c to 1032c)
The market price exceeds the NAV (1 mark) / investors are prepared to pay
extra for the shares.
For 1 mark:
The market price of the share decreased from 1060 cents to 1032 cents or
28 cents). They should be disappointed.
(Must compare market price to NAV for 2 marks). 6

26
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
1.6 The external auditors, Hassan and Jacob, have employed Janet to
work on the audit of Vijay Ltd. Janet owns 10 000 shares in Vijay Ltd.

Explain why this is a problem. Any one valid reason; part-marks for partial answers

• It is a conflict of interest/unethical.
• She could influence the results in a positive or negative way.
• Overlooking issues/insider information.
• She could be biased / not independent.
• Could put the validity / credibility of the audit at risk.

Give a valid solution.  Any one valid reason; part-marks for partial answers

• She should sell the shares if she wants to continue working on the
audit.
• She must be removed from this audit / she recuses herself from
the audit / she takes on other projects within this audit firm.
• She must disclose her vested interest and ensure that her
employers / review committee make a decision on her participation
in the audit.

For 1 mark:
• Disclose the vested interest formally.
4

27
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 2

2.1 PHASILE LIMITED


BALANCE SHEET AS AT 28 FEBRUARY 2017
ASSETS
Non-current assets Operation 2 500 000  9
Fixed assets (2 163 750 + 350 000 – 3 750 – 110 000) 2 400 000 
Operation; one part correct
Financial asset: Fixed deposit
100 000 
(160 000 – 60 000) Operation; one part correct

Current assets Operation 927 200  12


Inventories 129 600
Trade and other receivables
102 880 
(105 200  - 5 200  + 2 880) Operation; one part correct
Cash and cash equivalents
694 720 
(627 220 + 7 500 + 60 000) Operation; one part correct

TOTAL ASSETS Operation 3 427 200 

EQUITY AND LIABILITIES


Shareholders' equity 5
2 530 000 
(2 866 000 – 336 000 NCL ) Operation; one part correct
Ordinary share capital (2 530 000 – 512 400) 2 017 600 
Retained income 512 400 

Non-current liabilities 336 000  5


Loan : Director
336 000 
(470 400 - 134 400 ) Operation; one part correct

Current liabilities Operation 561 200  14


Trade and other payables
216 400 
(185 600+30 800) Operation; one part correct
*Current portion of loan see NCL 134 400 
*SARS- income tax
16 400 
(206 400 – 190 000) Operation; one part correct
*Shareholders for dividends
194 000 
(970 000 x 20 cents) Operation; one part correct

TOTAL EQUITY AND LIABILITIES Operation 3 427 200  45


Foreign entries -1 (max -2)
Incorrect or incomplete details -1 (max -2)
Other misplaced BS items are not foreign – simply mark as wrong
* Can be included in Trade and other payables

28
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 3

3.1 Choose the correct word(s) from those given in brackets.

3.1.1 Unqualified audit report 

3.1.2 Disclaimer report 

3.1.3 Qualified audit report  3

3.2.1 Notes to financial statements

3.2.1 (a) SHARE CAPITAL 7


Authorised Share Capital
1 000 000 Ordinary shares
Issued Share Capital
600 000 Ordinary shares in issue at the beginning of
the year for 650 cents a share 3 900 000
300 000  Ordinary shares issued at 800 cents on
1 September 2016 2 400 000
(50 000) Ordinary shares repurchased at an average price
of 700 cents  each during the year (350 000)
850 000  Ordinary shares at the end of the year 5 950 000 

3.2.1 (b) RETAINED INCOME 9


Balance at the beginning of the year 850 000
Net profit after tax 1 190 000
Repurchase of 50 000 ordinary shares at 2.50) (125 000)
Must be brackets
Dividends Must be brackets and 1 part correct (980 000)
Paid (600 000 x 50 cents) 300 000
Recommended (850 000 x 80 cents) see 3.2.1 a 680 000
Balance at the end of the year 935 000

29
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.2 KASSIE LTD.

3.2.2 BALANCE SHEET ON 29 FEBRUARY 2016


ASSETS
NON-CURRENT ASSETS 7 047 240
Fixed assets balancing figure 6 627 240
4 Fixed Deposit: BB Bank (600 000 – 180 000) 420 000

CURRENT ASSETS must be 1.5 of current liabilities 1 673 280


Inventories balancing figure 759 480
Trade- and other receivables
535 000 – 510 000
390 000
(358 000+ 9 000+ 25 000 – 2 000 )
SARS R25 000 could be separate
Cash and cash equivalents (343 800 + 180 000) 523 800
see above
13 TOTAL ASSETS check transfer from liabilities 8 720 520

EQUITY AND LIABILITIES


CAPITAL AND RESERVES 6 885 000
Share capital see 3.2.1 (a) 5 950 000
3 Retained Income see 3.2.1 (b) 935 000

NON-CURRENT LIABILITIES 720 000


3 Loan from CC Lenders (1 080 000 – 360 000) 720 000

CURRENT LIABILITIES 1 115 520


Trade- and other payables
75 520
(75 900– 2 000 + 1 620)
Short term loan 360 000
Shareholders for dividends see 3.2.1 (b) 680 000
7 TOTAL EQUITY AND LIABILITIES 8 720 520

535 000 / 510 000


30

30
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.2.3 Calculate the net asset value per share

see above
6 885 000 X 100 = 810 cents operation one part correct
850 000 1
see 3.2.1 (a)

3
Calculate the percentage return on average shareholders' equity

see 3.2.1 (b)


1 190 000  ______ x 100
½ (4 750 000 + 6 885 000) 1
5 817 500 -3 marks

= 20,5% operation one part correct 5

3.2.4 From 2015 to 2016 the directors made a deliberate decision to


change the policy on the distribution of profits in the form of
dividends. Explain this change. Quote figures to support your
answer.
Award part-marks for incomplete answers

They paid out 100% (all)  of their earnings in 2015 compared to 50% 
of their earnings (70÷140 cents) in 2016. The business is retaining funds
for future expansions/development/to improve NAV. 

For 1 mark:
The DPS decreased from 120 cents to 70 cents (50 cents) and the EPS
increased from 120 cents to 140 cents (20 cents) 4

3.2.5 The shareholders should be satisfied with the returns and earnings
on their shares. Quote and explain TWO financial indicators with
figures to support this opinion.
Award part-marks for incomplete answers

The earnings per share increased from 120 cents per in 2015 to 140 cents
in 2016 and this should make shareholders happy; 

The percentage return on average shareholders' equity improved


significantly by 5,3%, i.e. from 15,2% in 2015 to 20,5% in 2016.
see 3.2.3

31
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.2.6 The company needs to raise funds by securing additional loans or
issuing new shares.

You are approached for advice. In providing advice, quote TWO


relevant financial indicators with figures to support your advice.

Indicator  Trend plus figures Advice/conclusion 

Debt-equity ratio declined/improved from 0,33:1 to 0,18:1 signifying low


risk;

ROTCE improved drastically from 21,4% in 2015 to 27,2%by 5,8%.


Return of 27,2% is 9,2% more than the 18% interest the company is
currently paying on the loan.

The company can therefore, safely take on additional loans to expand its
operations.

32
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Summative Assessment 2

2.1 CONCEPTS

2.1.1 Financial asset 


2.1.2 Current asset 
2.1.3 Current liability 
2.1.4 Non-current liability 
4

2.2.1 Retained Income


Balance at beginning of year (1 207 000 + 110 000)  1 317 000

Funds used for shares repurchased (100 000 x R1,10)  (110 000)
Net profit after tax (1 900 000  – 532 000) 1 368 000
1 900 000 one mark × 72 % one mark one part correct

Ordinary share dividends operation one part correct


(1 300 000)
must be in brackets

Interim 420 000

Final (2 000 000 x 44/100) 880 000


one part correct

Balance at end of year 1 275 000 10


one part correct

33
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
2.2.2 BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) ON
28 FEBRUARY 2018
ASSETS
NON-CURRENT ASSETS operation 5 682 600
Fixed assets (5 495 500 – 275 000)  5 220 500
5 Fixed deposit: Gonow Bank balancing figure 462 100
CURRENT ASSETS CL X 2.1 3 998 400
Inventories (1 361 000 + 15 900) 1 376 900
Trade and other receivables
537 000
(556 000 – 27 800 + 8 800)
Cash and cash equivalents balancing figure 2 084 500

13 TOTAL ASSETS see total equity + liabilities 9 681 000

EQUITY AND LIABILITIES


ORDINARY SHAREHOLDERS' EQUITY
2 222 000 see loan ÷ 0.4 5 555 000

Ordinary share capital balancing figure 4 280 000

4 Retained income see 2.2.1 1 275 000


NON-CURRENT LIABILITIES 2 222 000
Loan: Direct Lenders 2 222 000
4 (2 777 500 – 555 500 ) one part correct

CURRENT LIABILITIES 1 904 000


Trade and other payables (428 950 + 13 550)  442 500
SARS: Income tax (532 000  – 506 000 ) 26 000
see 2.2.1

Current portion of loan see NCL above 555 500


Shareholders for dividends see 2.2.1 880 000

9 TOTAL EQUITY AND LIABILITIES operation 9 681 000

35

34
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
2.3.1 Nooitgedacht Ltd received a/an (qualified/unqualified/disclaimer
of opinion) audit report.

Choice: Disclaimer of opinion. 

Reason: Auditors could not find sufficient audit evidence to


express opinion/auditors do not express an opinion.  3

2.3.2 Provide TWO possible consequences of this audit report on the


market price of the shares.
Any two valid points  
• Potential investors and shareholders will lose confidence in the
company and directors and will not want to invest in the company.
• Current shareholders will lose confidence in the company and
directors and will try to sell their shares.
• Share price of the company will drop (supply and demand).
• Negative image of the company (bad publicity). 4

2.3.3 The managing director, Bibi Lindell, requested that his directors'
fees of R1,4 million be reflected under 'Salaries and wages' in the
Income Statement. As internal auditor, would you agree to his
request? Explain.
Would you agree? No 

Explanation  This is a material amount which is of interest to


the shareholders who have appointed the
Reason: directors. (GAAP materiality concept).
The Companies Act No. 71 of 2008 and King
Code requires for the director's fees to be
disclosed separately. 3

35
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
2.4
NO. CALCULATIONS AMOUNT
(i) R3 200 000 – R2 500 000 R700 000 

(ii) Vehicle 1: R240 000 x 25% = R60 000 


Maximum permitted: R15 000 – R1 = R14 999 
R92 999 
One part correct
Vehicle 2: R312 000 x 25% = R78 000 
R138 000 – 3 marks
(iii) R900 000 – R224 000 R676 000

(iv) R9 200 – 6 820 2 380


6400 one mark + 420 two marks
One part correct 16

TOTAL MARKS

75

36
JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE

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