Explain why the government implemented VAT in South Africa. State ONE point.
Any ONE valid explanation✓✓ part mark for unclear/incomplete/partial answers

• Additional source of revenue for the government / on a more regular basis.
• To fund infrastructure / provision of public goods and services;
• To provide for basic/essential services for the communities;
• Finance public debts; maintain the large state owned enterprises.
• It is an indirect tax that is paid by all – easy and quick way to generate extra funds
  (2)

Any suitable explanation ✓✓ part mark for unclear/incomplete/partial answers

• To make basic necessities affordable to indigent / poor communities / help them to live better (provide food) / they are cheaper (by the amount of VAT)
• Zero-rates items are regarded as essential items – consumed by all; should be accessible to all.
  (2)

Calculate the amount payable to SARS in respect of VAT for the two months ended 30 April 2021.
                                                                                                 one part correct
  ✓           ✓✓          ✓✓          ✓          ✓✓        ✓           ✓          ✓
9 450 + 61 800 – 34 500 – 1 890 – 2 520 + 1 140 + 1 380 = 34 860
OR
– 9 450 – 61 800 + 34 500 + 1 890 + 2 520 – 1 140 – 1 380 = – 34 860
OR
ignore sign on final answer
Output VAT: 61 800 + 1 140 + 1 380 = 64 320 + 9 450 = 73 770
Input VAT: 34 500 + 1 890 + 2 520 = 38 910 
Diff: 34 860
OR
VAT CONTROL*

Mark only ONE option
Choose the option that benefits the candidate

• Amounts may be on opposite sides (mirror)
• Underlined amounts may be in brackets, on the opposite side
  (11) 

State TWO benefits of using electronic funds transfers (EFTs) for payments to creditors.
Any TWO points ✓✓  accept short, incomplete statements, one-word answers if message is clear

The internal auditor feels that this incident of fraud should never have occurred in this business. Explain why he feels this way.
ONE valid point ✓✓ part mark for unclear/incomplete/partial answers

• The accountant, generally regarded as a senior employee in the business is expected to be responsible, professional and trustworthy / work independently.
• This was a deliberate action (nepotism) to defraud the business; which is not expected from an employee of his professional standing (loyal / ethical)
• The management should be aware of the potential for fraud of this nature and have internal control measures in place to prevent this / his competence may be questioned / he could be charged or sued for fraud or negligence.
• Preventative controls should have been in place to ensure employees are not tempted / consequences for defaulters should be in their contracts
  (2)

Explain how this could have been prevented. State TWO points.
Any TWO points ✓✓  ✓✓ part mark for unclear/incomplete/partial answers

• Could have appointed two people to authorise each EFT payment / division of duties - one person serves as a check on another /
• Screen suppliers properly to ensure that they are reliable/credible organisations / ensure that they actually exist.
• Do character checks on newly appointed employees as a reference for ethical conduct from their previous employers
• Bank notifications (sms) / OTP to the owner or a supervisor for all bank transactions;
• Regular / random supervision or checking of accounting records / journals / documents
  (4)

Explain the problem that is of concern to the auditor. Quote figures.
Explanation ✓ figures (showing a comparison) ✓✓
                                                                                       (5 x 8 x 46)

• Normal hours worked is less than expected by 590 (1 840 – 1 250) / 32%.
• Overtime hours is high; 36,5% of total production time worked (720/1 970)
• Overtime pay is R9 200 more than the normal time pay (259 200 – 250 000) / exceeds normal time pay by R9 200.
  (3)

Any TWO reasons✓✓ accept short, incomplete statements if message is clear

• Interruptions due to load-shedding/lockdown (Covid -19 related) /strikes
• Fluctuating periods of high and low demand (opening of schools/each term)
• Poor supervision during normal time / deliberate wasting of time.
• Authorizing overtime / exploiting overtime (due to higher overtime rate)
  (2)

Comment (must compare production to BEP) ✓ figures ✓

• The business produced 800 units more than the BEP (17 800 – 17 000) / the business is making a profit on 800 units.
• Low profitability (on only 800 units) considering the wastage of material and time lost in production.
  (2)

 2

16 895 ✓✓

 4

280 000 ✓
one part correct mark numerator & denominator as such

 6

63 550 ✓ one part correct

 4

96 000 ✓ one part correct

Comment on control (actual vs budgeted; may be implied in response)✓ effect on sales ✓ figure ✓

• Delivery expenses is lower than budgeted by R6 130 (R57 330 – R51 200) or by 10,7%, while sales were less than expected by 20% or by R176 400 (R882 000 – R705 600); delivery expenses therefore not well controlled.
• Budgeted for 6,5% of sales – actual was 7,3% of sales (0,8% higher); delivery expenses therefore not well controlled.
  (3)

State TWO benefits of this decision.
TWO valid points ✓✓ accept short, incomplete statements if message is clear

• The business will own an asset (increase in value of assets)
• Deliveries can be made at the convenience of the business / is under the control of the business.
•  Possible savings / more economical (saves on the mark-up which would apply to a supplier) / cutting out the middleman.
• Can be used to generate other income by outsourcing the vehicle
  (2) 

Apart from the items reflected in the Budget (Information F), list FOUR other items that Kayla should include in the budget.
Any FOUR items: ✓✓✓✓ be alert to other valid alternative answers related to the vehicle
Possible responses Do not accept any non-cash items, e.g. Depreciation

(4)

“NOT SATISFIED” OPTIONS

• The stockholding period has increased (from 52 days to 93,8 days see above) / Stock is not moving as fast has she expects.
• Possibility of bags becoming out-dated / out of fashion / obsolete
• Occupying storage space / idle stock is a risk of theft
• Too much working capital / cash tied up in stock / she will have to reduce prices to reduce stock

“SATISFIED” OPTIONS

• Bags are durable and can be sold in the future / possibly taken advantage of bulk discounts / increased profitability in the future (inflation)
• State of the economy (luxury goods) drop in demand was expected.
  (4)

• Too much stock on hand (615 units) Increased by 208 units (from 407 to 615)
• Drop in stock turnover rate 1,9 to 0,9 / high stock balance results in stock not moving / higher mark-up % also contributes to this
• Price too high (MU% increased from 50% to 75% / a 25% increase / price increase of R90 per unit (R630–R540)
• Purchasing the same number of units (800) despite having excess stock; contributing to stock piling.
• Stock items missing or stolen (42 units or 407 +800 – 550 – 615)

• Increase advertising;
• Consider discounts
• Reduce mark-up%
• Order according to sales / orders received
• Reduce mark-up % to increase sales
• Have clearance sales

• Regular stock-take to assess available stoc
• Replace stock according to units sold (base stock)
• Security tags on products
• Physical inspection or regular stock count
• Install cameras
• Sell online (if customers are the problem)

• Decrease in units sold:
  290 (2 260 – 1 970) or
  302 (2 182 – 1 880)
  OR drop in sales from 436 400 – 399 500 / by 36 900 / 8,5% OR by 86 900 (436 400 – 349 500 if missing cash not detected)
• Cash missing or stolen R50 000 (399 500 – 349 500)
  Or 69 125 (if returns not included)
•  High returns from customers; 78 (3,5% of sale) to 90 (4,6% of sales)

• Increase advertising
•  Keep selling price the same to increase sales

• Division of duties
• Encourage use of EFTs
• Request sms for deposits
• Reconcile deposits with items sold / sales deposits
• Online sales / sell on credit – less cash handling
• Daily depositing / routine

• Effect stricter return policy
•  Improve quality to reduce returns / do not buy inferior (cheaper) products
• change styles of jerseys / in fashion
• Train personnel to give best advice to customers.