MARKS: 150 

TIME: 2 hours

INSTRUCTIONS AND INFORMATION 

Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions. 
2. A special ANSWER BOOK is provided in which to answer ALL questions. 
3. A Financial Indicator Formula Sheet is attached at the end of this question  paper. 
4. Show ALL workings to earn part-marks. 
5. You may use a non-programmable calculator. 
6. You may use a dark pencil or blue/black ink to answer questions.
7. Where applicable, show ALL calculations to ONE decimal point.
8. Write neatly and legibly. 
9. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. 

QUESTION 1: CALCULATION OF NET PROFIT AND STATEMENT OF  FINANCIAL POSITION (50 marks; 40 minutes) 

1.1 Choose the correct word or term from the list given which best suits each  statement below. Write only the word or term next to the question numbers  (1.1.1 to 1.1.4) in the ANSWER BOOK. 

1.1.1 Document offering shares to the public 

1.1.2 Unit of ownership in a company 

1.1.3 Reflects written information on the operations of the business 

1.1.4 Reflects a fair view of the operating results of the Financial Statements  of a company (4 x 1) (4) 

1.2 LIYABONA LTD 

The information relates to the financial year ended on 29 February 2024. The  business sells generators. 

REQUIRED: 

1.2.1 Refer to Information B (i): 

Calculate the value of closing stock of AI generators using the Specific  Identification-method. (3) 

1.2.2 Refer to Information A and B: 

Use the table provided to calculate the correct net profit after tax for the  year ended 29 February 2024.  

Indicate ‘+’ for increase and ‘–’ for decrease at each adjusted amount. (14)

1.2.3 Complete the Statement of Financial Position on 29 February 2024. 

NOTE: 

• • Some amounts have been entered in the ANSWER BOOK. 
  • Figures are NOT required in the shaded areas. 
  • Show workings. (29)

INFORMATION: 

A. Extract: Balances and totals from the records on 29 February 2024: 

B. The net profit before tax, R3 609 320, was calculated before taking the following  into account:  

(i) The following stock-sheet relates to AI generators. It was recorded twice  when the final stock figures were calculated. 

• • Liyabona Ltd sells AI generators at a standard rate of R22 400 per unit.
  • A mark-up of 40% on cost is applied. 

NOTE: The SPECIFIC IDENTIFICATION valuation method is used. 

(ii) Debtors with credit balances of R12 350 on 29 February 2024 must be  transferred to the Creditors Ledger. Provision for bad debts should be  adjusted to 4% of debtors. 

(iii) A vehicle bought on 2 January 2019, cost R 450 000, was sold for cash for  R65 000 on 1 February 2024. No entries were made for the sale of the  vehicle. Vehicles are depreciated at 20% p.a. on cost. 

(iv) Insurance includes an annual premium of R21 540 paid on 1 December  2023.

(v) Rent is calculated on a fixed amount per m2 per month. The business  rented out 150 m2for the financial year ended 28 February 2023. An  additional 30 m2 was rented out from 1 August 2023. Rent was received  up to 30 April 2024.  

(vi) Unused consumable stores amounted to R5 320. 

(vii) The company has four directors. They all receive the same fee. Two  directors took an overseas trip and requested that their fees for January  and February 2024 be paid in March. The committee agreed. 

C. Income tax for the year is calculated at 30% of the net profit before tax. D. The fixed deposit will mature on 31 August 2024. 

E. The following financial indicators were calculated on 29 February 2024: 

• Current ratio: 2 : 1
• Net Asset Value per share: 425 cents

F. Share Capital: 

• The company is registered with an authorised share capital of 1 500 000  ordinary shares. 
• 75% of the authorised shares were in issue on 1 March 2023. The average  price per share at the time was R3,20.  
• The directors issued all unissued shares on 30 April 2023. EFT payments  totalling R900 000 were received. 
• The company repurchased 250 000 shares at R3,75 per share on 29 February 2024. 

G. Loan: Naties Bank 

The loan statement showed a closing balance of R928 700. The company  plans to increase their loan repayments in order to settle 15% of the capital  portion of the loan balance in the next financial year. A fixed interest of R5 800  per month is paid. 

QUESTION 2: CASH FLOW STATEMENT AND FINANCIAL INDICATORS (45 marks; 35 minutes) 

2.1 Give ONE accounting word/term for each of the following statements:

2.1.1 Shareholders’ Equity plus non-current liabilities equals … 

2.1.2 A repayment of loan is shown as an … of cash in the Cash Flow  Statement. 

2.1.3 The difference between current assets and current liabilities is referred  to as … (3 x 1) (3) 

2.2 You are provided with information relating to Mimosoa Limited. The financial  year-end is 30 September 2023. Information relates to the financial year ended  30 September 2023. 

REQUIRED: 

2.2.1 Complete the Cash Flow Statement for the year ended  30 September 2023. Show all workings in brackets. (25)

2.2.2 Complete the Retained Income note. (8) 

2.2.3 The directors issued more shares to improve the cash flow. Thandi  Manning, a shareholder, was against the decision and has raised her  concerns at the annual general meeting (AGM). 

• • Provide a reason for Thandi’s opinion. (2) 

2.2.4 Calculate the following financial indicators on 30 September 2023: NOTE: Round off to ONE decimal point. 

• • Debt-equity ratio (3) 
  • Acid-test ratio (4)

INFORMATION: 

A. The following information was extracted from the Statement of  Comprehensive Income for the year ended 30 September 2023: 

NOTE: The income tax rate is 30%. 

B. Extract from the Statement of Financial Position on 30 September: 

C. Fixed assets on 30 September: 

• Land and buildings were sold at cost during the year and a vehicle was sold  at carrying value at the end of the year. Accumulated depreciation on the  vehicle sold was R125 000 at the beginning of the year. Vehicles are  depreciated at 20% p.a. on diminishing-balance method. No additions were  made during the year to both. 
• Equipment was bought at the beginning of the year. No equipment was sold  during the year. Equipment is depreciated at 15% p.a. on cost. 

D. Trade and other receivables include: 

E. Trade and other payables include: 

F. Ordinary Share capital and dividends: 

• 850 000 shares were in issue on 1 October 2022. 
• On 1 December 2022, 150 000 additional shares were issued at R7,00 each.
• 200 000 shares were repurchased on 31 March 2023 at R1,70 above  average price. These shares qualify for interim dividends.  
• Interim dividends of 25c per share were paid on 30 April 2023. 

QUESTION 3: INTERPRETATION OF FINANCIAL STATEMENTS (40 marks; 30 minutes) 

MABHABS LTD and LANDA LTD 

The information relates to TWO companies. Tiger Simelane owns shares and is a  director in both these companies. He recently invested another R375 000 in each  company by buying shares on the JSE at market value. 

REQUIRED: 

NOTE: Where comments or explanations are required, you should: 

• • Quote financial indicators and trends with figures 
  • Give a reason or explanation for the financial indicators quoted 

Refer to information A to C. 

3.1 Purchase of shares: 

• Explain why directors should be interested in the price of their companies’  shares on the JSE. (2)
• Calculate the number of additional shares in Mabhabs Ltd that Tiger was  able to buy on the JSE in 2023. (3) 
• Comment on the price that Tiger paid for the shares in each company, and  give TWO reasons why he might have been satisfied to pay the price. (6) 

3.2 Dividends, earnings and returns: 

• Explain your opinion on which company has the better dividend pay-out  policy. Give comparative figures. (6) 
• Compare and comment on the % return on equity earned by each company. (4) 
• Tiger feels that the earnings per share (EPS) of Landa Ltd is much better  than that of Mabhabs Ltd. Explain why he feels this way. (5) 

3.3 Refer to Information B and C: 

Mabhabs Ltd was negatively affected more than Landa Ltd by the poor  economy. 

(a) Explain TWO decisions taken by the directors of Mabhabs Ltd in  response to the state of the economy, and how these decisions will affect  the company in future. (6) 

(b) Explain TWO decisions taken by the directors of Landa Ltd that affect  risk and gearing. Quote and comment on TWO financial indicators. (8)

INFORMATION: 

A. Shareholding of Tiger Simelane in two companies: 

B. Financial indicators, market prices and interest rates on 28 February 2023: 

C. Extracts from the Cash Flow Statement for the year ended  28 February 2023:  

NOTE: Inflow and outflow of cash are NOT indicated on amounts below:

QUESTION 4: CORPORATE GOVERNANCE (15 marks; 15 minutes) 

4.1 Company directors are expected to identify and take account of legitimate  expectations of stakeholders. 

• Provide TWO consequences of neglecting the expectations of the  stakeholders by the company. (4) 

4.2 AUDIT REPORTS 

Choose the audit opinion from COLUMN B that describes the audit report in  COLUMN A. Write only the letter (A–C) next to the question numbers 

(4.2.1–4.2.3) in the ANSWER BOOK. 

 (3 x 1) (3) 

4.3   (a) Which type of audit report will encourage shareholders to buy shares in a  company? (1) 

(b) Explain why it is important for an independent auditor to be a member of a  professional body. (1) 

4.4 Extract from an article in the Saturday News: 

Explain the role of the remunerations committee. Give THREE points. (6)

TOTAL: 150

MARKING GUIDELINE

MARKS: 150 

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. Unless otherwise stated, give full marks for correct answer. If the answer is incorrect, mark workings.
4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark as a working mark for that figure (not  the method mark for the answer). NOTE: If figures are stipulated in marking guideline 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.  If candidates provide more than the required number of responses, inspect all responses to give benefit to the  candidate. Penalties may be applied for foreign entries if candidates earn full marks on a question (max. -2 per Q)
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, marker must inspect the reasonableness of the answer.
10. Operation means ‘check operation’. ‘One part correct’ means operation and one part correct.  NOTE: Check operation must be +, -, x, ÷, as per candidate’s calculation (if valid) or per marking guideline. 
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 ⌧. 
13. Be aware of candidates who provide valid alternatives beyond the marking guideline. Note that one comment could  contain different aspects.  
14. Codes: f = foreign item; p = placement/presentation. 

QUESTION 1 

1.1

1.1.1 Prospectus ✓ 

1.1.2 Shares ✓ 

1.1.3 Directors’ Report ✓ 

1.1.4 Independent Auditors’ Report ✓ 

1.2.1 Calculate: The value of closing stock of AI generators using the Specific  Identification-method. 

22 400 x 100/140 = 16 000 ? one part correct   (either 22 400 or 100/140) 

15 + 95 – 89 = 21 ✓ x 16 000 336 000 ? 

One part correct 3 

1.2.2 Calculate the correct net profit after tax for the year ended  29 February 2024. Indicate ‘+’ for increase and ‘–’ for decrease at each  adjusted amount. -‘ 

(i) No WORKINGS ANSWER Incorrect net profit before tax 3 609 320 

(ii) Provision for bad debts adjustment (51 180 – 36 074) = + 15 106 ✓?*

(iii) Profit on sale of asset (65 000 – 1) = + 64 999 ✓ 

(iv) Insurance (21 540 x 9/12) = + 16 155 ✓?*

(v) Rent Income (213 300/2 370 = 90) 90 ✓ x 180 ✓ x 2 ✓ = - 32 400 ?* 

(vi) Consumable stores = + 5 320 ✓

(vii) Directors’ fees (1 237 500 x 4/44) = - 112 500 ✓?*

Net profit before tax 3 566 000

Income tax (3 566 000 x 30%) = - 1 069 800 ?* 

Correct net profit after tax operation 2 496 200 ? *One part correct

1.2.3 LIYABONA LTD 

STATEMENT OF FINANCIAL POSITION ON 29 FEBRUARY 2024 

QUESTION 2 

2.1

2.1.1 Capital employed ✓ 

2.1.2 Outflow ✓ 

2.1.3 Net current assets / net working capital ✓ 

2.2 MIMOSOA LTD 

2.2.1 Cash Flow Statement for the year ended 30 September 2023

 NOTE: Allocate method mark for both ‘one part correct’ and ‘correct sign’.

2.2.2 RETANED INCOME NOTE  

2.2.3

2.2.4

QUESTION 3 

3.1 Purchase of shares: 

Explain why directors should be interested in the price of their companies’  shares on the JSE. 

Any ONE valid answer ✓✓ 

• • To compare with other companies. 
  • Shareholders will want to have capital growth on their investment. 
  • Directors will be judged on the performance of the shares as this reflects  the performance of the company. 
  • It shows public confidence in the company. 2 Calculate the number of additional shares in Mabhabs Ltd that Tiger was  able to buy on the JSE in 2023. 

Comment on the price that Tiger paid for these shares and give TWO  reasons why he might have been satisfied to pay the price. 

FOR EACH COMPANY: - Comment with figures ✓ ✓ Reason ✓ 

MABHABS 

JSE price exceeds NAV by 90 cents (R7,50 – R6,60) 

Reason: 

• He wants to be a majority shareholder. 
• JSE price reflects public demand for the shares. 
• He feels that there is potential for high returns. 
• He can have more influence over decisions by the board of directors. 

LANDA 

JSE price is lower than NAV by 50 cents (R4,25 – R3,75) 

Reason: 

• Landa is earning high returns for him. (ROSHE 17,9%) 
• The JSE price is a good deal compared to NAV. 
• Optimistic about the future. 6 

3.2 Dividends, earnings and returns: 

Explain your opinion on which company has the better dividend pay-out  policy. Give comparative figures. 

• Mabhabs Ltd ✓ 
• Retaining funds for future expansion ✓ 

OR 

• Landa Ltd ONE mark 
• Rewarding shareholders to keep them happy. ONE mark 

FIGURES: 

• Mabhabs Ltd pays out 65% of their earnings (60c of 92c) ✓✓ 
• Landa Ltd pays out 96% of their earnings (75c of 78c) ✓✓

Compare and comment on the % return on equity earned by each  company. 

• Mabhabs Ltd is not performing well ✓ 
• ROSHE is 6,1% which is below the interest on investment of 7%. ✓ 
• Landa Ltd is performing well ✓ 
• ROSHE is 17,9% which is above the interest on investment of 7%. ✓4 

Tiger feels that the earnings per share (EPS) of Landa Ltd is much better  than that of Mabhabs Ltd. Explain why he feels this way. 

• Comparison of EPS for both companies ✓ ✓ 
• EPS of Mabhabs Ltd is 92 cents  
• EPS of Landa Ltd is 78 cents  
• Any ONE comparative comment – Financial indicator ✓ figure/s ✓✓ 

*Accept if a learner calculated EPS yield.5 

3.3 Mabhabs Ltd was negatively affected more that Landa Ltd by the poor  economy. 

(a) Explain TWO decisions taken by the directors of Mabhabs Ltd in response  to the state of the economy, and how these decisions will affect the  company in future. 

TWO valid decisions ✓ ✓ Figures ✓ ✓ Effect of decision on company ✓ ✓ 

(b) Explain TWO decisions taken by the directors of Landa Ltd that affect  risk and gearing. Quote and comment on TWO financial indicators. 

TWO valid decisions ✓ ✓ Figures ✓ ✓ 

• Increased loan, R3 200 000 
• Sold shares, R400 000 
• Repurchased shares, R0 

TWO financial indicators with figures ✓ ✓ Comment on risk ✓ Comment on gearing ✓ 

QUESTION 4 

4.1 Provide TWO consequences of neglecting the expectations of the  stakeholders by the company. 

TWO valid points ✓✓ ✓✓ 

• Stakeholders will lose trust and confidence in the company 
• Promote calls for boycotts, resignations or lawsuits. 4 

4.2 Choose the audit opinion from COLUMN B that describes the audit report in  COLUMN A. Write only the letter (A–C) next to the question numbers  (4.2.1–4.2.3) in the ANSWER BOOK. 

4.3 (a) Which type of audit report will encourage shareholders to buy shares  in a company? 

Unqualified audit report ✓ 1 

(b) Explain why it is important for an independent auditor to be a member  of a professional body. 

ONE valid point ✓ 

• So that readers of financial statements can have confidence in his  opinion. 
• Assurance to the public that he/she is well trained on an on-going  basis. 
• Disciplinary action if negligent in performing duties. 
• Aware of latest legislation, e.g., IFRS, Companies Act, King Code,  etc. 
• Act in ethical manner. 
• To benchmark quality of work. 1

4.4 Explain the role of the remunerations committee.

Give THREE points. Any THREE valid points ✓✓ ✓✓ ✓✓ 

• Review salaries, bonuses, and other earnings. 
• Prevent directors from paying themselves too much. 
• They must approve and give advice on proposals with regards to fees,  bonuses, etc. 
• Ensure fairness / transparency in the payment of fees / salaries. 
• Detect and prevent fraud / corruption / wastage. 6

TOTAL MARKS 15 

TOTAL: 150