ACCOUNTING
GRADE 12
NATIONAL SENIOR CERTIFICATE
JUNE 2018

INSTRUCTIONS AND INFORMATION
Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions.
2. A special ANSWER BOOK is provided in which to answer ALL the questions.
3. Show ALL workings to earn part-marks.
4. You may use a non-programmable calculator.
5. You may use a dark pencil or black/blue ink to answer the questions.
6. Where applicable, show all calculations to ONE decimal point.
7. Write neatly and legibly.
8. A breakdown of the questions is provided below. You must attempt to comply with the suggested time allocation for each question.

QUESTION 1: INVENTORY VALUATION (50 marks; 30 minutes)
1.1 Choose a concept from the list provided that describes each statement below.
Write only the concept next to the question numbers (1.1.1–1.1.4) in the ANSWER BOOK.

1.1.1 The closing stock is valued at the most recent purchase prices.
1.1.2 An annual stock-take must be done in order to determine the value of the stock balance at the end of the year.
1.1.3 Large, expensive items are valued at the original invoice price of the individual stock items.
1.1.4 A comparison of the stock records with the physical stock-take reveals any stock deficit. (4 x 1) (4)
1.2 MGIJIMA TRADERS
Mgijima Traders sells school bags and stationery cases to learners in the Peddie area. School bags are valued using the FIFO method and stationery cases are valued using the weighted average method. The financial year ended on 30 April 2018.
REQUIRED:
1.2.1 Calculate the following for school bags on 30 April 2018:

• The value of the closing stock(8)
• Cost of sales(6)

1.2.2 Calculate the following for stationery cases on 30 April 2018:

• The number of units missing(7)
• The value of the closing stock (9)

1.2.3 Suggest TWO internal control measures that the business can use to reduce the incidence of missing stock. (4)
1.2.4 Refer to information C:
The business decided to sell computer bags from 1 February 2018.

1. Calculate the value of the closing stock using the specific identification method. (7)
2. Was the idea of introducing the computer bags successful or not?
   Explain. Quote figures. (5)

INFORMATION:
A. Stock records of School Bags for the financial year ended 30 April 2018

B. Stock records of stationery cases for the financial year:

C. Stock records of computer bags:

Computer bags are sold at a fixed price of R850 each.
[50]

QUESTION 2: RECONCILIATIONS (25 marks; 15 minutes)
2.1 Indicate whether each of the following statements are TRUE or FALSE. Write only TRUE or FALSE next to each number (2.1.1–2.1.4) in the ANSWER BOOK.
2.1.1 Preparing a bank reconciliation statement is not necessary as the bank always sends the statement on time every month.
2.1.2 A debit balance on the bank statement means that the business has a favourable bank balance.
2.1.3 A post-dated cheque received from a debtor will only be recorded in the relevant cash journal on the date on the cheque.
2.1.4 Interest on a bank overdraft is recorded as a separate expense item in the Cash Payments Journal. (4 x 1) (4)
2.2 CREDITORS’ RECONCILIATION:
Ayanda Traders purchases goods on credit from Thembi Suppliers. The statement of account received from Thembi Suppliers on 31 May 2018 showed an outstanding balance of R8 300. The Creditor’s Ledger account of Thembi Suppliers in the books of Ayanda Traders reflects an amount of R11 570 due.
REQUIRED:
Complete the table provided to show the effect of each error/omission. Indicate whether each amount must be added (+) or subtracted (-). (12)
INFORMATION:
A. Creditors’ Ledger of Ayanda Traders Thembi Suppliers (CL6)

B Statement of account received from Thembi Suppliers

ERRORS AND OMISSIONS NOTED:

1. An invoice for goods purchased by the manager, R930, did not appear on the May 2018 statement from Thembi Suppliers. It was also not recorded in the creditors’ ledger of Ayanda Traders.
2. An allowance of R320 granted for damaged goods was recorded as an invoice in the creditor’s ledger account of Thembi Suppliers.
3. An invoice for R5 830 was incorrectly reflected as R8 530 on the statement received from Thembi Suppliers.
4. Ayanda Traders recorded a 7,5% discount when a payment of R6 000 was made. Thembi Suppliers did not grant this discount, stating that the payment was late.
5. The statement reflected a receipt of R2 000 on 22 May 2018. This was a cheque that Thembi Suppliers received from some other business.
6. An invoice for R3 840 on 28 May 2018 did not appear on the statement.
   The statement was received on 26 May 2018.
7. Interest on overdue account, R60, is only reflected on the statement.

2.3 DEBTORS’ AGE ANALYSIS
REQUIRED:
Identify THREE different problems shown by the Age Analysis and quote evidence from the question to support your answer. In each case suggest an internal control measure to correct the problem. (9)
INFORMATION:
The Debtors’ Age Analysis of Mpots Stores on 31 May 2018:
Credit Policy: Debtors are granted 30 days to settle their accounts.
DEBTORS’ AGE ANALYSIS ON 31 MAY 2018:

QUESTION 3: FIXED ASSETS AND INCOME STATEMENT (70 marks; 45 minutes)
3.1 Provide the name of the statement or report for each of the descriptions provided below. Write only the name of the statement or report next to the number (3.1.1–3.1.4) in the ANSWER BOOK.
3.1.1 Shows the net profit or loss of the company for the financial year.
3.1.2 Shows the cash effects of operating, financing and investing activities of a business.
3.1.3 Shows the opinion expressed on the fair presentation of the figures in the financial statements.
3.1.4 Shows the financial position of a business in terms of its assets, equity and liabilities. (4 x 1) (4)
3.2 FOUCHE LTD
Information from the records of Fouche Ltd for the year ended 30 April 2018 is provided.
REQUIRED:
3.2.1 Refer to adjustments (a) and (b):

• Calculate the total depreciation for the financial year ended 30 April 2018.(12)
• Prepare the Asset Disposal Account to record the sale of vehicle.(9)

3.2.2 Complete the Income Statement (Statement of Comprehensive Income) for the year ended 30 April 2018. Show workings. (45)
INFORMATION:
A. Information from the pre-adjustment trial balance on 30 April 2018:

B. Adjustments and additional information:

1. A vehicle was sold for R50 000 cash on 1 March 2018. Details of the vehicle are as follows:

   	R
   Cost price	175 000
   Accumulated depreciation on 1 May 201	7 78 750

   This transaction has not yet been recorded by the bookkeeper.
2. Make provision for depreciation as follows:
   • Vehicles at 15% p.a. on cost price
   • Equipment at 10% p.a. on the diminishing balance method
     NOTE: New equipment, cost price, R62 000 was purchased on 1 November 2017. This has been correctly recorded.
3. A physical stock-taking on 30 April 2018 revealed the following inventories on hand:
   • Trading stock R752 400
   • Packing material R3 800
4. ¼ of the audit fees must still be paid.
5. The company has two directors on equal fees. A third director was appointed on 1 November 2017 on the same fee structure. He has taken his fees for May and June 2018.
6. A debtor with an outstanding balance of R12 400 was declared insolvent. A cheque for 65% of this amount was received from the insolvent estate and recorded in the books. The balance must still be written off as a bad debt.
7. Provision for bad debts must be adjusted to 4% of debtors.
8. Extra storage space was rented out from 1 August 2017 at R7 250 per month. The tenant paid the rent for 12 months, taking into account an increase of R500 per month from 1 May 2018.
9. Interest capitalised, as per loan statement amounted to R76 300.
10. After all the adjustments, the operating profit on sales was 24% and the income tax for year at 32% of the net profit amounted to R742 080.

[70]

QUESTION 4: BALANCE SHEET AND AUDIT REPORT (70 marks; 40 minutes)
You are presented with information from the records of Pheswa Ltd. The financial yearend was 28 February 2018.
REQUIRED:
4.1 Prepare the following notes to the Balance Sheet:
4.1.1 Ordinary share capital (11)
4.1.2 Retained income (14)
4.1.3 Trade and other payables
NOTE: As there is insufficient space under Current Liabilities on the Balance Sheet, all items must be shown in this note. (9)
4.2 Complete the Balance Sheet (Statement of Financial Position) on 28 February 2018. (25)
INFORMATION:
A. List of balances extracted on 28 February 2018, unless otherwise stated:

B. Share capital and dividends:

• The authorised share capital comprised 1 200 000 ordinary shares.
• On 1 March 2017, 60% of the shares were in issue.
• On 30 June 2017, the directors issued a further 200 000 at R6,80 each.
• On 31 August 2017, an interim dividend of 13 cents per share was paid to all shareholders on the share register.
• On 31 October 2017, 100 000 ordinary shares were repurchased at R7,00 per share. These shareholders did not qualify for final dividends.
• A final dividend of 27 cents per share was declared on 28 February 2018.

C. Net profit and income tax:

• The net profit before tax amounted to R535 000.
• The provisional tax payments did not cover the total income tax for the year.
  An amount of R12 730 was still due to SARS.

D. Loan: Fraser Bank
The loan statement received on 28 February 2018 showed the following:

20% of the outstanding balance is expected to be paid during the next financial year.
4.3 AUDIT REPORT
The following questions are based on an extract of the external auditors of Pheswa Ltd:
REQUIRED:
4.3.1 Briefly explain the role of an independent auditor. (2)
4.3.2 What type of audit did the company receive? Explain. (3)
4.3.3 Further investigation of the marketing expense on the Income
Statement revealed that an amount of R210 000 relates to a holiday for the CEO and his family. It covered accommodation and air tickets.
The bookkeeper was instructed to debit marketing expenses with the R210 000 and the independent auditor was requested to ignore this as it had been recorded in the financial statements.

• Briefly explain why the independent auditor was not willing to follow the request of the CEO. Give ONE point. (2)
• Provide TWO possible consequences for the auditor if he agrees to this request. (4)

INFORMATION:

[70]

QUESTION 5: CASH FLOW STATEMENT AND INTERPRETATION (55 marks; 35 minutes)
5.1 Choose a GAAP principle from COLUMN B to match the description in COLUMN A. Write only the letter (A–D) next to the question number (5.1.1–5.1.4) in the ANSWER BOOK.

(4 x 1) (4)
5.2 FLORENT LTD
The information relates to the financial year ended 31 December 2017.
REQUIRED:
5.2.1 Calculate only the missing figures indicated by (a) to (e) in the Cash Flow Statement on 31 December 2017. (19)
5.2.2 Calculate the following financial indicators on 31 December 2017:

• Percentage operating expenses on sales (3)
• Solvency ratio (5)
• Debt/equity ratio (3)

5.2.3 Comment on the operating efficiency of the company for the year ended
31 December 2017. Quote TWO financial indicators (with figures) to support your comments. (6)
5.2.4 Should the shareholders be happy with their returns and dividends for the year ended 31 December 2017? Explain. Quote THREE financial indicators (with figures) to support your comments. (9)
5.2.5 The Chief Executive Officer (CEO) feels that it would be a good idea to increase the loans next year. Quote TWO financial indicators (with figures) to support his opinion. (6)
INFORMATION:
A. Extract from the Income Statement (Statement of Comprehensive Income) for the year ended 31 December 2017:

B. Balance Sheet (Statement of Financial Position) on 31 December:

C. Share Capital:
2 310 000 ordinary shares on 1 January 2017             R4 620 000
390 000 ordinary shares issued on 1 January 2017          858 000
2 700 000 ordinary shares on 31 December 2017       R5 478 000
D. Dividends:

• Interim dividends of 33 cents per share was paid on 30 June 2017.
• Final dividends were declared on 31 December 2017.

E. Tangible/Fixed assets:

• Vehicles sold at carrying value during the year were correctly recorded.
  The cost price of these vehicles was R350 000 and the accumulated depreciation was R247 500 on the date of disposal.
• Land and buildings were extended during the financial year.

F. Trade and other payables include the following:

G. Financial indicators calculated on 31 December:

H. CASH FLOW STATEMENT ON 31 DECEMBER 2017

[55]

QUESTION 6: VAT AND PROBLEM-SOLVING (30 marks; 15 minutes)
6.1 Choose the correct word/s from the alternatives within brackets. Write only the word/s next to the question number (6.1.1–6.1.4) in the ANSWER BOOK.
6.1.1 VAT paid by a business on goods purchased is referred to as (Output VAT / Input VAT).
6.1.2 It is compulsory for all businesses with an annual turnover of (less than R50 000 / more than R1 000 000) to register for VAT.
6.1.3 VAT returns are submitted after (every six months / every two months) of trading activities.
6.1.4 VAT returns are collected by (SARS / SARB). (4 x 1) (4)
6.2 PLEASURE PATIOS
Pleasure Patios owned by Phillip, is a registered VAT vendor, using the invoice method.
REQUIRED:
6.2.1 Calculate the amount payable to/receivable from the tax office for VAT on 30 April 2018. Indicate receivable or payable. Do all VAT calculations at 15%.(13)
6.2.2 Phillip wants to register for e-filing. He is concerned about doing financial transactions over the internet.

• Provide TWO benefits of doing taxes through e-filing. (2)
• Give ONE point of advice to Phillip. (1)

INFORMATION:
A. On 1 April 2018 the VAT control account had a credit balance of R8 300.
B. The following information was taken from the cash journals for April 2018:

C. Additional information:

• VAT on credit purchases, R24 360
• Total credit sales, including VAT, R163 760
• VAT on credit notes issued, R945
• Bad debts written off during the month, R2 990
• VAT on drawings of trading stock, R270

6.3 PROBLEM-SOLVING
Information of three bike shops in Bisho. Each shop has a floor space of 500 m².
REQUIRED:
6.3.1 Identify ONE problem in Shop 1 and ONE problem in Shop 2. Quote figures. In EACH case, give ONE point of advice. (6)
6.3.2 Explain TWO good decisions that Veli has taken in respect of Shop 3. Quote figures. (4)

Information for May 2018:

TOTAL: 300