ACCOUNTING
GRADE 12 
NSC EXAMS PAST PAPERS AND MEMOS SEPTEMBER 2019
PREPARATORY EXAMINATIONS

MARKING PRINCIPLES: 

1. Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the  question for that item (no foreign item penalty for misplaced items). 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 the answer is 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. Where penalties are applied, the marks for that section of the question cannot be a final negative. 
8. Where method marks are awarded for operation, the marker must inspect the reasonableness of  the answer before awarding the mark.
9. 'Operation' means 'Check operation'. 'One part correct' means 'Operation and one part correct'.  Note: Check operation must be +, –, x or ÷ or per candidates’ response.
10. In calculations, do not award marks for workings if numerator & denominator are swapped - this  also applies to ratios.
11. In awarding method marks, ensure that candidates do not get full marks for any item that is  incorrect at least in part. In such cases, do not award the method mark. Indicate by way of ⌧
12. Be aware of candidates who provide valid alternatives beyond the marking guideline.
13. Codes: f = foreign item; p = placement/presentation. 

MEMORANDUM 

QUESTION 1: DEBTORS AGE-ANALYSIS AND BANK RECONCILIATION
1.1 DEBTORS AGE-ANALYSIS 
1.1.1 Explain how the Debtors’ Age Analysis can assist with the control  over debtors. Provide ONE point.  
Any ONE valid point. ✔✔ Part marks for partial/incomplete answers. 

• Effective method of credit control Helps identify debtors who have not paid within the credit terms granted. Interest can be charged to debtors not adhering to the business’ policy. Legal action can be taken against debtors who do not comply. (2)

1.1.2 Calculate the average debtors’ collection period (in days) for the  financial year ended 31 August 2019.  

(5)

• Comment whether the business should be satisfied with this. Any ONE valid point. ✔✔ Part marks for partial/incomplete answers.
  • The business cannot be satisfied as debtors are not complying with the  30 days credit terms. (2) 

1.1.3 Identify TWO different problems revealed by the Debtors’ Age  Analysis. Quote evidence and/or figures. In each case, provide advice  to improve the internal control relating to the problem identified. 

(6)

1.2 BANK RECONCILIATION 
1.2.1 (4)

1.2.2 Calculate the correct totals for the Cash Receipts Journal and the  Cash Payments Journal for July 2019. Use the tables provided.  

(14)
1.2.3 Bank reconciliation statement on 31 July 2019. (10)

# Note: Do not award method mark for balancing figure if R15 000 appears in any column.
1.2.4 Explain how cheque No. 908 should be treated when preparing the  financial statements on 31 July 2019, the end of the financial year. 

• Increase bank ✔ and increase creditors ✔
  Do not accept: Dr bank and Cr Creditors control is for ledger account not financial statement 2 

1.2.5 Identify the GAAP principle applied by the bookkeeper.

• Principle of prudence ✔ 

Provide TWO suggestions on how a similar problem in future can be  prevented.  
Any TWO valid suggestions ✔✔ ✔✔ Part marks for partial/incomplete answers 

Division of duties (partial answer) 

• Encourage EFT payments by customers/debtors.
• All cash received must be deposited daily (deposit slips must tally with  receipts issued).
• Daily checks to see that deposits are made.
• Request notification (SMS) from bank for all transactions. (5)

TOTAL MARKS : 50

QUESTION 2: INVENTORY VALUATION 
2.1 Calculate the following on 28 February 2019: 
2.1.1 Value of closing stock (10)

10 2.1.2 Gross profit for the year ended.  (5 )

2.2.1 Calculate the stock value on 28 February 2019 using the FIFO  method.  (7)

2.2.2 Explain the effect on gross profit if the FIFO method is used. 
Any valid point ✔✔ 

• A larger closing stock will result in a smaller cost of sales and hence a  greater (an increased) gross profit. 
• The gross profit will be more compared to when weighted average  method is used.  (2) 

2.2.3 As an internal auditor, explain the benefits of using the FIFO method  to the owner and the accountant. State TWO points. 
Any TWO valid points ✔✔ ✔✔ part marks for short/incomplete statements 

• Stock shown at recent prices, realistic
• Reflect a higher gross profit 
• Easy to apply 
• No manipulation of profits (4)

2.3 Ching Lee feels that she was not able to achieve her targeted mark up % for 2019.  
Do (or perform) a calculation to confirm whether she is correct. (3)

Provide TWO suggestions that can be implemented in order to  improve profitability. 
Any TWO valid suggestions ✔✔ ✔✔  

• Give less trade discounts
• Support local suppliers
• Supervise sales to ensure correct prices are applied
• Consider after-sales services such as maintenance, repairs and  installations (4)

TOTAL MARKS : 35

QUESTION 3: MANUFACTURING 
3.1.1 DIRECT LABOUR COST  (6)

FACTORY OVERHEAD COST  (10)

3.1.2 PRODUCTION COST STATEMENT FOR THE YEAR ENDED  28 FEBRUARY 2019  (10)

3.2.1 Identify ONE variable cost that is not well controlled in each  department. Quote figures. In each case, provide a solution for the  problem identified. 
Mark sections independently  (8)

3.2.2 CALCULATION OF BREAK-EVEN POINT (4)

Related Items

3.2.3 Explain whether the business should be satisfied with the production  of suitcases. Quote figures. 

• The business will not be satisfied, ✔ did not break-even by 663 units. 
• Produced 19 000 units; Break-even point was 19 663 units. 
• The business is making a loss on 663 units ✔✔
  OR
• Production dropped compared to last year by 6 000 units whilst break even point increased by 432 units.3

3.2.4 JP wants to adjust the selling price of ONE of the products. What  advice would you offer? Provide a valid reason for your suggestion,  quoting relevant figures. 
Product and explanation ✔✔ figure ✔ 

• Consider decreasing the price of suitcases to increase sales.
• The competitor has maintained his selling price, and has possibly attracted  many customers.
• The increased selling and distribution costs was not effective to increase  sales.
• A reduced price will attract more customers which will require production  to increase.
• THREE-mark option: (if figure provided)
• Increase the price of laptop bags to be just below the price of the  competitor
• The competitor charges R265. (4)

TOTAL MARKS : 45

QUESTION 4: FINANCIAL STATEMENTS 
4.1 (5)

4.2.1 RETAINED INCOME NOTE (12)

4.2.2 
   [35]
4.2.3 At the annual general meeting, the board of directors proposed the  following TWO programmes:  
Explain why the directors included these proposals in their  directors’ report. Provide TWO points.  
TWO valid points ✔✔  ✔✔

• Companies are expected to contribute to the communities that  support them (corporate social responsibilities)
• The King Code prescribes that companies concentrate on the triple bottom line and not just profits. They are expected to put back into the  community as well as the environment.
• Positive publicity will improve their image and their support.  (4)

Provide a different benefit of each of the programmes proposed, to  the company.  
TWO points each ✔✔  ✔✔

TOTAL MARKS : 60

QUESTION 5: CASH FLOW AND INTERPRETATION 
5.1.1 CASH GENERATED FROM OPERATIONS  (15)

5.1.2  (10)

5.1.3 (7)

5.1.4

5.2 Calculate the following financial indicators for 2019:

• Acid test ratio 
            _{327 150 two marks}
  1 231 050 ✔ – 903 900 ✔ : 944 800 ✔ 
  0,35 : 1  _{one part correct accept 0,4 : 1} (4)
• Debt-equity ratio 
           _{3 345 800 two marks}
  1 622 000 ✔: 1 932 000 ✔ + 1 413 800 ✔ 
  0;48 :1  _{one part correct accept 0,5:1} (4)
• Net asset value per share 
         _{3 345 800 two marks}
  1 932 000  + 1 413 800  x 100 = 363,67 or 364 cent  _{one part correct}   (4)
             920 000 
• Percentage return on total capital employed: 
        1 230 000  + 144 150        x 100 = 32,6  _{one part correct}   (8)
  ½ (4 967 800 + 3 456 000 ) 
      ^{4 211 900 five marks} 

5.3 It was a good decision for the directors to increase the loan. Explain  by quoting TWO financial indicators with figures to support the  director’s decision.  
Financial indicator ✔  ✔ and Figure ✔ ✔ Explanation ✔ ✔ 

• The debt-equity ratio increases from 0,1 : 1 to 0,5 : 1. 
• The return on total capital increase from 21,2% to 32,6% (see 5.2) 

Explanation 

• Although the business is making greater use of loans than last year as  reflected by the increase in the debt/equity ratio, ROTCE is much higher  than the interest rate (cost of the loan). 
• Debt-equity ratio is lowly geared and the return on capital employed is  32,6% and is much higher than the 15% interest on loan. Positively  geared. (6)

5.4 One of the shareholders want to sell their shares at 550 cents per  share. Explain why the business should not repurchased these  shares. Quote TWO financial indicators (with figures) to support your  opinion. 
Financial indicator ✔  ✔ and Figure ✔  ✔

• The NAV of 363,7 or 364 (see 5.2) is less than the 550 cents 
• Market value of 380 cents is lower than the 550 cents 
• This shareholder would not even be able to sell these shares on the  JSE. 
• Although there is an upward trend in the MP and the NAV, it is still not  good practice to pay an amount that is way above the share price. (4)

5.5 Identify TWO major decisions taken by the directors, as evident  from the Cash Flow Statement. Quote figures. Explain how these  decisions would benefit the business in future.  
Decision ✔ ✔ Figures ✔ ✔ Benefit ✔✔ ✔✔  (8)

5.6 Calculate the amount of dividends she obtained this year. 

• 20 000 x 0,33 = R6 600 ✔ ✔  (2)

Explain to her why you think the directors changed the dividend  pay-out policy this year. Quote figures. 
Explanation ✔ ✔ figures  ✔

• The company paid out 89,3% of EPS last year as they had no/little plans  for improvement in the business.
• They decided to retain 58,8% of the EPS this year as they have plans to  expand the business which will in turn result in greater profits in the long  run. 
• They want to use funds from operations to improve the business rather  than increase the loan or issue new shares. 
• Their plans would have been explained in the directors’ report so that  shareholders would buy into the proposals. (3)

TOTAL MARKS : 80

QUESTION 6: CASH BUDGET 
6.1 Provide ONE point why is it a good idea to compare actual figures  against budgeted figures. 
Any ONE valid response ✔✔  

• To reflect on whether your projected receipts and payments have been  realistic or well controlled.
• To improve future projections.
• To determine variances between projections and actual amounts.
• To be able to control receipts and payments on a monthly basis. (2)

6.2 Identify TWO items that were incorrectly entered in the Cash  Budget. 

• Depreciation ✔
• Vehicle bought on credit ✔ 2 

6.3 Complete the debtors Collection Schedule for July 2019  (7)

6.4.1 Percentage increase in salary and wages with effect from July 2019.  (3)

6.4.2 Missing figures, (i) and (ii) in the extract of the Cash Budget.   (8)

6.5 Explain what you would mention to shareholders about each of the  following items at the end of July 2019. 
In each case advise what effect these items will have on the  company. 
Any valid responses  
Explanation one mark per item ✔ ✔ Advice one mark per item ✔ ✔    (4)

6.6 Shareholders are thinking of purchasing the business premises  rather than renting it. 
Explain ONE major advantage and ONE major disadvantage of this  option.  (4)

TOTAL MARKS: 30 
TOTAL: 300