ACCOUNTING
GRADE 12 
NSC EXAMS
PAST PAPERS AND MEMOS
NOVEMBER 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. Where method marks are awarded for operation, the marker must inspect the reasonableness of the  answer and at least one part must be correct before awarding the mark. 
10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note: check operation must be +, -, x, ÷, or per candidate’s response. 
11.  In calculations, do not award marks for workings if numerator & 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 ⌧.
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
1.1.1 False✓
1.1.2 True ✓
1.1.3 True ✓     
Accept recognizable abbreviations e.g. T or F
1.2 KRIGE SHIRTS
1.2.1 Calculate direct labour cost.

• 3 ✓ x 1 960 ✓ x 90 ✓
  529 200 (normal time) x 12%
  1 x 1 680 x 90
  • 529 200   three marks
  • 63 504    ✓ ✓if 12% of normal time
  • 151 200    ✓ ✓ one part correct
  • 12 146  ✓
  • 756 050  ✓ one part correct
• 529 200 x 112%
  592 704     +      151 200    +  12 146    =       756 050
  five marks       two marks      one mark     one method mark
•     705 600                       -25 200             63 504
  (4 x 1 960 x 90) - 90 (1 960 - 1 680) + (3 x 1 960 x 12%) + 12 146      = 756 050
  three marks               two marks                   two method marks     one mark       one method mark
•      705 600                   84 672                -25 200                        -9 022
  (4 x 1 960 x 90) + (705 600 x12%) - 90(1 960 - 1 680) + (21 168 - 12 146)        = 756 050
  three marks               two marks           two method marks                   one mark       one method mark

1.2.2 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 31 JULY 2018

Misplaced items (FOHC): award marks but penalise on prime cost
1.3 GEMMA'S MANUFACTURERS
1.3.1 Calculate the break-even point for the year ended 31 August 2018.

1.3.2 Compare and comment on the break-even point and the production level achieved over the last two years. Quote figures.
Part-marks for partial answers

• Compulsory response:
  Comparison of the BEP with the level of production of 2018 ✓✓ Figures ✓
  Business produced 63 units (15%) more than the BEP (420 - 357) see 1.3.1
  OR:
  The business made a profit on only 63 units (420 - 357) compared to 105 units last year (540 - 435)
• Other optional responses:
  Comparison of 2017 and 2018 BEP or production ✓✓ Figures ✓
  ✓ BEP decreased from 435 units in 2017 to 357 units in 2018 (78 units; 17,9%)
  ✓ The business produced 120 units (22,2%) less than last year (540 - 420) 

1.3.3 Give TWO reasons for the increase in direct material cost. Suggest ONE way to control this cost.
REASONS:
Any TWO valid reasons. ✓✓                ✓✓ Part marks for partial/incomplete answers.

• Inflationary increases / transport costs / increase in fuel price / scarcity. ✓
• Wastage due to poor workmanship. ✓
• Theft of material (in the factory) due to poor internal controls. VAT increased to 15%
• Change in exchange rate (if raw materials imported)
• Changed suppliers (more expensive) / Better quality raw materials

SUGGESTION:
Any ONE valid suggestion ✓    Suggestion may be marked independently of reason

• Look for cheaper suppliers without compromising quality. ✓
• Negotiate transport and delivery discounts. ✓
• Take advantage of bulk discounts.✓
• Recycle waste material / use off-cuts✓
• Train and supervise workers to minimise wastage. ✓
• Control stock regularly to identify shortages.✓
• Buy stock as required to avoid stock piling and possible theft. ✓

QUESTION 2
2.1 VAT
2.1.1

 2.1.2 You are the internal auditor. The sole owner, Samson, used a business cheque to buy a new car for R460 000 including VAT. This car is kept at home for his wife's use. Samson says the vehicle must be recorded as a business
asset and R60 000 must be recorded as a VAT input in the business' books.
Explain what you would say to Samson. Provide TWO points.
TWO valid points ✓✓          ✓✓      part-marks for partial / incomplete answers; figures not required
Expected responses for two marks:                  Be aware of two points within one explanation

•  This is tax evasion / he is attempting to reduce the amount due to SARS for VAT (this is illegal and unethical)
• He will be increasing the input VAT, effectively reducing the amount due  to SARS.
• He could be fined or imprisoned because it is a criminal offence.
• Personal  transactions  and  business  transactions  should  be  kept separate (Business entity concept) / Samson should pay for this out of  his private bank account.
• As the car is not used for business purposes, the full amount of R460 000  should either be treated as drawings or a reduction of his capital  contribution. 

2.2 CREDITORS' RECONCILIATION
2.2.1 

2.2.2 The internal auditor insists that direct payments (EFTs) must be used to pay suppliers.
Explain ONE reason to support his decision.
ONE reason ✓✓       part-marks for partial / incomplete answers

• It is quick and easy / easier to monitor / efficient / convenient / safer/ cheques may be lost / not time-bound (business hours) / less bank charges / no need to keep track of outstanding cheques / makes claiming cash discounts easier / avoid interest on late payments  

Explain ONE internal procedure to ensure control over this system.
ONE internal control measure ✓✓  part-marks for partial / incomplete answers For two marks:

• Senior personnel authorized to make internet payments
• Two people to authorise an EFT transaction (allocation of duties)
• Security codes for users (unique codes) / change codes regularly
• Notification from bank (sms / email) when payments are effected
• For one mark: Division of duties  

2.2.3 Besides dismissing Vernon, provide ONE suggestion for action to be taken against him.
ONE valid point ✓✓                                                                            Part-marks for partial or unclear answer

• Disciplinary hearing / criminal or civil charge / suspension / demotion / transfer to another department / deductions from his salary / written warning

Provide ONE suggestion to prevent this problem in future.

ONE valid suggestion ✓✓                                         Part-marks for partial or unclear answer

• Division or rotation of duties / one person check orders, the other receives stock / Stock records to be updated with every invoice / Proper authorization of orders / Ensure goods received at the gates are supported by order form and invoice / Regular stocks counts to compare to records  

QUESTION 3
3.1
3.1.1 Current assets  ✓
3.1.2 Operating income ✓
3.1.3 Non-current asset ✓
3.1.4 Operating expense ✓

• Accept recognizable abbreviations e.g. NCA

3.2.1   TEMBISO LTD
INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018

Foreign items (e.g. Balance Sheet items / dividends; see Principle 1) -1 max       *one part correct

3.2.2 ORDINARY SHARE CAPITAL
AUTHORISED SHARE CAPITAL

• 1 600 000 ordinary shares

ISSUED SHARE CAPITAL                                                               If no brackets, check operation

RETAINED INCOME                                                                             If no brackets, check operation

3.2.3   EQUITY AND LIABILITIES SECTION OF THE BALANCE SHEET

 3.3  AUDIT REPORT
3.3.1

• Point 1       Opinion    ONE valid point  ✓
  The auditors found no problem to report / unqualified report / statistical sampling used / met the required standard
• Point 2       IFRS and Companies Act  ONE valid point   ✓✓     Part-mark for partial answer
  For two marks:   Must cover local & global points
  Companies operate in local and international contexts / may have local and international shareholders / compliance with national and international laws and standards / companies may operate on a global market and engages in international trade and locally / shareholders (investors) may come from all parts of the world / readers in any this country and other countries can understand how financial statements are prepared or presented
  For one mark:   Partial / incomplete answer
  Comply  with  standards  or  laws     /  must  comply  with  South  African
  Companies Act / must comply with international standards 
• Point 3       Independent  ONE valid point   ✓✓                                        Part-mark for partial answer
  Their opinion is unbiased / they have no personal interest in the company/ No conflict of interest / They are authentic. They have high international standards of professionalism to maintain / They have a code of conduct.  

3.3.2

• Point 4       TWO examples of ethical responsibilities:
  Any TWO valid examples    ✓✓           ✓✓           Part-mark for partial answer
  No colluding with management to overlook any material matter. No accepting bribes or engaging in corruption.
  Care taken in completing the audit and expressing the opinion.
  The readers can rely on the information in the financial statement.
  Being honest in their duties / have integrity / truthfulness / unbiased.
  Complying  with  King  Code  or  GAAP  /  Keep  up  to  date  with  new requirements. 
• Point 5       TWO examples of audit evidence:
  Any TWO valid example ✓✓            ✓✓        Part-mark for partial answer
  Check the internal controls and the efficiency of the internal audit.
  Source   documents     (provided   by   external   organisations,   provide verification)
  Records such as asset registers, stock records etc. Policies and procedures of the company
  Report of an audit committee which assess the internal and external audit processes / Internal auditors report on ensuring internal controls are efficient)

QUESTION 4
4.1 CALCULATION OF FINANCIAL INDICATORS FOR 2018
4.1.1 Calculate:  % operating expenses on sales

4.1.2  Calculate:  Acid test ratio

4.1.3 Calculate:  % return on shareholders' equity

4.2 FIGURES FOR 2018 CASH FLOW STATEMENT
*Be aware of alternative arrangements for calculations; accept final answers in brackets
*Final answer need not indicate inflow or outflow - may ignore brackets
*Choose the line which best benefits the candidates.
4.2.1 Calculate: Change in investments

• 25 000

4.2.2 Calculate:  Income tax paid

4.2.3  Calculate:  Fixed assets sold (at carrying value)

4.3 EXPLANATIONS ON CASH FLOW STATEMENT
4.3.1 Explain why the directors are satisfied with the improvement in cash and cash equivalents since 1 July 2016. Quote figures.
ONE valid point relevant figure/s                        Part-marks for partial or unclear answers

• Response for three marks (i.e. comment on two financial years):
  Large negative balance of R609 000 (at end of 2016 fin.year) improved to positive R410 000 (at end of 2018 fin.year) / improved by R1 019 000.
  OR
  Large overdraft of R609 000 (at end of 2016) improved to R130 000 / by R479 000 by the end of the 2017 fin. year. Improvement continued in 2018; the overdraft was eradicated, and C&CE were positive R410 000 at end of 2018 fin. year.
• Response for two marks (i.e. comment on one financial year):
  In 2018 fin. year, C&CE increased from R5 000 to R410 000 / by R405 000
  OR:
  In 2017 fin. year, overdraft of R609 000 decreased to R130 000 / by R479 000
  OR:
  In 2018 fin. year, overdraft of R130 000 was eliminated, C&CE improved to positive R410 000 / by R540 000. 

4.3.2 Identify THREE decisions that the directors made to pay for land and buildings.

Explain how these decisions affected the capital employed in the 2018 financial year. Quote figures.   Any ONE of: Must quote appropriate figures   

• TCE increased by R4,171m / from R9,791m to R13,962m / by 29,9 42,6% 
• OSHE increased by R4,921m / by 68,4% / OSC increased by R4m /
• Loan decreased by R750 000

Explain how these decisions affected the financial gearing in the 2018 financial year. Quote TWO financial indicators and their figures. 
part-mark if figure wrong
TWO relevant financial indicators    figures and trend 

• Debt/equity ratio improved (decreased) from 0,4: 1 to 0,2:1
• ROTCE improved (increased) from 17,8% to 20,8% (while interest rate is 12%)

4.3.3 From the Cash Flow Statement identify ONE decision made by the directors in 2017 that they did NOT make in 2018, besides the points mentioned above. Give a possible reason for the decision in 2017.

4.4 DIVIDENDS, RETURNS AND SHAREHOLDING
4.4.1  Calculate:  Total interim dividends paid for the 2018 financial year

Calculate:  Interim dividends per share for the 2018 financial year

4.4.2 Calculate total dividends earned by Dudu Mkhize for the 2018 financial year.

4.4.3       Calculate the minimum number of additional shares that Dudu should have bought.

4.5.1 Explain why it was necessary to purchase properties in other provinces instead of in KZN.
 Any valid explanation e.g.                                                  Part-marks for unclear / incomplete answers

• To increase their target market / to increase sales / to generate new customers / to expand to areas where there is lots of money / because they exhausted the market in KZN / too much competition in KZN / low profits in KZN / to diversify their business operations (e.g. rental income) / because of better value for money in other provinces

Explain whether the decision to purchase these properties had the desired effect on sales. Quote figures.
one mark for figure without implied comparison
Identify positive effect     Figures  comparison may be implied by the figures for two marks

• Sales increased by 850 bikes / from 900 to 1 750 / by 94,4% OR by R5,442m / from R7,74m to R13,18m / by 70,3%

Explain another strategy they used to solve the problem of low sales. Quote figures.
one mark for figure without implied comparison
Identify positive effect     Figures  comparison may be implied by the figures for two marks

• Decrease in MU% from 72% to 58% / by 14% (led to increased sales) OR Decreased selling prices reduced from R8 600 to R7 533 / by R1 067

4.5.2 Give advice on what Ben Palo should say about the following topics:
Advice on what to say on earnings per share:
Explanation/trend    Figures   comparison may be implied by the figures for two marks
one mark for figure without implied comparison

• EPS increased by 60% / from 130c to 208c / by 78c (compared to R28 or R12,11)

Advice on what to say on % return earned:
one mark for figure without implied comparison
Explanation/trend    Figures   comparison may be implied by the figures for two marks

• ROSHE (is above returns on alternative investments) increased from 14,4% to 19,8% / 26,5% / 15,8%  see 4.1.3

Advice on what to say on share price on the JSE:
one mark for figure without implied comparison
Explanation/trend    Figures comparison may be implied by the figures for two marks

• Market price increased R21,00  R28,00 Exceeds NAV R8,99  R12,11

QUESTION 5
5.1 
5.1.1 C  / FIFO

5.1.2  E  / Specific Identification

5.1.3 A   / Straight line

5.1.4 D  / Diminishing balance  
5.2 PACKER'S SUITCASE SHOP
5.2.1 Calculate the value of the closing stock on 30 June 2018 using the first-in- first-out method.

5.2.2    Charles suspects that suitcases have been stolen. Provide a calculation to support his concern.

5.2.3   Charles is concerned about the volume of stock on hand.
Calculate for how long his closing stock is expected to last.

ONE problem with keeping too much stock on hand:  ONE point 
Part-mark for partial answer

• Can become obsolete and therefore useless to customers.
• Staff may see less movement in stock and decide to steal.
• Cost of storage / lack of storage space.

ONE problem with keeping insufficient stock on hand:  ONE point 
Part-mark for partial answer

• Will not meet the needs of consumers - they may go elsewhere to buy.
• Loss of income from sales.

5.3  MINDEW LIMITED
5.3.1 

5.3.2  Explain how the internal auditor should check that movable fixed assets were not stolen.
Any ONE point                Part-marks for unclear / incomplete answers

• Conduct physical inspection (regular and random) 
• Compare to fixed asset register

5.3.3  As an independent auditor, what advice would you give? Provide ONE point.
ONE valid point                                             Part-marks for unclear / incomplete answers

• GAAP prescribes the historical (original) cost principle when recording  assets and only recognising profits and/or losses on disposal (i.e. prudence).
• IFRS provides for revaluation (fair value) provided that this estimate can be measured reliably (evidence).
• Essentially, financial statements must not be overstated to create a  false impression on profitability
• There could be tax implications. 

QUESTION 6
6.1 Debtors' Collection Schedule for October 2018.

*one part correct
6.2 Calculate:

1. Cash sales for September
   403 200  x 60/40  = 604 800  one part correct
   Or  1 008 000 - 403 200 = 604 800   Or 1 008 000 x 60% = 604 800
   one mark          one mark       method mark             one mark        one mark     method mark
2. Rent income for October
                   one part correct; must increase
   25 600 x 109% = 27 904
   25 600    + 2 304  = 27 904
3. Payments to creditors in October
   1 008 000  x ¹⁰⁰/₁₇₅  x 50% = 288 000   one part correct
   576 000 two marks

6.3 Calculate the % increase in salaries of sales assistants for October 2018.

Explain  whether  the  sales  assistants  should  be  satisfied  with  this increase.
Explanation 

• They should be satisfied as a 10,5% increase is a fair increase which is above the current inflation rate.
  OR
  They may be dissatisfied when compared to the 25% increase to salaries of manager.

6.4 Refer to Information E:
6.4.1    Explain the effect of the new competitor on any TWO items in the budget for September. Provide figures.
TWO valid points        figures        

• Total sales decreased from R1 008 000 to R840 000 (by R168 000).
• 40 fewer air-conditioners were sold.
• Cash sales are below budget (R604 800 - R336 000) / increase in credit sales (R504 000 - R403 200).
• Reduced delivery expenses (R67 200) and commission on sale (R25 200) due to poor sales.
• Cash surplus is less than budget (R22 500 compared to R63 000) / cash balance at end is less than expected (R120 500 compared to R161 000).  

6.4.2 Identify TWO changes Donald implemented in October in response to the new competitor. Quote figures. Give ONE reason for EACH change.

Do not accept advertising (no change)         
 6.4.3  Explain why Donald feels that his decisions were successful. Provide TWO points (with figures).
TWO valid points (with figures)        Be aware of two points within one explanation

• Sales of air-conditioners exceeded budget by 50 units (300 - 250) 
• Units sold increased from 200 to 300 / by 100 / by 50%
• Sales were R210 000 over budget (R1 050 000 compared to actual R1 260 000 /  by 20%
• Total sales increased from R840 000 to R1 260 000 / by R420 000 / by 50%
• Increase in credit sales from the expected R420 000 to R882 000 / by R462 000  / by 110%
• Advertising did not increase (remained at R10 000) yet sales increased.  

TOTAL: 300