ACCOUNTING
GRADE 12 
SCE PAST PAPERS AND MEMOS
JUNE 2018

MARKING PRINCIPLES:

1. Unless otherwise stated in the marking guideline, penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied.
2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item.
3. Full marks for correct answer. If answer incorrect, mark the workings provided.
4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer). Note: if figures are stipulated in memo for components of workings, these do not carry the method mark for final answer as well.
5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or - sign or bracket is provided, assume that the figure is positive.
6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates.
7. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions.
8. Where penalties are applied, the marks for that section of the question cannot be a final negative.
9. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note: check operation must be +, -, x, ÷, or per memo.
10. 'One part correct' means ‘operation and one part correct’. Where method marks are awarded for one part correct, the marker must inspect the reasonableness of the answer and at least one part must be correct before awarding the mark.  If a figure has earned a method-mark, this will be regarded as ‘one part correct’.
11. In calculations, do not award marks for workings if numerator and denominator are swapped - this also applies to ratios.
12. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. Indicate with a x
13. Be aware of candidates who provide valid alternatives beyond the marking guideline.
14. Codes: f = foreign item; p = placement/presentation.

MEMORANDUM 

QUESTION 1
1.1.1

Foreign entries -1 (max -1) e.g. 6 950; 12 675; 18 450; 30 975 (from previous recon) And/or other foreign entries incorrectly duplicated in journals and/or reconciliation (mark scored elsewhere)
1.1.2  Calculate the Bank Account balance in the Ledger of Hartfield Suppliers on 30 April 2018.

Accept alternative arrangements for calculations such as ledger account / equation form
1.1.3 Bank Reconciliation Statement on 30 April 2018

*Foreign entries -1 (max -1) e.g. 6 950; 12 675; 18 450; 30 975 (from previous recon)
*And/or other foreign entries incorrectly duplicated in journals and/or reconciliation (mark scored elsewhere)
*TWO column method: Assume debit followed by credit column. Mark negative amounts wrong.
1.2 The internal auditor is concerned about the management of cash.
1.2.1 Explain TWO different problems to justify her concern. Quote figures.
Any TWO valid responses:   Problem  ✔Theft    ✔Rolling          Figure or date ✔✔
Do not accept incorrect recording of a cheque; alternative terms may be used
Problems:  Inspect if two aspects are included in one explanation

• Theft/Fraud/Internal control measures are lacking (R25 000 missing)  Accept date in lieu of figures
• Rolling / late depositing of cash: R12 675 received on 10 March and deposited only on 28 April 2018 OR R10 000 was received on 20 April 2018 and is still outstanding  

1.2.2 Give advice (TWO points) on how such problems can be avoided in future.
Any two valid responses: ✔✔

• Create a policy for regular, daily depositing
• Request notification from bank for all transactions (sms)
• Division of duties / one person serves as a check on another
• Check promptly to bank statements
• Use a security company to collect cash
• Ask debtors to pay by EFT Accept use EFT
• Background checks / police clearance on staff 

1.3Explain  TWO  benefits  of  using  the  electronic  funds  transfer   (EFT) system rather than cheques for direct payments to suppliers.
Any TWO valid responses ✔✔    ✔✔  Part-marks for unclear/incomplete explanations

• Cheaper than cheque payments or debit orders (only data costs)
• No holding period as for cheques before money is available
• Less fraud and theft than with cheques / eliminate risks with lost / stolen / forged / dishonoured cheques / greater security Accept security
• Payees are happy because funds can be transferred more quickly at any time of the day or night (not restricted by banking hours)
• Simplifies bookkeeping and efficiency / saves time / transactions quicker / proof of payment immediate
• Save on bank charges 4

QUESTION 2
2.1 Accept abbreviations
2.1.1  Selling and distribution cost✔
2.1.2 Direct labour cost ✔
2.1.3 Direct/raw materials cost ✔
2.1.4  Administration cost ✔
2.2 TIGHT-FIT MANUFACTURERS
2.2.1 

 2.2.2 Production Cost Statement for the year ended 31 March 2018.
Incorrect placement of DMC and FOHC: do not award ticks for details;  -1 presentation if WIPS details not given;
Will also lose method marks on Prime cost subtotal; the figures will get method mark even if incorrectly placed

2.2.3 Give TWO reasons why the business should support local suppliers.
Reasons:                         Any TWO relevant reasons ✔✔

• No import charges will be paid
• Less transport costs
• Prices more stable / prices not influenced by fluctuations in exchange rates.
• Creates more employment opportunities to people from the country / enhances GDP of the country / helps small or new businesses / improves standard of living
• No delays in the case of emergency orders or returns / more convenient to transport goods
• Money stays in the country / improves exchange rate
• Less crime if employment increases
• Goodwill of the community (Ubuntu) 2

2.3 BREAK-TIME MANUFACTURERS
2.3.1 

2.3.2 Explain why the owner should be concerned about the break-even point. Quote figures.
Compare BEP with level of production  ✔✔   Figures  ✔

• The business produced and sold 331 500 units. This is below the break-even point of 365 000 units (33 500 units less) see 2.3.1
• The BEP has increased by 131 000 units (56%) while the number of units produced and sold increased by 37 500 units (13%).

2.3.3 Explain why the owner would NOT be satisfied with the direct labour cost per unit.
Quote figures.
Trend ✔   Figures ✔   Explanation  ✔    Do not accept comment on total DLC

• Trend: The increase in the labour cost is R1,96 per unit (R5,60 to R7,56) / 35% increase / DLC per unit went up by 35% while units produced went by 13%
• Explanation: This exceeds the inflation rate / workers have been inefficient / production volume did not increase as much as the DLC per unit  

Give ONE solution to this problem.
Any ONE relevant control measure  ✔✔ Part marks for unclear / incomplete answer

• Set production targets of production (during normal hours) / time and motion studies.
• Better supervision to ensure workers are on duty during normal working hours/ Set limits on overtime hours and ensure foreman controls this.
• Reconsider conditions of service e.g. minimum normal hours, overtime rate.
• Have plans for disruption due to power cuts, strikes etc.
• Engage in skills training to improve efficiency of workers.
• Use machines more extensively
• Negotiate affordable / reasonable increases (in line with inflation) in salaries/ wages. 

QUESTION 3
3.1.1  Calculate the value of the closing stock of bicycles on 31 May 2018.

3.1.2

Give ONE possible reason for the slow sales of Ryder bicycles.
ONE valid reason:  ✔✔   Part-marks for unclear / incomplete answer

• The customers do not like the new Ryder model /
• High returns indicate the quality is not good
• This is a new model / Customers not familiar with this model / poor marketing strategy.

Give advice (ONE point) to Fred in this regard.
ONE valid point of advice ✔✔ Part-marks for unclear / incomplete answer

• Look for another model to replace the Ryder model
• Discontinue selling this model as mark-up % is low 
• Advertise/promote the positive characteristics of the new model.

3.2.1 Explain why it was NOT a good idea to change to a cheaper supplier of T-shirts. State TWO points.
Any two valid points    Explanations ✔   ✔       Figures  ✔✔
Possible answers:

• The returns by customers are up from 0 to 40 (do not accept poor quality only)
• Although more  units  were  sold  the  total  gross  profit  decreased  from R43 200 to R29 000 or by R14 200 (32,9%)
• Maintaining the profit mark-up at 50% on cost resulted in a lower selling price (R45 cheaper) made customers doubt the quality.

3.2.2 Celia   decided   to   change   the   supplier  in  2018   and   to   change   the mark-up %. How has this decision affected the business? State TWO points.
Any two valid points    Explanations ✔✔       Figures  ✔✔
Possible answers:

• Total units sold decreased from 165 to 150 / by 15 units / by 9%
• No returns (zero) in 2018 / returns by customers went down from 5 to 0
• The gross profit increased from R61 600 to R97 500 /by R35 900 / 58,3%)

3.2.3 Make TWO separate suggestions to Celia to improve the profit on pants in 2019.
Any two valid points    Explanations ✔✔       Figures  ✔✔
Possible answers:

• Advertise more to increase the sales as it went down from 325 to 280
• Increase the selling price (increase mark-up) to be > 910 and < 990
• Find a cheaper supplier as cost price went up from R620 to R650

QUESTION 4
4.1
4.1.1  True  ✔
4.1.2  False ✔
4.1.3  True  ✔   Accept abbreviations for T or F
4.1.4  False  ✔
4.1.5  False  ✔
4.2  MODISE LTD
4.2.1RETAINED INCOME      Ignore foreign items; presentation -1 max

4.2.2   MODISE LTD
BALANCE SHEET ON 28 FEBRUARY 2018

Ignore foreign items
*Do not award ticks for details if item incorrectly placed
If incorrect placement, mark workings; -1 in each case
Accept negative amounts for balancing figures based on candidates’ workings
# If evidence of current portion of loan included is in T&OP, award 2 method marks
4.2.3 The    directors    want    to    give    R500 000    to    a    local    school.
Give TWO reasons why companies take such decisions.
Any TWO valid reasons ✔✔  ✔✔ Part-marks for unclear / incomplete answers

• This forms part of their corporate social investment (CSI) / responsibility (CSR) in accordance with the King Code
• Leads to goodwill from the community (support/positive image/good publicity)
• Creates a safer environment for the school / Contributes to better facilities for learners
• Tax deductible 4

4.3 AUDIT REPORT
4.3.1  Briefly explain the role of an independent auditor.
ONE valid explanation: ✔✔ Part-marks for unclear / incomplete answer

• The independent auditor expresses an opinion on the fair presentation of the financial statements
• Protects the interests of the shareholders/public.

Expected responses for max of 1 mark:

• Checks the books/Internal control/Detects fraud 

4.3.2 Did Denga Limited receive a qualified/unqualified/disclaimer of opinion audit report?
Qualified report ✔  May be underlined in answer book
Briefly explain your choice.   Mark independent of the decision above
Explanation ✔✔Part-marks for unclear / incomplete answer
Valid responses for two marks:

• The audit opinion expressed an exception whereby it qualified the report regarding the shortcoming/exception in the case of advertising
• Advertising expenses of R500 000 could not be verified. 

4.3.3 State THREE possible consequences for the independent auditor if he had NOT mentioned the advertising expense in his report.
Part-marks for unclear answers; but one-word answers acceptable because of ‘State’
Three different consequences  ✔✔     ✔✔       ✔✔ DO NOT ACCEPT ‘FIRED’

• Disciplinary hearing (IRBA)
• Arrested (if fraud)
• Deregistered / struck off the roll
• Suspended (during investigation)
• Fined
• Sued by shareholders (held liable) (if they are found to be negligent)
• Lose clients / fired by clients / won’t be hired
• Not trusted / integrity or character would be questioned

QUESTION 5
5.1
5.1.1 C ✔
5.1.2 D ✔
5.1.3 A ✔
5.1.4 B✔
5.2 MALOTRA LTD 
5.2.1                                Ignore brackets in final answer

 5.2.2 Calculate the net profit after income tax on 28 February 2018.

5.2.3  

*Brackets not needed as it is a calculation, not a CFS
5.2.4    

5.2.5  

5.2.6  The directors decided to increase the loan during the current financial year. Explain whether this was a good decision or not. Quote TWO financial indicators (with figures).

✔ Debt/equity ratio is 0,2:1 ✔ (see 5.2.5) / 0,1:1 /  from 0,1:1 to 0,2:1
✔ Return of capital employed is 14,6% / 16,4% ✔

Do not accept any other financial indicators
Explanation must contain reasons Part-marks for unclear /incomplete explanation
Response for two marks:
There is positive gearing (ROTCE exceeds interest rate on loans) and it is low risk (not making extensive use of borrowed capital). ✔✔
Response for one mark:

• This is a good decision because of positive gearing
• This is a good decision because it is still low risk

5.2.7 Comment on the price paid for the shares repurchased on 1 January 2018.
Quote TWO financial indicators (with figures).
Must compare NAV and market price to repurchase price (not average share price price)
The company paid a *higher price for the share R8,00✔ than the ✔ NAV of ✔ 778 cents and the ✔market price of ✔ 780 cents.  see 5.2.3
*This might be higher/lower/equal if error is made in calculation in 5.2.3.  
5.2.8 Thandi Nene owns 416 000 shares in the company. When the directors decided  to  issue a  further 200 000  shares  during October  2017,  she decided not to buy more shares and rather spend her funds on an overseas holiday.
Explain why you feel Thandi has made the wrong decision. Quote relevant figures or calculations to support your opinion.
Calculations:  If workings correct, but answer not a %, award marks but -1 in each case for no %

• % shareholding before the share issue  416 000 / 800 000 = 52% ✔✔
• % shareholding after the share issue      416 000 / 1 000 000 = 41,6%✔✔
• % shareholding after repurchase             416 000 / 880 000 = 47,3%

Explanation:
Explanation (must mention or imply majority shareholding i.e. 50% + 1 share) ✔✔
Thandi was the majority shareholder before the issue of the additional shares. As she did not increase her number of shares, she is no longer the majority shareholder. (Even after the repurchase of 120 000 shares she remains with less than 50% of the shares).
Response for two marks:
She has lost out on earning a maximum of R80 000 of dividends on the extra shares she could have bought / she has lost out on extra capital growth or extra returns of the shares.

Note: 200 000 x 40 cents = R80 000 dividends extra could have been earned
(She would have had to pay 200 000 x R8,20 = R1,64m) 

QUESTION 6
6.1.1  The main purpose of a Cash Budget is to … ✔✔
                                                     Part-marks for incomplete / unclear response

• Project / estimate the expected bank balance at end of budget period.
• Project / estimate / monitor / control expected cash received and paid over budget period.

6.1.2  The main purpose of a Projected Income Statement is … ✔✔
                                                   Part-marks for incomplete / unclear response

• Project / estimate the expected net profit for the budgeted period.
• Project / estimate / monitor / control expected income and expenses for budget period.  

6.2.1 Debtors' Collection Schedule:

6.2.2  

6.3 

6.4.1 Tony is not concerned about the overspending in advertising. Explain why this is so.
Quote figures to support your answer.

Candidates must indicate the positive effect of advertising on sales  ✔✔
Provide appropriate figures    ✔      ✔ one mark each
Expected response for 4 marks:

• Advertising increased by R3 000 but Sales increased by R96 000.
  OR
• Advertising increased by 37,5% while Sales increased by 20% on bigger base.  

6.4.2 State   ONE   consequence   of   not   paying   the   amount   due   to   creditors   in April 2018.
Any ONE valid consequence    ✔✔  Part-marks for incomplete / unclear response

• Credit to the business will be stopped by the creditors.
• The credit ratings of business will decrease / could be blacklisted / report to credit bureau
• Business will be charged interest for slow payment.
• Legal action can be taken by the creditors 

6.4.3 State TWO points in favour of appointing Gentex Cleaning Services.
Any two valid responses        ✔✔                  ✔✔ Figures not required but may be provided as part of an explanation
Part-marks for incomplete / unclear response

• Outsourced cleaning could cost less than budgeted/actual for wages and cleaning materials
• Easier to budget (fixed contract amount)
• Expertise / professionalism / specialisation of the cleaning company
• No interruption or extra costs due to workers on sick leave etc.
• No storage space needed for cleaning materials
• Leads to reduction in administration costs
• VAT input can be claimed from SARS
• The cleaners can be rotated between different clients if necessary

Explain ONE point that Tony should consider before making this decision.
Any valid response ✔✔    Part-marks for incomplete / unclear response

• Whether it will make the current employees redundant / retrench or reassign the existing cleaners (consider the ethics of this)
• Reliability of the new cleaning company
• Honesty of the workers of the outsourced business
• Negative image of outsourcing to the company
• Whether outsourcing conflicts with their social responsibility programmes
• Instructions to cleaners have to be given through the cleaning firm’s managers
• Terms of the contract regarding fee increases

Response for one mark:

• VAT charged on outsourced cleaning services 6