Accounting T1 - Companies Memo-1
Accounting T1 - Companies Memo-1
Accounting T1 - Companies Memo-1
TERM ONE
SOLUTION BOOKLET
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
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
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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
Activity 4
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
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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
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
• Interim dividends (900 000 x 0,12) one part correct 108 000
• Final dividends 168 000
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 2
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
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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
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
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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
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
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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
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.3 AUDIT REPORT
Any valid explanation ✓✓ Part marks can be awarded for partial answers
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
• 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.
The debt or providing for bad debts should take place in the same year when
the debt was incurred. (Matching principal) ✓✓
TOTAL MARKS
75
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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
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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
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4.2.3 CALCULATE THE FOLLOWING ON 28 FEBRUARY 2014
The rate at which depreciation on equipment is written off
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TOTAL
MARKS
75
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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
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
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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
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
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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
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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
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
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
6.2 Explain each audit opinion underlined in the extract below.
TOTAL MARKS
75
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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
(c) 7 (Old): 2 890 000 x 15% = 433 500 one part correct
(3 640 000 – 750 000)
(d) 2 3 640 000 + 900 000 – 750 000 = 3 790 000 one part correct
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MOVEMENTS:
2 500 000 24 800
Additions -
(56 250)
Disposals - -
(48 040)
Depreciation - (103 125)
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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
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.
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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.
D. MTOMBENI LTD
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
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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
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Summative Assessment 1
Accumulated
depreciation on
2013 2013 34
Aug
31 Equipment 90 000 Aug
31 equipment
920*
(28 800 + 6
120)
Bank 55 080
* Any figure
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
Movements
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 2
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Activity 4
Shareholders for dividends Refer note above (final dividends) 217 600
1 272 158 16
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 1
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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
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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
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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
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 2
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Activity 3
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.2 KASSIE LTD.
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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
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;
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
3.2.6 The company needs to raise funds by securing additional loans or
issuing new shares.
The company can therefore, safely take on additional loans to expand its
operations.
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
Summative Assessment 2
2.1 CONCEPTS
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
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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
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
2.3.1 Nooitgedacht Ltd received a/an (qualified/unqualified/disclaimer
of opinion) audit report.
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
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE
2.4
NO. CALCULATIONS AMOUNT
(i) R3 200 000 – R2 500 000 R700 000
TOTAL MARKS
75
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JENN TRAINING; GRADE 12 ACCOUNTING TERM ONE