GAUTENG DEPARTMENT OF EDUCATION

PROVINCIAL EXAMINATION
NOVEMBER 2020
GRADE 11

ACCOUNTING
PAPER 1

TIME: 2 hours

MARKS: 150

14 pages + 1 formula sheet

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INSTRUCTIONS

1. Answer ALL the questions.

2. A special ANSWER BOOK is provided in which all questions are to be answered.

3. Show ALL workings in order for part marks to be allocated.

4. Where applicable, round all calculations to the nearest rand. All other calculations to be
rounded to one decimal place.

5. Read the instructions of each question carefully and follow them precisely.

6. Learners will forfeit marks for:

 the use of non-standardized abbreviations.

 overwriting of figures or words.
 superfluous/foreign entries.

7. Non-programmable calculators may be used.

8. All answers must be written in blue or black ink.

9. Use the information in the table as a guide when answering the question paper. Try not to
deviate from it.

Question Topic Marks Time

1 Financial Statements 55 42 minutes
2 Partnerships 40 32 minutes
Analysis and interpretation
3 20 16 minutes
of Financial Statements
Asset Management &
4 35 30 minutes
Internal Control
150 120 minutes

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QUESTION 1: FINANCIAL STATEMENTS (55 marks; 42 minutes)

The following information was taken from the accounting records of Golden Gate Traders on
30 June 2020, the last day of the financial year.

REQUIRED:

1.1 Prepare the Statement of Comprehensive Income (Income Statement) for the
year ending 30 June 2020. (40)

1.2 Complete the following Notes to the Financial Statements:

1.2.1 Trade and other receivables (6)

1.2.2 Trade and other payables (9)

INFORMATION

1. Figures extracted from the pre-adjustment Trial Balance on 30 June 2020:

Balance Sheet Accounts

Vehicles 130 000
Equipment 78 500
Accumulated depreciation on vehicles 34 000
Accumulated depreciation on equipment 30 000
Trading stock 42 563
Debtors’ control 31 900
Provision for bad debts 550
Bank (favourable) 8 540
Creditors’ control 21 363
Fixed deposit : Zee Bank @ 15% p.a. 10 000
Loan : Zee Bank 60 000
Nominal Accounts Section
Sales (less Debtors’ Allowances) 337 600
Cost of sales ???
Repairs 1 618
Bad debts 1510
Telephone 2 350
Rent income 17 836
Interest on fixed deposit 1 125
Rates 2 850
Insurance 4120
Discount received 600
Packing materials 13 500
Water and electricity 4 830
Salaries 78 000
U.I.F. contributions 3 120

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2. Adjustments and additional information.

2.1 A credit note for R1600 issued to a debtor, dated 27 June 2020, was not
recorded. The cost price of these goods was R1000.The goods were placed
back into stock.

2.2 The business prices its goods at a mark up of 60% on cost. Trade discount of
R4000 was allowed on invoices to certain customers.

2.3 A physical stock count on 30 June 2020 revealed the following to be on hand.

 Trading stock R 44 000

 80% of packing material was used during the year

2.4 A cheque issued to a creditor for R1 900 settling our account of R2 000 was
dishonoured and sent back by the bank marked R/D.

2.5 On 18 June 2020, R1 370 was received from M. Stuurman whose debt had
previously been written off as irrecoverable. The amount was credited to the
Debtors’ Control account in the General Ledger.

2.6 The provision for bad debts must be increased by R400.

2.7 Insurance includes a policy with an annual premium of R3 000 which expires
on 31 October 2020.

2.8 A suite of offices has been let to an estate agent since 01 February 2019. The
rent agreed upon was R15 600 for the first year and a 12 % increase in the
second year. Make the necessary adjustments.

2.9 The telephone account for June 2020 must still be paid, R230.

2.10 On 30 December 2018 an amount of R10 000 was placed in a fixed deposit at
15 % interest per annum. Interest for the last quarter is still receivable. Interest
is not capitalised.

2.11 Depreciation for the year totalled, R23 475.

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2.12 The following details of a new employee, D. Laurence, were omitted from the
Salaries Journal for June 2020.

 Gross salary R4 200

 Deductions : P.A.Y.E. R840
Medical aid R150
U.I.F. 1%

 The enterprise contributes to the U.I.F. on a rand for rand basis.

No payments in respect of the above have been made.

2.13 The loan statement showed the following information:

 Balance on 01 July 2019 R60 000

 Balance on 30 June 2020 R48 000
 Repayments for the year R18 000
 Interest capitalized ???

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QUESTION 2: PARTNERSHIPS (40 marks; 32 minutes)

The following information was taken from the accounting records of Mighty Mouse Traders on
28 February 2020, the last day of the financial year. The business is a partnership with Mighty
and Mouse as partners.

REQUIRED:

2.1 State whether the following statements are TRUE or FALSE. (5)

2.1.1 Owners’ Equity for a partnership consists of Capital and Drawings only.

2.1.2 All current accounts are current liabilities.

2.1.3 The partnership agreement stipulates the amount of capital that each
partner has to contribute to the business.

2.1.4 The double entry principle means that the partnership needs to have
a separate bank account from the personal bank accounts of each of
the partners.

2.1.5 A partner cannot contribute more capital to a partnership.

2.2 Use all relevant information and prepare the Current Account Note on
28 February 2020. (14)

2.3 Use all relevant information and prepare the Statement of Financial Position
(Balance Sheet) on 28 February 2020.
Where notes are not required, show all calculations in brackets to earn part
marks. (21)

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INFORMATION:

1. List of balances and totals extracted from the accounting records on

28 February 2020:

Capital : Mighty 200 000

Capital : Mouse 100 000
Current account : Mighty (01 March 2019) (Debit) 4 800
Current account : Mouse (01 March 2019 (Credit) 6 200
Drawings : Mighty 20 000
Drawings : Mouse 6 800
Fixed assets at carrying value (Missing figure) ???
Fixed deposits (See information 3.1) 30 000
Inventories (Missing figure) ???
Total trade and other receivables (See information 4) ???
Petty cash 500
Cash float 1 000
Loan : Giant Bank (See information 4) ???
Total trade and other payables (Before adjustment 3.3) 45 050
Bank overdraft 12 200
Salaries : Mighty (See information 5.1) 49 600
Salaries : Mouse (See information 5.1) 78 000
Net profit for the year 141 000

2. Transactions not yet recorded:

2.1 Mighty returned merchandise with a cost price of R700. This

merchandise was taken from stock for personal use.

2.2 A cash cheque for R1 000, drawn by Mighty for personal use, was
recorded as Drawings : Mouse, by mistake.

3. Additional information:

3.1 The business has two fixed deposits:

 R10 000 at Giant Bank – matures on 01 April 2020

 R20 000 at Small Bank – matures on 01 December 2021

3.2 A repayment of R5 000 on the loan is made annually on 28 February.

The payment for this year was made on 28 February 2020. However,
this has not been recorded in the books of the business.

3.3 After the Bank Reconciliation for February 2020 was completed, it
showed, as part of the outstanding cheques, a total of R1 200 for post-
dated cheques.

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4. Some of the financial indicators of the business as calculated on

28 February 2020:

 Current ratio 1,2 : 1

 Acid test ratio 0,5 : 1
 Debt-Equity ratio 1,5 : 1

5. Information taken from the Partnership Agreement:

5.1 Salaries

 The partners increased their annual salaries by 20% p.a. on

01 July 2019.
 Mighty has not as yet withdrawn his February 2020 salary.
 Mouse has withdrawn her salary for the financial period.

5.2 Interest on capital

Take note that Mighty increased his capital contribution by R100 000
on 01 September 2019. This has been properly recorded.

 8% p.a. on any amount up to R100 000 of capital contribution.

 10% p.a. on the amount of capital above R100 000.

5.3 Remaining profit or loss

The remaining profit or loss is shared between the two partners in the ratio of
their capital contributions at the beginning of the financial year.

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QUESTION 3: ANALYSIS AND INTERPRETATION (20 marks; 16 minutes)

The following information was taken from the accounting records of Kings Traders on
31 December 2020, the last day of the financial year. The business is a partnership, with King
Midas and King Ben as partners.

REQUIRED:

Use all relevant information to do the following:

Where relevant, answers need to include financial indicators and figures.

3.1 Calculate King Ben’s percentage earnings for the year ended 31 December
2020. Does he have reason to be satisfied? Give ONE reason for your answer. (10)

3.2 Calculate the debt-equity ratio on 31 December 2020. (3)

3.3 The partners are considering taking up an additional R200 000 loan at an
interest rate of 12% per annum.
Do you think this is a good idea? Refer to one financial indicator and to gearing
to motivate your answer with figures. (3)

3.4 The partners are concerned about the liquidity position of the business. Refer to
two financial indicators with figures to justify their concerns. (4)

INFORMATION:

1. The following balances were taken from the accounting records:

31 Dec 2020 31 Dec 2019

Owners’ equity 1 038 154 988 054
Equity : King Midas 532 592 401 042
Equity : King Ben 505 562 597 012
Loan @ 15 % p.a. 250 000 320 000

2. Additional information for the year ended 31 December 2020:

2.1 Net profit for the year, R420 100

2.2 Both King Midas and King Ben earn an annual salary of R165 000 each.

2.3 Interest on capital : King Midas, R48 000 and King Ben, R60 000

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2.4 Drawing for the year : King Midas, R200 000 and King Ben, R180 000

2.5 Share of the remaining profit : partners share equally in the remaining
R37 100.

3. Some of the financial indicators of the business:

Financial indicator 31 Dec 2020 31 Dec 2019

Current ratio 1,4 : 1 1.7 : 1
Acid test ratio 0,8 : 1 1,2 : 1
Stock turnover rate 9,2 times 8,4 times
Solvency ratio 2,4 : 1 3,5 : 1
Return on equity (partnership) 32,2 % 27,9 %
Debt-equity ratio ??? 0,3 : 1
Interest on fixed Deposit 5% 5%

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QUESTION 4: ASSET MANAGEMENT AND INTERNAL CONTROL

(35 marks; 30 minutes)

The following four questions are independent of each other.

4.1 ETHICS

REQUIRED:

Match each of the terms in COLUMN A with the most appropriate description
in COLUMN B. Write down only the correct letter next to the question number
(4.1.1 to 4.1.5) in the ANSWER BOOK.

COLUMN A COLUMN B
4.1.1 Confidentiality A “people, planet, profit”
4.1.2 Transparency B The ability to maintain
economic, social and
environmental resources
without doing harm to any of
the three.
4.1.3 Triple bottom line C The acknowledgement and
assumption of responsibility
for your actions, duties and
decisions.
4.1.4 Code of ethics D A written set of rules and
guidelines outlining ethical
principles to be followed by a
business and all its members.
4.1.5 Accountability E Information obtained while
performing professional
services should be treated
appropriately.
F An open and honest way of
doing things and does not
seek to hide the truth. (5)

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4.2 ACCOUNTING EQUATIONS

REQUIRED:

Analyse the following transactions according to the headings provided in the

answer book, using the example as a guide. The bank account is in overdraft at
all times.

Example: Partner Barack deposited R50 000 directly into the bank account of
the business as part of his capital contribution.

4.2.1 Paid partner Barack R8 000 by EFT as part of his monthly salary.
According to the partnership agreement, he is entitled to a monthly
salary of R8 000. (5)

4.2.2 Partner Michelle took goods, with a cost price of R800, for personal use.
Goods are sold at a profit margin of 25% on cost. (3)

4.3 ASSET MANAGEMENT

REQUIRED:

Read through all the information relating to the tangible (fixed) assets of Disney
Manufacturers and then answer the following questions.

4.3.1 If all vehicles are depreciated using the same method, what is the rate
of depreciation used by the business? (3)

4.3.2 It was decided to sell Vehicle 2 (see fixed asset register) as it was
costing too much in repairs and maintenance.

Complete the asset register page to calculate the vehicle’s book value
on the date it was sold. (Round off to the nearest rand when doing all
depreciation amounts.) (10)

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INFORMATION:

1. General Information

 Disney Manufacturers makes and delivers wooden furniture.

 They rent their factory.
 On 01 March 2020 they owned equipment and three delivery
vehicles, which are used to deliver furniture in a 100 km radius
around Johannesburg.

2. Fixed Asset Register

Type of asset: Vehicle 2

Registration number: GT66YRGP Date purchased: 31 August 2017
Supplier: Toyota Date sold: 31 May 2020
Rate of depreciation: ? Depreciation method: ?
Movement
Date Cost price Depreciation Accumulated Carrying
depreciation value
28 February 2018 380 000 47 500 47 500 332 500
28 February 2019 380 000 83 125 130 625 249 375
28 February 2020 380 000
31 May 2020 380 000

4.4 PROBLEM SOLVING

REQUIRED:

Study all the given information and identify one problem in each branch.
Provide a solution to the problem under the headings provided in the ANSWER
BOOK. (9)

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INFORMATION:

Bongiwe Zwane opened an Accounting franchise called “Accounting Made Easy”.

After 10 months of operating, she has 3 branches open, one each in Daveyton,
Actonville and Farramere.

The school offers extra Accounting lessons to high school learners from 14:00 to
18:30. All lessons are on an individual basis for 45 minutes (six lessons per day),
Monday to Friday, at a cost of R120 per lesson. Each learner attends 1 lesson per
month. The total number of learners a school can take in, is 360 per month. A total of 3
educators can teach at any one time at each branch. Educators are paid R70 per
lesson.

Bongiwe has obtained the monthly figures from the 3 schools for November 2020. She
is concerned that not all 3 schools are operating as efficiently as possible.

Figures for November 2020:

Daveyton Actonville Farramere

Number of educators 3 3 2
Number learners 300 400 190
Income from lessons R36 000 R48 000 R19 000
EXPENSES
Rent R6 000 R8 000 R12 000
Advertising R600 R1 200 R0
Salaries R22 400 R25 200 R13 300
Other expenses R2 000 R2 000 R4 500

TOTAL: 150

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 ANNEXURE

FORMULA SHEET

Gross profit 100 Gross profit 100 Net profit 100

x x x
Sales 1 Cost of Sales 1 Sales 1

Operating Expenses 100 Operating Profit 100

x x
Sales 1 Sales 1

Total Earnings by Partner 100 Net Profit 100

x x
Average Partner' s Equity 1 Average Partners' Equity 1

Current Assets: Current Liabilities Current Assets – Inventories: Current Liabilities

Average Debtors 365 12 Average Creditors 365 12

x or x or
Credit Sales 1 1 Credit Purchases or Cost of Sales 1 1

Average Inventorie s 365 12 Cost of Sales

x or
Cost of Sales 1 1 Average Inventorie s

Non Current Liabilities: Partners Equity Total Assets: Total Liabilities