ACCOUNTING PAPER 2
GRADE 12
NOVEMBER 2021
MEMORANDUM
NSC EXAMINATIONS

QUESTION 1
1.1 Provide TWO documents that Zig Zag Traders will need from potential debtors before they will be allowed to open accounts.
Any two accept recognisable abbreviations

• Identity document (ID)
• Salary advice slip / proof of income / proof of registration (student)
• Proof of residence (municipal bill / from statements) / residential address
• References / credit history / not listed on credit bureau / credit score / Income tax certificate (ITC)
• Bank statement (3 months)
• Criminal record (police clearance record)

1.2 Calculate: Correct closing balance of the Debtors' Control Account on 30 September 2021. Indicate changes with '+' for an increase, '–' for a decrease or '0' for no change.
PROVISIONAL BALANCE - 228 000

1. + 1 750
2. 0
3. (62 500 – 65 200) two marks – 2 700
4. + 7 000
   +3 500 one mark + 3 500 one mark
5. + 5 200
6. (250 – 700) two marks – 450
7. 0

R238 800 one part correct; must include provisional balance
Accept brackets for – sign; if no sign assume positive
-1 foreign entries (max - 2); see ii and vii.
9

Calculate: Correct amounts owed by the following debtors only:

Pre-printed balances are not regarded as “one part correct” *one part correct
1.3 Explain THREE different problems highlighted by the debtors' age analysis. Provide the name of a debtor and/or figure(s) in EACH case.

1.4 Provide TWO points to support the internal auditor's concern that Susan's job description could lead to potential fraud.
Any TWO separate or different points  (part marks for incomplete / partial / unclear responses)

• Too many related functions performed by one person - could compromise efficiency / job not done well
• Lack of supervision could lead to negligence / rolling over of cash / theft / no authorisation for returns / not applying returns policy effectively
• No division of duties – temptation to engage in fraudulent transactions / manipulating sales or returns / creating false documents / mismanagement / poor record-keeping (stock sheets / debtors)
• No continuity of tasks / tasks may not get done / lag behind if Susan is on leave / absent.
• Cash is easily stolen (not using electronic payments / credit cards / EFT)

TOTAL MARKS: 30

QUESTION 2
2.1 PRUDY MANUFACTURERS
2.1.1 PRODUCTION COST STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2021

10
2.1.2 ABRIDGED STATEMENT OF COMPREHENSIVE INCOME (INCOME STATEMENT) FOR THE YEAR ENDED 28 FEBRUARY 2021

*one part correct
2.2 CONTROL OF RAW MATERIAL
2.2.1 * do not accept “install cameras”
Missing from the storeroom

• Physical counts / random inspections / keep detailed stock records / control or monitor the movement of fabric
• Rotation / division of duties / storeroom manager to be accountable
• Improve security at receipt / dispatch points / limit access to storeroom
• Storeroom staff to have lockers (no bags allowed in storeroom)

1 050
(2 700 + 10 800 – 12 450) – 850
= 200 metres one part correct

Wasted in the factory

• Improve training
• Use cutting patterns / technology
• Improve supervision
• Make use /or buy good quality material
• Effective use of off-cuts
• Incentives for minimizing wastage
• Regular servicing of machines

7 800 x 1,5 metres
12 450 – 11 700 = 750 m one part correct
OR 12 450 / 1,5m
8 300 – 7 800
500 x 1,5m

2.2.2 Calculate the total cost of the metres of fabric lost and wasted.
200 + 750 see 2.2.1 200 x 120 750 x 120
950m x R120 OR R24 000 + R90 000
R114 000 If amounts calculated in 2.2.1 x R120 Two or nothing

Explain how this loss should be shown in the statements mentioned in QUESTION 2.1 on the previous page.
Any valid answer, e.g.

• Amount shown as an expense item (on the Income Statement)
• Examples of possible expense items:
  e.g. loss due to theft / administrative cost / selling and distribution cost
  increased direct material cost / adjust factory overhead cost / cost of sales

2.3 ROSEMARY'S TOY FACTORY
2.3.1 Provide a calculation to confirm that the break-even point for the 2021 financial year is correct.
  224 000   = 3 556 units
255 – 192 
63 two marks
Numerator and denominator must be marked as such
OR
Sales at BEP      Total FC           VC at BEP
(255 x 3555,55)                       (192 x 3 555,55)
906 665             – 224 000         – 682 665 = 0
one mark one mark one mark

2.3.2 Explain why Rosemary is pleased with the production level, sales and break-even point. Quote figures.
Valid comparison Figures  part marks for incomplete / partial / unclear responses
Must mention Production (and sales) and BEP for four marks

• Produced and sold 1 344 units above the BEP (4 900 – 3 556) / making a profit on 1 344 units
• Made a profit (includes production and sales) on 1 344 units (4 900 – 3 556) in 2021 compared to 500 units (4 000 – 3 500) in 2020 / profit on an additional 844 units (168,8%)
• Profit (includes production and sales) was R84 672 (1 344 x R63) in 2021 and R32 000 (500 x R64) in 2020; an increase in of R52 763 (164,8%)
• Sales / production increased by 900 units (4 900 – 4 000) / by 22,5% whereas BEP increased by only 56 (3 556 – 3 500) / by 1,6%. – good control over costs.

Two-mark options: Only ONE of: (max 2 marks)

• Revenue from sales increased from R960 000 to R1 249 500 (R289 500 / 30,2%)
• Comparison of units produced only (4 900 – 4 000) / by 900
• Comparison of BEP only (3 556 – 3 500) / by 56

2.3.3 Explain to Rosemary why the fixed cost per unit decreased from R56,00 to R45,71.
ONE point that either mentions or explains economies of scale Two marks or nothing

• Economies of scale: As more units are produced, fixed cost per unit would decrease
• Increased production (by 900 units) resulted in a decrease in fixed cost per unit, due to fixed cost remaining fairly constant or not influenced by levels of production
• The average fixed cost per unit would decrease as units produced increases / total fixed costs (constant) are divided by a large number of units.

2.3.4 Rosemary made deliberate decisions regarding variable costs to improve the business. Explain the decisions that she might have taken on these costs and how these could have had positive effects on the business. Quote figures.

TOTAL MARKS: 45

QUESTION 3
3.1 DEBTORS' COLLECTION SCHEDULE
Calculate the amounts denoted by (a)–(c)

3.2 Calculate the amounts denoted by (a)–(c) on the Cash Budget.

1. Rent income for December 2021:
   20 056 x 100/109 or 20 056 – 1 656
   18 400
   one part correct
2. Payment to creditors in January 2022
   456 000 x 80%
   OR 456 000 – 91 200 (20% of 456 000)
   one mark one mark
   364 800 one part correct
3. Payment for cleaning services in January 2022
   15 510 x 100/165 x 105/100
   one mark one mark
   OR 15 510 x 105
                        165
   one mark (as denominator)
   9 870
   one part correct
   Accept:
   9 400 as a final answer: three marks;
   9 400 + 470; four marks;
   9 400 + any other amt: three marks only

3.3 Workload of employees:
Provide TWO points that Brian can explain to his sales staff to justify his plan. Quote figures. Be aware of alternative ways of expressing statistics
TWO points (with figures) part marks for incomplete / partial / unclear responses

• He budgeted for 230 customers; only 175 was recorded / 55 less (23,9%) / 76%
• Sales was less than budgeted (798 000 – 707 000) / by R91 000 / 11,4%
• Salaries are set at a basic rate of R16 400 per worker (cost the business when budgeted sales are not achieved)

Assuming 5 workers (including driver)

• Each worker was expected to attend to 46 customers (230/5); but the actual is an average of 35 customers (175 /5) / 11 less / 23,9%
• Retrenching one person will not affect the expected workload of the remaining 4 workers, projecting an average of 44 (175/4) customers (expected 46)

Assuming 4 sales staff (excluding driver)

• Each worker expected to attend to 58 (230/4) but actual is 44 (175/4) / 14 less / 24%
• If one is retrenched, the average customers per worker is 58 (175/3) customers; same as the expected 58 (230/4).

Explain why the repair staff members are not satisfied with their workload. Quote figures. Be aware of alternative ways of expressing statistics
ONE point figures 

• They are over-worked. Customers (from 70 expected to 136-actual) / 66 more than expected / 94% more / 194%. Customers prefer to repair rather than buy.
• They are expected to attend to 35 customers per worker but attended to 68 customers (an average of an additional 33 customers per worker)
• Fee income is R34 000 more than expected / 66 000 – 32 000 / 106%
• Wages fixed at a basic rate of R5 500 per worker – not influenced by workload / commission, and is R10 900 less than a sales worker.

What suggestions can you offer to solve the problem of the workload of employees? Provide TWO points.
TWO different points  part marks for incomplete / partial / unclear responses

• Train the sales staff member to do repairs
• Suggest incentive bonuses / overtime pay
• Negotiate a better wage package / commission
• Train staff to work in other departments / rotation
• Employ temporary staff / casual workers / employ more workers

3.4 Sales trends:
Comment on the cash and credit sales figures for November 2021. Explain why Brian is concerned. Quote figures.
Comment on both cash sales and credit sales (with comparison of budget and actual figures)
Comment on cash sales only (with comparison of budget and actual figures) one mark
Comment on credit sales only (with comparison of budget and actual figures) one mark
Expected responses for 3 marks:

• Cash sales are lower than expected by R336 800 / 70,3% / (478 800$ – 142 000) whilst credit sales are higher than expected by R245 800 / 77% / (565 000 – 319 200$)
• Cash sales are now only 20% of total sales (142 000/707 000) expected 60%; whilst credit sales are now 80% of total sales (565 000 / 707 000); expected 40%

3.5 Comment on the control over fuel for the delivery vehicle and the consumable stores used for repairs. Quote figures.

TOTAL MARKS: 35

QUESTION 4:
4.1.1 Calculate: Value of the closing stock on 28 February 2021
2 346 040 four marks
2 182 700 two marks
60 x 900 2 490 x 25
101 090 + 2 236 700 – 54 000+ 62 250 x 420
                 2 636                      one part correct
206 + 2 490 – 60
Numerator and denominator must be marked as such
OR: R890 six marks x 420
R373 800 One part correct must be x 420

4.1.2 Calculate: Stock turnover rate
Using units:
      2 216     
½(206 +420)
313 two marks
Using amounts:
1 972 240 one m.marks
(2 346 040 – 373 800) see 4.1.1.
½ (101 090 + 373 800 see 4.1.1)
237 445 two m.marks Numerator and denominator must be marked as such
7,1 times  one part correct; accept 7 times
8,3 times  one part correct; accept 8 times

4.1.3 Comment on the stock turnover rates for boots and sandals and identify the major problem relating to EACH product. Quote figures.

4.2 FIXED ASSETS
4.2.1 List THREE points for good internal control over movable fixed assets.
Any THREE valid points
Accept short, specific statements; do not accept general statements e.g. “good management” or “division of duties”

• Maintain an updated fixed asset register / depreciation / carrying value / condition
• Regular physical inspection / count the items / identification tags (barcodes)
• Service and maintenance plans, and ensure that this is done regularly
• Insurance plan to cover loss / damage / accidents
• Keep a log book and mileage / install tracking devices
• Note drivers / users in a register / authorisation for use / record of time in/out.
• Only trained personnel to use technical equipment
• Cameras to monitor use of equipment
• Secure premises for storage / locked garage / alarm system in premises

4.2.2 Calculate: Cost of land and buildings purchased on 31 August 2020
6 250 000 – 5 500 000
R750 000 – 60 000
= R690 000

4.2.3 Calculate: Depreciation on vehicle for year ended 28 February 2021
R480 000 x 25% = R120 000; but carrying value is R30 000
Maximum permitted: R30 000
R30 000 – R1
R29 999

4.2.4 Calculate: Loss on photocopy machine traded in on 30 November 2020
224 000 two marks (30% x 224 000 x 9/12) two marks
320 000 – (96 000 + 50 400) – 88 000
146 400 three marks
173 600 four marks
OR
Asset Disposal

Be alert to other valid alternative presentations for calculations
85 600 One part correct

Calculate: Depreciation on the new photocopy machine and on the remaining old equipment for the year ended 28 February 2021
Depreciation on the new photocopy machine:
R410 000 x 30% x 3/12
Accept alternative expressions e.g. 0,3; 30/100; ¼; 25%; 0,25 as one part correct
= R30 750 One part correct

Depreciation on the remaining old equipment: Choose and mark ONE option consistently
OPTION 1: * 30% is not “one part correct”
(2 100 000 – 320 000) = 1 780 000 one part correct
(1 440 000 – 96 000) = (1 344 000)  one part correct
2 100 000 – 1 440 000 – 224 000 436 000 four marks x 30%*
OPTION 2: * 30% is not “one part correct”
(2 100 000 – 1 440 000) x 30% = 198 000 one mark + one m.mark
(320 000 – 96 000) x 30% = (67 200) one mark + one m.mark
OPTION 3: * 30% is not “one part correct”
(2 100 000 – 1 440 000) x 30% = 198 000 one mark + one m.mark
[320 000 – (146 400 – 50 400)] x 30% = (67 200) one mark + one m.mark
R130 800 One part correct If x 30%

4.2.5 The CEO feels that the land and buildings are worth at least R10 000 000 and wants to adjust the figure in the Statement of Financial Position (Balance Sheet) accordingly. Explain why the auditor does NOT agree.
Any valid reason  part marks for incomplete / partial / unclear responses

• Historical cost rule: should be shown at their original cost price /
  Prudence: to be conservative in reflecting assets on financial statements
• Profit can be recognised / realised on disposal
• Unethical to manipulate figures in the financial statements / inflated value
• CEO's opinion does not seem to be based on clear evidence; needs evaluation / appraiser

TOTAL MARKS:  150