2022 Gr 12 Accounting Study pack Activities ENG

Western Cape Education Department Directorate: Curriculum FET ACCOUNTING Gr 12 2022 Study Pack ACTIVITIES & CORE NOTES Workbook https://wcedeportal.co.za/eresource/213136

2022 Gr 12 Accounting Study Pack Activities/Notes Dear Grade 12 Accounting learner The activities in this booklet have mostly been selected from the latest National past examination papers to ensure all content and the latest exam trends are covered. You will therefore be well prepared for tests and exams if you work through all the activities regularly and with dedication. Past exam questions prior to Nov 2019 included in the 2020 Revision Pack are still relevant (except Bank reconciliation) and may be included in your revision / study programme. The content for Paper 1 and Paper 2 are listed on page 3. It is important that your revision /study programme is based on these topics so that you are well prepared for each paper. Note that Fixed assets and Inventory may be assessed in BOTH papers. In your preparation focus on: - the core notes/tips for each topic that highlight what can be expected in exam questions. It also includes formats and basic information to strengthen your basic knowledge of the particular topic. - the time allocated to each activity. Use this allocation to practice how to manage your exam writing time. Try to adopt time saving methods in order to work more effectively through an activity/exam question. - Work EVERY DAY on one or more activity to build your Accounting confidence, especially after a topic has been completed in class. - Other exam tips that you could practice regularly and apply when you write a test or exam: ▪ ALWAYS read the instructions carefully before answering the question. ONLY do what is required. ▪ Start with the questions you know best, e.g., Budgeting (some easy marks are available in this topic) to boost your confidence. ▪ Do not spent too much time on a question. IF the allocated time is over, move on to a next question to earn more marks. Only come back to incomplete questions, if you have time to spare. ▪ Underline certain words in the questions, so that you know exactly what the examiner expects, e.g., quote figures; Give TWO points…. ▪ SHOW ALL CALCULATIONS CLEARLY. You may use subheadings to label your calculations, e.g., 'depreciation', 'old' or 'new', etc. Your positive attitude and your drive to succeed supported by hard work will ensure success in Accounting. The WCED Accounting team INDEX TOPIC Page No. Companies (P1) Core notes: Financial statements & Analysis and interpretation 4 - 11 Activities 1 - 17 (including P1 Fixed Assets & P1 Inventory ) 12 - 42 Fixed Assets Core notes 43 Activity 1-3 (Activity 2 – 6 (Companies) also include P1 Fixed Assets) 43 - 46 Inventory Core notes 47 Activities 1 - 5 48 - 56 Manufacturing / Cost Core notes 57 accounting Activities 1 - 5 58 - 66 Reconciliations Core notes 67 - 69 Activities (Bank, Debtors, Creditors) 69 - 81 Budgets Core notes: 82 Activities 1 - 5 83 - 93 VAT Core notes 93 Activities 1 - 8 94 - 96 2

2022 Gr 12 Accounting Study Pack Activities/Notes MID-YEAR*, TRIAL AND FINAL EXAMS (two papers) (on 2 different days) Paper 1 Paper 2 150 marks; 2 hours 150 marks; 2 hours Topics: Discipline 1 Topics: Discipline 2 Recording, reporting, Internal management evaluating and control processes Gr 12 Formula sheets Gr 12 Formula sheets included included * Midyear exams are subject to change in policy Two-paper classification for questions and/or sub- questions in this revision booklet   / Paper 1 Paper 2 Both papers 3

2022 Gr 12 Accounting Study Pack Activities/Notes PAPER 1 COMPANIES COMPANY ACCOUNTS / FINANCIAL STATEMENTS Company concepts Authorised share capital | Issued Share capital | Shareholders' Equity (OSE) | Dividends (Interim / Final) Shareholders for dividends | Income tax | SARS (income tax) | Provisional tax | Retained income (Earnings less Dividends) | Earnings per share (Net profit after tax divided by number of issued shares) Limited liability | CEO (Chief Executive Officer) | Directors (executive, non-executive, etc.) | Auditors (internal and independent/external) Parties involved in companies Documents/statements relating to companies ▪ Shareholders ▪ Statement of Comprehensive Income ▪ Directors/ Chief Executive officer (CEO) / CFO ▪ Statement of Financial Position ▪ Internal auditor vs Independent auditors ▪ Cash flow statement ▪ SARS ▪ Auditor’s report ▪ Directors' report ▪ Tax assessment COMPANY ACCOUNTS  Dr SARS (Income tax) Cr Bank (payment of opening bal.) Balance b/d (opening) Bank (provisional) Income tax (assessment for the year) Tax calculated for the year; Bank (second payment) amount in Statement of Balance c/d = CR Balance b/d Balance c/d = DR Balance b/d Comprehensive Income (Payable TO SARS) OR (Payable BY / Receivable from SARS) Dr Dividends on ordinary shares Cr Bank (interim dividend paid) Balance b/d (opening) Shareholders for dividends Appropriation a/c (dividends declared, not paid yet) ▪ Interim dividend is paid during the year ▪ Final dividend is declared at end of year - will only be paid in the next fin. Year (=Shareholders for dividends) ▪ Calculate dividends: Number of ISSUED shares X cent per share declared for dividends NOTES on other accounts and NOTES to financial statements:  ▪ Appropriation account NEVER has a BALANCE ▪ Retained income has opening balance and closing balance ▪ Retained Income NOTE is just another format of the Retained Income account ▪ The opening balance for Shareholders for dividends a/c is the amount owed from previous year and the closing balance should be the final dividends DECLARED at end of this year. This balance is shown in Trade and other payables. 4

2022 Gr 12 Accounting Study Pack Activities/Notes STATEMENT OF COMPREHENSIVE INCOME (INCOME STATEMENT)  Format Sales (- Debtors allowances) ADJUSTMENTS (less) Cost of sales ( ) ▪ ALWAYS ADD: Accrued income; Accrued expenses ▪ ALWAYS SUBTRACT: Prepaid expenses; Income received in advance Gross Profit 'A' ▪ Goods returned by debtors: Add selling price to Debtors' allowance and Other operating income 'B' subtract from Debtors' control in Balance sheet; the Cost of these goods to … … be subtracted from COS and add to Trading stock (in Balance sheet) … … ▪ Subtract: Consumable stores on hand from total in the trial balance Gross operating income 'A+B' ▪ Trading stock deficit/surplus - look out for adjustments affecting inventory ▪ Depreciation: Vehicles and Equipment - know the different methods to Operating expenses ( ) 'C' calculate depreciation for the year. … … ▪ Bad debts: look out for adjustments affecting debtors … … ▪ Provision for bad debts adjustment: bigger than the balance given Operating profit '(A+B) - C' (Expense); smaller than balance given (Income) (add) Interest income ▪ Contributions to UIF/Medical aid/Pension funds must be ADDED to Salaries and wages Profit before Interest expense ▪ Bad debt recovered: INCOME received from a debtor who was previously (less) Interest expense ( ) written off. Include as income. Profit before Income tax ▪ Insurance - use amount in the adjustment (outside the accounting period) (less) Income tax ( ) and DEDUCT from Insurance Net profit after income tax STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)  Format ASSETS NON-CURRENT ASSETS Fixed assets Cash & Cash equivalents includes Bank, Cash float, Financial assets: Fixed deposit Petty cash, Savings account and the portion of the fixed CURRENT ASSETS deposit that matures. If Bank has an overdraft balance (CR balance) it will NOT be shown here, but in current liabilities. Inventory Trade & other receivables Cash & cash equivalents TOTAL ASSETS Short term portion of the loan EQUITY & LIABILITIES If part of the loan is to be repaid (paid back) during the next CAPITAL & RESERVES 12 months, this amount must be deducted and added to current liabilities as a 'short-term loan' Ordinary share capital Retained income NON-CURRENT LIABILITY Long term loan CURRENT LIABILITY Trade & other payables Bank overdraft (IF Bank has a credit balance) Short-term portion of loan TOTAL EQUITY & LIABILITY ALWAYS show ALL calculations in brackets, where Notes are not required. 5

2022 Gr 12 Accounting Study Pack Activities/Notes Assets Non-current assets ▪ Fixed assets are always shown at book/carrying value (Know the format of the Fixed Asset Note) ▪ Fixed deposit (a portion may mature during the next financial year = subtract and add to Cash and Cash equivalents. Current assets ▪ MUST be in correct order: Inventory; Trade & other receivables; Cash & cash equivalents ▪ Inventory includes consumable stores on hand ▪ Trade & other receivables: o Debtors (remember to DEDUCT provision for bad debts) o Could include the amount overpaid to SARS (DR balance) o ADD Accrued income and Prepaid expenses ▪ Cash & cash equivalents: (see the bubble on the previous page) Equity / Capital & Reserves Ordinary share capital ▪ NEVER add Authorised Share capital (in the note) or show it in the Statement of Fin. Position ▪ Note on Ordinary share capital: (KNOW the format) Ordinary Share Capital Note (Format) (Authorised section not always required) Authorised No. of registered xxx shares Ordinary shares (DO NOT ADD to amounts below) Issued No. of issued shares (Beginning) Ordinary shares at beginning of year xxx add No of new issues Ordinary shares during the year xxx (subtract this No. of shares) Ordinary shares repurchased at AVERAGE share price (R or c amount) ( xxx ) No. of issued shares (end) Ordinary shares at end of the year xxxx Retained income note (Format) Balance at beginning of the year (add) Net profit after tax (less) Repurchase of shares (No of repurchased shares x (buy back price minus average share price)) Ordinary share dividends Paid (Interim dividend amount) Recommended (Final dividends declared OR Shareholders for dividends at end of year) Balance at the end of the year Current liabilities ▪ Trade and other payables include: o SARS amount (CR balance - we owe them)(Could be Income tax, PAYE, VAT) o Accrued expenses o Income received in advance o Shareholders for dividends (declared amount only) o Creditors for salaries + Contributions like UIF/Pension/Medical aid EXAM TIPS: ▪ The Statement of Financial Position may be completed in 'parts', i.e. Assets or Equity and Liabilities only. ▪ Some subtotals and/or totals could be mathematically calculated where financial indicators are given, e.g. Acid test ratio is 0,8 : 1 Required: Calculate Current Assets = Total current liabilities x 0,8 (NB: Current assets consist of Inventories + Trade and other receivables + Cash & Cash equivalents; therefore, any one of these figures can be mathematically calculated) 6

2022 Gr 12 Accounting Study Pack Activities/Notes CASH FLOW STATEMENT  Basic concepts Purpose of cash flow statement | Cash inflow | Cash outflow | Operating activities | Investing activities Financing activities | Change in working capital CFS Format  Cash flow from operating activities 1 Directors' decisions in CFS that affect 'Cash' flow Cash generated from operations Ideally positive (business generates cash effectively) Interest paid ( ) Compulsory Dividends paid ( ) Decision Income tax paid ( ) Compulsory Cash flow from Investing activities 2 Ideally negative (in brackets) to show growth/expansion Purchase of fixed assets ( ) Decision; Large amount will have a negative effect on cash Proceeds from sale of assets Decision; to replace outdated technology / improve productivity (NEVER to make a 'profit'!!!) Fixed deposits (Matures / Placed) Decision Cash flow from Financing activities 3 Ideally positive (funding inflow to finance investing activities) Proceeds from shared issued Decision; Buying back of shares ( ) Decision Proceeds/Repayment of loan Decision Net change in cash & cash equivalent (1 + 2 + 3) Net result of the decisions Cash & cash equivalent beginning of year NOTE: Cash & cash equivalent end of year Major decisions are identified by LARGE amounts Expansion or growth may also be driven by market share and not only cash situation. Note 1: Reconciliation between profit before tax and cash generated from operations ▪ Profit before tax - make sure you use the profit before tax from the Income Statement. If profit after tax is given, remember to ADD back tax. ▪ Adjustments i.t.o. Depreciation and Interest expense. These figures are taken directly from the Income statement and are ADDED to the profit before tax to give you the operating profit before changes in working capital. ▪ Changes in working capital o difference between the previous year and the current year’s figures o exclude amount owed to Shareholders, Accrued interest and amount owed to SARS. ▪ Dividends paid calculation o Use the information from Retained Income note and/or Trade & other Payables ( Shareholders for Dividends) o Total dividends for year (Interim + Final) plus amount owing at beginning of year minus amount owing at end of year o OR Interim dividends paid during the year PLUS Shareholders for dividends BEGINNING of the year. ▪ Taxation paid calculation Use information from Income statement (IS), Trade and other receivables (SARS = Debit balance) and Trade and other payables (SARS = Credit balance). ONE of the following calculations must be used, depending on the balances of SARS at beginning of the year (or previous year) and end of the year: o Income tax (from IS) ADD SARS (credit balance, previous year) LESS SARS (credit balance, end of year) o Income tax (from IS) ADD SARS (credit balance, previous year) ADD SARS (debit balance, end of year) o Income tax (from IS) LESS SARS (debit balance, previous year) LESS SARS (credit balance, end of year) o Income tax (from IS) LESS SARS (debit balance, previous year) ADD SARS (debit balance, end of year) 7

2022 Gr 12 Accounting Study Pack Activities/Notes ▪ Investing Activities o Information from Fixed/Tangible asset note; Combine/ Use TOTAL fixed assets, depending on how information was given. o Calculation for assets purchased OR sold: Fixed assets @ carrying value (previous year/opening balances) 1 Depreciation (from IS) less 2 Assets purchased @ COST during the year* add 3 Assets sold @ carrying value during the year ** less 4 (ignore profit/loss on sale of asset) Fixed assets @ carrying value (current year/closing balances) = 5 *IF assets purchased is not given, then calculate it: 5 + 4 + 2 - 1 = answer ('3') in brackets in CFS **IF assets sold is not given, then calculate it: 5 - 3 + 2 - 1 = answer ('4') without brackets in CFS o Investments: Fixed deposit made/placed: (use brackets); fixed deposit matures: NO brackets! ▪ Financing Activities o Proceeds from shares issued during the year: NO Brackets (inflow) o Shares bought back: SHOW brackets (outflow) o Loans: Difference between current year and previous year: Current year more than previous year = NO Brackets - inflow Current year less than previous year = SHOW brackets - outflow (loan was paid) ▪ Net change in Cash and cash equivalents ADD Operating activities PLUS Investing activities (IF it is negative, subtract!) PLUS Financing activities Making comments on financial indicators: ▪ Compare: o Goals set by the business, e.g., mark up% applied vs the mark-up actually reached o Indicators of the same business over two financial years (to determine the increase / decrease / trend) o Indicators of two or more businesses in the same industry o Interest rates of alternative investments with ROSHE o Interest rate of loans with ROTCHE ▪ Suggest alternative directions/actions to improve a declining situation EXAM TIPS: ▪ You need to know the formula BUT do not write it down in the exams. (No marks are allocated for it - formula sheet is given ONLY to remind you of the correct formula to use) ▪ Problem solving (creative thinking and own opinion) is integrated in the analysis and interpretation questions. ▪ You may be required to analyse possible investment in two companies (compare risk, gearing, return on investment in both companies). [ENSURE that you understand financial gearing to be able to comment and compare effectively] ▪ You may also compare two financial years in one and/or two companies. 8

2022 Gr 12 Accounting Study Pack Activities/Notes FINANCIAL INDICATORS Financial statements are analysed to find answers to certain questions. Structure your comments with these 'questions' (below) in mind QUESTION TERM FINANCIAL INDICATOR FORMULA % Gross profit on sales / GP How profitable is the /Sales x 100 = … % % Gross profit on CoS / GP business; how well /CoS x 100 = … % does it control its Profitability % Operating profit on sales OP /Sales x 100 = … % expenses and how and operating / effective is the efficiency % Operating expenses on sales OE business in its /Sales x 100 = … % / operation? % Net income on sales / NI /Sales x 100 = … % Current ratio  CA : CL (CA - Inventory) : CL Acid test ratio  (Debtors + Cash) : CL Cost of Sales Stock turnover rate / Average Trading Stock Can the business The higher this number, the faster assets are turned into cash repay its short-term Average Stock x 12 (365) debts; is the operating Liquidity Stock holding period / Cost of Sales 1 (1) capital being handled Debtors' collection period Average Debtors x 365 efficiently? Cash flow Credit Sales problems? / Aim is 30 days Average Creditors x 365 Creditor's payment period Credit Purchases • Good, when it takes longer to repay / creditors • Negotiate for 90 days to avoid interest Can the business Owners’ equity or Net assets Solvency Total assets : total liabilities repay its debt? (for sustainability/continuity)  Net profit after Tax x 100 Return on shareholders’ Average SHE equity (ROSHE)  Compare this % with alternative investments, e.g. fixed deposit interest % Net profit after Tax x 100 = …c Earnings per share (EPS)  No. of shares issued 1 It shows the profit per share available for sharing with shareholders Dividends x 100 = …c Do the owners earn a No. of shares issued 1 good return on their Return on Dividends per share (DPS)  It is the proportional share of the profit paid + owed to shareholders. capital invested in the investment **EPS - DPS = retained profit per share for future business? expansion Total SHE x 100 = …c No. of shares issued 1 - Compare to issued or ave. price of shares and to market (JSE) price of shares. Net asset value per share - If the NAVPS increases, it shows that profits are (NAVPS)  retained; company is expanding and is wealth growing. - When company issues more shares, it should be at NAV to retain wealth. 9

2022 Gr 12 Accounting Study Pack Activities/Notes LT Liabilities : SHE = (…. : 1) SHE = Share capital + Retained Inc - Creditworthiness = ability to obtain loans. To what extent is the business funded by Debt : Equity ratio  - High risk/low creditworthiness = 0,5 : 1 to 1 : 1 (opt to issue shares) - Low risk /high creditworthiness = 0,1 : 1 to 0,4 borrowed capital, and : 1 (borrow more) to what degree does it - Compare this ratio before and after a change affect the financial Risk / gearing in loans to show the change in risk levels risk? Net Inc before tax and int. x 100 Can the business Ave. capital employed 1 borrow more money? [Capital employed = SHE + LT loans] Return on total capital Compare to % interest on loans. Is it worth it? employed (ROTCE)  - Higher = high leverage; loans are used to expand and improve return/ profit. - Lower = low leverage; loans not used effectively to improve return/profit. May not be able to repay loans with interest. NOTE: Debt-Equity ratio shows risk and financial gearing (relationship between debt (loans) and own capital (shareholders’ equity): ▪ High risk relates to positive gearing (can expand/grow with loans obtained, although paying back may be challenging) ▪ Low risk relates to negative gearing (limited opportunities for expansion) Financial Leverage refers to the USE of debt (loans) to accelerate (like the ‘gears’ in a vehicle) financial growth (wealth) and expanding business operations. GR 12 FORMULA SHEET with explanatory notes Familiarise yourself with the layout of the formula sheet to use it effectively in exams 10

2022 Gr 12 Accounting Study Pack Activities/Notes AUDIT REPORTS  (More details are available in the 2020 Revision Pack) Basic concepts Internal auditor | external (independent) auditor | audit opinion | unqualified opinion | qualified opinion disclaimer of opinion | audit sampling | audit evidence | internal audit report | external audit report ▪ External audit reports are included in the published Financial Statements of companies. ▪ Shareholders, employees and creditors need to TRUST and BELIEF the financial statements prepared by the internal auditors and approved by directors. Their ‘relationship’ with the company relies on these financial statements. ▪ External auditors issue an OPINION on the published financial statements based on their external audit after checking the reliability of the sampled audit evidence, e.g. internal controls that are in place, etc. ▪ THREE types of external audit opinions based on the auditors’ findings: o Unqualified = a ‘clean’ audit; there are no issues/challenges found; shareholders may believe the financial results reflected in the published financial statements. o Qualified = some issues were found that can make statements less credible. Directors will have an opportunity to explain or make changes to the statements. o Disclaimer of opinion = Auditors are not willing to issue any opinion as the financial information are too flawed and does not meet IFRS standards, which are ‘auditing rules’ standardised for all auditors. ▪ Auditors should be registered with a professional institution (SAICA, SAIPA, ACCA, SAIBA, etc.) for the following reasons: o Professionally recognition to work (practice) as an independent auditor o Their qualifications are verified o Act/Work within a professional code of conduct to be ethical and trustworthy CORPORATE GOVERNANCE  Basic concepts Shareholders | directors | board of directors | executive directors | non-executive directors | management committees | transparent & ethical management | management | control | CEO | CFO In Gr 12 corporate governance entails: ▪ effective, responsible and ethical management of a company. ▪ a broader /deeper insight into managing and control in a company. ▪ DIRECTORS (on behalf of shareholders, the owners of the company) are responsible for managing companies. ▪ Directors may hold shares in the company (this depends on the MOA of the company) ▪ Directors are members of the BOARD of DIRECTORS who are collectively in charge of the management of a company’s business operations. ▪ They make strategic (long term) and operational (short term) decision [see the Cash Flow Statement for some of the strategic decisions] ▪ Some management duties are given (delegated) to either individual directors or management committees. Types of directors ▪ Executive directors: employed by the company; manage the day-to-day operations ▪ Non-executive (‘outside’) directors: they are not part of the executive team of directors but are part of the board of directors ▪ CEO (Chief Executive Officer): chairperson (leader) of the board of directors ▪ CFO (Chief Financial Officer): responsible for managing the company’s financial strategies and operations; reports directly to the CEO. Management and/or Work committees ▪ These committees ensure accountability and transparency in managing and operate the company. ▪ They manage/address certain challenges relevant to the company, such as environmental awareness, corruption and/or fraud, job creation, etc. ▪ Examples: o Audit committee; remunerations committee; social & ethics committee; risk committee 11

2022 Gr 12 Accounting Study Pack Activities/Notes COMPANIES (Paper 1) COMPANY TRANSACTIONS ACTIVITY 1: TRANSACTION ANALYSIS AND AUDIT REPORT (Q1, May/June 2021) (20 marks; 15 minutes) 1.1 Choose the correct word from those given in brackets. Write only the word next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK 1.1.1 The concept of (limited/unlimited) liability ensures that shareholders are not responsible for the debts of the business in the event of bankruptcy. 1.1.2 When preparing financial statements, creditors will be reflected as trade and other (receivables/payables/equity). 1.1.3 The separate disclosing of significant items, such as interest expenses, is an application of the (prudence/materiality) GAAP principle (3) 1.2 ROCK-STONE LTD REQUIRED: Analyse the transactions below according to the headings on the table provided in the ANSWER BOOK. • Indicate account debited and account credited in the General Ledger and the effect on the accounting equation. Indicate an increase as +, a decrease as – and no effect as 0. Refer to the example provided • Assume a favourable bank balance at all times. Example: Bought stationery on credit, R3 200 NO. ACCOUNT DEBITED ACCOUNT CREDITED AMOUNT A O L e.g. Stationery Creditors' Control 3 200 0 – + TRANSACTIONS: 1.2.1 Electronic funds transfers (EFT) totaling R136 000 were made to share- holders, being the amount owing to them at the end of the previous financial year. 1.2.2 The company received R450 000 for the issue of new shares. 1.2.3 The income tax assessment for the year was received. The income tax amount, R338 200, exceeded the provisional tax payments made. (9) 1.3 Independent audit report: You are provided with an extract of the audit report for Rock-Stone Ltd for the financial year ended 28 February 2021. REQUIRED: 1.3.1 Identify the type of audit report that the company received. Give a reason for your answer. (2) 1.3.2 Explain why the auditor referred to: • Pages 8 to 23 (2) • International Financial Reporting Standards and the Companies Act of South Africa (2) 1.3.3 Name any TWO items of audit evidence that the auditors may have used. (2) 12

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: Extract of the audit report: To Shareholders Basis of Opinion We conducted our audit in accordance with international standards on auditing. We are independent of the company, as applicable to performing audits, and with other ethical requirements as per the professional code of conduct. The audit evidence we obtained was sufficient and appropriate. Opinion We have audited the financial statements, as set out on pages 8 to 23. These comprise the Statement of Comprehensive Income, Statement of Financial Position and the Cash Flow Statement for the year ended 28 February 2021. In our opinion, the financial statements present fairly, in all material respects, the financial position of the business as at the year then ended, its financial performance and cash flows, in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa. Perun and Balan Registered Auditors 30 May 2021 20 Activity 1 https://wcedeportal.co.za/eresource/208431 STATEMENT OF COMPREHENSIVE INCOME ACTIVITY 2: STATEMENT OF COMPREHENSIVE INCOME AND RETAINED INCOME NOTE (Q2, May/June 2021) (50 marks; 40 minutes) PEYPER LIMITED You are provided with information for the financial year ended 28 February 2021. REQUIRED: 2.1 Refer to Additional Information B(f). Calculate the value of the closing stock on 28 February 2021 using the weighted- average method. (5) 2.2 Complete the Statement of Comprehensive Income (Income Statement) for the year ended 28 February 2021. (Some of the pre-adjustment figures have been entered for you.) (37) 2.3 Prepare the Retained Income Note on 28 February 2021. (8) 13

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Extract from the Pre-adjustment Trial Balance on: 28 Feb. 2021 29 Feb. 2020 Balance Sheet accounts section R R Ordinary share capital 13 650 000 14 650 000 Retained income ? 2 978 000 Loan: Wonder Bank 1 439 600 2 150 000 Vehicles ? 1 546 000 Equipment ? 722 000 Accumulated depreciation on vehicles ? 858 000 Accumulated depreciation on equipment ? 269 500 Trading stock 2 000 000 Debtors' control 382 000 Provision for bad debts ? 9 800 SARS (Income tax) 520 000 Nominal accounts section Sales ? Cost of sales ? Directors' fees 4 836 000 Audit fees 497 200 Advertising 342 400 Sundry expenses 88 000 Trading stock deficit ? Bad debts recovered 5 800 Rent income 208 250 Interest income (on fixed deposit) ? Salaries and wages 6 425 000 Depreciation (on vehicle sold) 41 250 Packing material 45 800 Profit on sale of vehicle ? Bad debts 28 800 Ordinary share dividends 672 000 B. Additional information: (a) The mark-up achieved is 160% on cost. The correct gross profit is R14 881 600. (b) Packing materials used during the financial year was R39 700. (c) Received and recorded R9 750 from the insolvent estate of a debtor which paid out 65 cents in the rand. The remaining amount must be written off. (d) Adjust the provision for bad debts to R9 350 (e) One of the employees was on sick leave and was omitted from the Salaries Journal for February 2021. Her salary details are as follows: GROSS NET EMPLOYERS' DEDUCTIONS SALARY SALARY CONTRIBUTION ? 30% of gross R23 800 R4 500* salary *Employers' contributions are debited to the Salaries and Wages account. 14

2022 Gr 12 Accounting Study Pack Activities/Notes (f) Stock valuation: The business sells sunglasses. The accountant has incorrectly calculated the closing stock amount which is reflected on the Trial Balance. The weighted- average method should have been used. This must be corrected. The following details are applicable: • Stock of sunglasses: DATE UNITS TOTAL VALUE 1 March 2020 4 000 R2 433 000 28 February 2021 2 400 ? • Purchases of sunglasses during the financial year DATE UNITS COST PRICE TOTAL PER UNIT PURCHASES R R 31 May 2020 4 200 650 2 730 000 15 October 2020 4 800 790 3 792 000 11 February 2021 2 500 820 2 050 000 TOTAL 11 500 8 572 000 (g) The premises have been rented for the past five years. The rent for March 2021 has been received and recorded. Due to the lockdown, the rent was decreased by 25% per month for only three months from April to June 2020. (h) Loan: Wonder Bank • Fixed monthly repayments of R59 200 have been made and recorded for the financial year ended 28 February 2021. • The loan statement reflected a balance of R1 652 000. • Provide for interest on loan capitalised. (i) An old delivery vehicle was sold for R88 400 cash on 31 December 2020. This has been correctly recorded. Details of the delivery vehicle sold: Cost price R198 000 Accumulated depreciation on date of sale R115 500 Provide for depreciation as follows: • On vehicles at 25% p.a. on cost • On equipment: R90 500 (j) The correct net profit after tax after all adjustments is R1 342 080. The income tax rate is 28% of the net profit before tax. Interest income is the balancing figure. (k) Shares and final dividends NOTE: The relevant entries have been made: • 250 000 shares were repurchased at R4,25 per share on 30 November 2020. • On 28 February 2021, the ordinary share capital comprised 3 412 500 shares. • A final dividend of 36 cents per share was declared on 28 February 2021. All shareholders on the register at the financial year-end qualify for final dividends. 50 15

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 3: STATEMENT OF COMPREHENSIVE INCOME AND RETAINED INCOME NOTE (Q1, NSC Nov 2020 (1) / Sep 2021) (60 marks; 45 minutes) You are provided with information from the records of Victoria Limited for the year ended 30 June 2020. The company sells and repairs two types of fridges: the Icekool and the Freezo models. REQUIRED: 3.1 Refer to Information B(a): Calculate: • Total depreciation for the year (7) • Profit/Loss on sale of fixed asset (2) 3.2 Refer to Information B(d): Calculate the loss on the Icekool fridges destroyed in the fire. (5) NOTE: The relevant figures from Questions 3.1 and 3.2 must also be entered in the financial statement or note. 3.3 Complete the Statement of Comprehensive Income (Income Statement) for the year ended 30 June 2020. (35) 3.4 Prepare the Retained Income Note to the Statement of Financial Position. (11) INFORMATION: A. Balances/totals, among other, from the books on 30 June: 2020 2019 Balance sheet accounts section R R Ordinary share capital 10 150 000 10 500 000 Retained income ? 3 200 000 Mortgage loan: Silver Bank 1 984 000 2 300 000 Vehicles 4 220 000 Equipment 968 000 Accumulated depreciation on vehicles ? 1 325 000 Accumulated depreciation on equipment ? 327 000 Fixed deposit: JM Bank 1 520 000 Trading stock 1 657 500 Debtors' control 2 740 000 Shareholders for dividends ? 427 500 SARS: Income tax (provisional payments) 120 000 Creditors' control 652 000 Nominal accounts section Sales 12 945 000 Cost of sales ? Salaries and wages 2 740 000 Audit fees 356 000 Sundry operating expenses 252 500 Directors' fees 1 279 000 Service fee income 3 400 000 Consumable stores 815 800 Bad debts 196 000 Advertising (Protea TV only) 123 200 Interest on investments 165 000 Dividends on ordinary shares 675 000 16

2022 Gr 12 Accounting Study Pack Activities/Notes B. Adjustments and additional information: (a) No entries have been made for depreciation and the disposal of the fixed asset. • Vehicles are depreciated at 20% p.a. on the diminishing balance method. • Equipment is depreciated at 15% p.a. on cost price. Note that equipment was sold on 31 January 2020. Details are as follows: Cost price R40 000 Accumulated depreciation on 1 July 2019 R18 000 Selling price R22 500 (b) Two directors, Hlophe and Frey earn directors' fees: • Frey has not been paid his full fees because of rent due by him to the company. No entry has been made for the rent yet. • Since 1 December 2019, Frey had rented part of the company property for personal use. The monthly rent of R13 000 must be offset against the directors' fees owed to him. (c) An entry of R28 800 was made for consumable stores returned to a creditor on 27 June 2020. The credit note from the creditor reflects an amount of only R21 600. The credit note is correct but has not been recorded yet. Consumable stores on hand at the year-end were R18 000. (d) Fridges are valued using the specific identification method. No entry has been made in respect of a fire that occurred in the storeroom. A number of Icekool fridges were destroyed and the insurance company will pay out 80% of the cost of the fridges destroyed. The stock record is as follows: OPENING COST NUMBER OF CLOSING MODEL PURCHASES STOCK PER UNIT UNITS SOLD STOCK Icekool 200 units 1 400 units R3 500 1 300 units 275 units Freezo 0 640 units R6 750 550 units 90 units (e) The business uses a mark-up of 60% on the cost of the fridges. Trade discounts granted on the sale of Freezo fridges, totaling R275 000, have been recorded. (f) R32 400 from the estate of an insolvent debtor was deposited into the bank account of the business. This represented 75 cents in the rand. The balance of his account must be written off. (g) Protea TV has been contracted to produce an advertisement and to broadcast it at a fixed monthly rate for the period 1 September 2019 to 31 August 2020. The amount paid to Protea TV includes a once-off fee of R26 000 paid in August 2019 for producing the video. The balance covers monthly advertising on TV for the 12 months commencing 1 September 2019. (h) Provide for interest on the mortgage loan. The statement received from Silver Bank indicates monthly repayments of R48 500. This includes capitalised interest. (i) The income tax rate is 28% of the net profit. (j) Share capital and dividends: • 50 000 shares were repurchased at R9,60 each on 31 March 2020. These shares do not qualify for final dividends. • No new shares were issued in the current financial year. • 1 450 000 shares were in issue on 30 June 2020. • Interim dividends were paid on 31 December 2019. • Final dividends of 56c per share were declared on 30 June 2020. 60 17

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 4: FIXED ASSETS & STATEMENT OF COMPREHENSIVE INCOME (Q1, NSC, Nov 2020 (2)) (60 marks; 45 minutes) The information relates to Robbie Ltd for the financial year ended 28 February 2021. REQUIRED: 4.1 Refer to INFORMATION B(a) for fixed assets. Calculate the following: 4.1.1 The missing amounts denoted by (i) to (iii) on the Fixed Asset Note. (11) 4.1.2 Profit/Loss on the sale of equipment on 1 October 2020. (2) 4.2 Refer to INFORMATION B(e) for trading stock. (4) Calculate the trading stock deficit. 4.3 Prepare the Statement of Comprehensive Income for the financial year ended 28 February 2021. (43) INFORMATION A. Extract from the Pre-adjustment Trial Balance on 28 February 2021: R Mortgage loan: Sufi Bank 1 005 500 Debtors' control 123 000 Trading stock ? Provision for bad debts (1 March 2020) 7 030 Sales ? Cost of sales 6 966 000 Salaries and wages 1 468 120 Directors' fees 3 330 000 Audit fees 91 000 Repairs 476 000 Rent income 173 000 Interest income 25 000 Interest on loan ? Bad debts 19 200 Advertising 25 680 Sundry expenses 452 310 Ordinary share dividends 86 400 B. Adjustments and additional information (a) Vehicles: • The business owns two vehicles on 28 February 2021. The second vehicle was purchased on 1 November 2020. • Vehicles are depreciated at 15% p.a. on cost Equipment: • Depreciation is 20% p.a. on the diminishing-balance method • Unused equipment was sold for R40 000 on 1 October 2020. Accumulated depreciation on the equipment sold was R36 600 on 1 March 2020. 18

2022 Gr 12 Accounting Study Pack Activities/Notes Extract of the Fixed Asset Note VEHICLES EQUIPMENT Cost (1 March 2020) 460 000 360 000 Accumulated depreciation (1 March 2020) (396 750) (187 595) CARRYING VALUE (1 March 2020) (i) 172 405 Additions (at cost) 510 000 0 Disposals (at carrying value) 0 (iii) Depreciation (ii) (31 281) CARRYING VALUE (28 February 2021) Cost (28 Feb 2021) 970 000 285 000 Accumulated depreciation (28 Feb 2021) (b) The business maintains a mark-up of 120% on cost. Note that trade discounts of R648 000 were granted to special customers. (c) The account of debtor B Melta, R800, must be written off. (d) Provision for bad debts must be adjusted to 5% of outstanding debtors. (e) Trading stock is valued on the weighted-average method. The Ledger Account and records reflect that 280 units should be on hand. However, the physical stock count reflects only 262 units on hand. The stock records are as follows: UNITS UNIT PRICE TOTAL Stock at beginning of year 200 R3 600 R720 000 Purchased during the year 1 840 R4 100 R7 544 000 Returns: damaged units 40 R4 100 R164 000 Available for sale 2 000 R8 100 000 Stock units per records 280 ? ? (f) 30% of the audit fees is still outstanding. (g) The monthly rent income did not change during the year. During February 2021 the tenant paid R9 000 for repairs to the premises and deducted this from his rent for February 2021. Repairs are the responsibility of the company, and this was not recorded. The rent for March 2021 was received in advance. (h) The company has four directors earning the same fee. One director resigned on 31 May 2020 and received his fees up to this date. Another director is still owed fees for January and February 2021. (i) Advertising consists of a contract with a newspaper for the entire financial year. Payments are monthly, however instalments were paid for 11 months only. NOTE: The monthly rate decreased by R240 from 1 November 2020 (j) The net profit after tax was accurately calculated at R1 054 000. The income tax rate is 32%. 60 Activity 2-4 https://wcedeportal.co.za/eresource/208436 19

2022 Gr 12 Accounting Study Pack Activities/Notes STATEMENT OF FINANCIAL POSITION ACTIVITY 5: FIXED ASSETS AND FINANCIAL STATEMENTS (Q4, SC 2020) (65 marks; 50 minutes) AVENGERS LTD The information relates to the financial year ended 31 March 2020. REQUIRED: 5.1 Refer to Information B: Calculate the missing amounts denoted by (i) to (iv). (16) 5.2 Prepare the following notes to the Balance Sheet on 31 March 2020: • Ordinary share capital (7) • Retained income (8) 5.3 Complete the Statement of Financial Position (Balance Sheet) on 31 March 2020. Show workings. (34) INFORMATION: A. Amounts extracted from the books on 31 March: 2020 2019 BALANCE SHEET ACCOUNTS R R Ordinary share capital ? 4 800 000 Retained income ? 1 181 250 Mortgage loan: Grandeur Bank 2 508 000 3 150 000 Fixed assets at carrying value 11 458 500 Trading stock (balancing figure) ? Net trade debtors 881 000 Bank (favourable) 454 000 Creditors' control 1 318 000 SARS: Income tax (provisional) 972 000 Income received in advance 32 000 Shareholders for dividends 889 200 752 000 Nominal accounts (pre-adjustment amounts) Commission income 29 920 Rent expense 364 000 Directors' fees 2 275 000 B. Incomplete Fixed Asset Note: LAND AND VEHICLES EQUIPMENT BUILDINGS Carrying value (1 April 2019) 631 000 Cost (i) 1 281 000 Accumulated depreciation (650 000) (200 000) Movements Additions 625 000 Disposals (850 000) 0 (iii) Depreciation (ii) (42 450) Carrying value (31 March 2020) Cost 9 650 000 Accumulated depreciation (iv) 20

2022 Gr 12 Accounting Study Pack Activities/Notes Land and buildings: • A building, on a separate property, was sold at cost. Vehicles: • A new vehicle was bought on 1 January 2020. • Vehicles are depreciated at 20% p.a. on cost. Equipment: • Old equipment, cost R21 000, was sold on 30 September 2019. The accumulated depreciation was R15 000 on 1 April 2019. • Equipment is depreciated at 15% p.a. on the diminishing-balance method. C. Share capital: DATE INFORMATION 1 April 2019 800 000 ordinary shares in issue 31 May 2019 400 000 ordinary shares issued 1 October 2019 60 000 ordinary shares repurchased • Average share price, R7,00 • Repurchase price per share, R10,80 D. Dividends: • An interim dividend of 124 cents was paid on 30 September 2019. • Final dividends were declared, R889 200 E. Mortgage loan: Grandeur Bank • Fixed monthly repayments (including interest) have been made and correctly recorded • Interest of R258 000 has not been recorded by the business yet. • The capital repayment will remain the same over the next financial year. F. The decrease in the provision for bad debts, R2 500, was not recorded. G. Commission income for March 2020, R41 900, was still outstanding. H. The company has three directors who earn the same monthly directors' fee. One director has not received his directors' fee for March 2020 yet. I. Rent for April 2020 has been paid. The rent was increased by 25% on 1 January 2020 J. Net profit after tax and income tax: • The correct net profit after tax after all adjustments is R2 534 400. • Income tax is calculated at 28% of the net profit 65 21

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 6: STATEMENT OF FINANCIAL POSITION AND AUDIT REPORT (Q4, NSC Nov 2019) (65 marks; 50 minutes) 6.1 VISIV LTD The financial year ended on 28 February 2019. REQUIRED: 6.1.1 Calculate: • Amounts for (i) and (ii) in the Fixed Assets Register (5) • Profit/Loss on sale of asset (2) • Fixed assets carrying value on 28 February 2019 (4) 6.1.2 Calculate the correct net profit after tax for the year ended 28 February 2019. Indicate (+) for increase and (–) for decrease. (9) 6.1.3 Refer to Information A–H. Prepare the following on 28 February 2019: • Retained Income Note (9) • Statement of Financial Position (Balance Sheet). (27) NOTE: Show workings. Certain figures are provided in the ANSWER BOOK. INFORMATION: A. Fixed assets: A delivery vehicle was sold on 31 October 2018, but no entries were made to record this transaction. Details of vehicle sold: Delivery Vehicle X43 Date purchased: 1 March 2016 Date sold: 31 October 2018 Sold for: R195 000 (cash) Depreciation rate: 25% p.a. (diminishing-balance method) CARRYING COST DEPRECIATION VALUE 28 February 2017 R400 000 R100 000 R300 000 28 February 2018 75 000 225 000 31 October 2018 (i) (ii) B. List of balances/totals on 28 February 2019 (before taking into account all adjustments below): Ordinary share capital R8 152 000 Retained income (1 March 2018) 865 300 Mortgage loan: Prati Bank 1 758 000 Fixed assets (carrying value) 10 190 000 Fixed deposit: Prati Bank (balancing figure) ? Trading stock 1 102 000 Net trade debtors 1 090 000 Bank (favourable) ? SARS: Income tax (provisional tax payments) 155 000 Creditors' control 1 906 800 C. Net profit before tax, R822 700, was calculated before correcting the following: • Provision for bad debts must be increased by R65 000. • R9 800 of an advertising contract applies to the next financial year. • A tenant paid rent of R334 000 for the period 1 March 2018 to 31 March 2019. Rent was increased by R3 000 per month from 1 January 2019. • Depreciation and profit/loss on the vehicle sold must be recorded. • A further R43 000 is owed for income tax. 22

2022 Gr 12 Accounting Study Pack Activities/Notes D. Ordinary shares: DATE DETAILS 1 March 2018 2 000 000 shares in issue; total book value R7 600 000 31 May 2018 360 000 shares repurchased at R4,10 each 1 October 2018 800 000 new shares issued 28 February 2019 2 440 000 shares in issue E. Dividends: • Interim dividends were paid in September 2018, R295 200. • Final dividends of 20c per share were declared on 28 February 2019. F. A creditor with a debit balance of R7 600 must be transferred to the Debtors' Ledger. G. An EFT payment for R75 000, dated 30 April 2019, was made to a supplier in February. H. After processing all adjustments: • The current ratio is 0,8 : 1. • The current liabilities totalled R2 900 000. • The current portion of the loan is the balancing figure. 6.2 AUDIT REPORT FOR YEAR-END 28 FEBRUARY 2019 The financial statements of Visiv Ltd (see QUESTION 6.1.3) were audited. You are provided with extracts from the audit report. Extracts from the audit report: Basis for audit report Point 1 We were unable to obtain sufficient audit evidence to support the amounts provided for certain income and expense items ... Point 2 Furthermore, the repurchase of shares on 31 May 2018 is not in accordance with provisions of the Companies Act (Act 71 of 2008), as the liquidity of the company has been compromised … Opinion Point 3 Because of the significance of the matters described above, we do not express an opinion … REQUIRED: 6.2.1 Refer to Point 3. What type of audit report did the company receive? (1) 6.2.2 Refer to Point 1. Give TWO examples of audit evidence that the auditors would have required regarding this problem. (2) 6.2.3 Refer to Point 2. • Apart from the current ratio, identify and calculate ONE other financial indicator that the auditors would have used in deciding on this opinion. (4) • Explain what the directors could have done to prevent this comment by the auditors. Provide TWO points. (2) 65 23

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 7: STATEMENT OF FINANCIAL POSITION (55 marks; 45 minutes) (Q1, NSC Nov 2021 (P1)) JIMO LIMITED The information relates to the financial year ended 30 June 2021. The business sells formal clothing for men and women. REQUIRED: 7.1 Refer to Information B. Calculate the value of the closing stock of formal suits that was omitted from the stock (5) sheets on 30 June 2021. 7.2 Refer to Information C. Use the table provided to calculate the correct net profit after tax for the year ended (12) 30 June 2021. Indicate ‘+’ for increase and ‘-‘ for decrease. 7.3 Refer to Information A-H. Complete the following on 30 June 2021: • Retained Income Note (5) • Statement of Financial Position (Balance Sheet) (33) NOTE: • Adjustments from Information C also affect the Statement of Financial Position (Balance Sheet) • Show workings. Certain figures are provided in the ANSWER BOOK. • Figures are NOT required in the shaded areas. INFORMATION: A. List of balances, before taking into account all adjustments below: 30 June 2021 30 June 2020 R R Ordinary share capital ? ? Retained income 3 240 000 Mortgage loan: Best Bank 3 755 000 4 175 000 Trading stock 4 198 500 SARS: Income tax (provisional tax) 1 200 000 Net trade debtors 3 668 810 Bank overdraft ? Petty cash and cash float ? Creditors' control 1 253 000 Accrued income / Income receivable 8 000 Shareholders for dividends 1 170 000 821 700 B. The accountant omitted the closing stock figure of formal suits in the trading stock balance provided in Information A. NOTE: • The first-in-first-out (FIFO) method is used to value the stock of the formal suits. • All other relevant entries have been recorded correctly. The information relating to the stock of formal suits is as follows: 24

2022 Gr 12 Accounting Study Pack Activities/Notes Balances: QUANTITY UNIT PRICE TOTAL VALUE 1 July 2020 110 R1 900 R209 000 30 June 2021 240 ? ? Purchases: 760 R1 943 500 14 Nov. 2020 360 R2 350 R846 000 10 Feb. 2021 170 R2 600 R442 000 18 May 2021 230 R2 850 R655 500 Returns: 25 May 2021 24 R2 850 R68 400 C. The net profit before tax, R4 918 950, was calculated before taking into account/ correcting the following: (i) Audit fees include R123 600 which was paid in advance for the next financial year. (ii) The repayments on the loan are fixed at R35 000 per month (including capitalised interest). Details on the loan statement: • 1 July 2020, R4 175 000 • 30 June 2021, R4 028 000 (iii) Rent income: Rent of R64 000 was received from a tenant for the period 1 July 2020 to 31 August 2021. This has been recorded. This amount takes into account a reduction of R750 per month from 1 May 2021. The year-end adjustment has not been made. (iv) After taking into account the correction above, it was determined that an additional R85 250 is still owed to SARS in respect of income tax for the year. D. Shares and dividends: • 26 000 shares were repurchased on 1 July 2020 at R3,00 above the average share price. • The business did not pay interim dividends during the 2021 financial year. • A final dividend of 65 cents per share was declared on 30 June 2021. • 1 800 000 shares were in issue on 30 June 2021. E. Debtors with credit balances totalling R11 000 must be transferred to the Creditors’ Ledger. F. On 30 June 2021, Jimo Ltd returned 10 ladies’ coats to the supplier, Bargain Wholesalers. The selling price was R1 750 each. The mark-up was 25% on cost. No entry has been made. G. A fixed monthly instalment of R35 000 (to cover loan repayments and interest) has to be paid over the full period of the loan. Interest will decline over the life of the loan. The interest on the loan budgeted for the next financial year is R234 000. H. The following financial indicators were calculated on 30 June 2021: Acid-test ratio 1,2 : 1 Net asset value per share (NAV) 540 cents 55 Activity 5-7 https://wcedeportal.co.za/eresource/209121 25

2022 Gr 12 Accounting Study Pack Activities/Notes CASH FLOW & FINANCIAL INDICATORS ACTIVITY 8: FINANCIAL INDICATORS AND CASH FLOW STATEMENT (Q2, NSC Nov 2020 (1) / Sep 2021) (40 marks; 30 minutes) 8.1 Four statements/reports are provided as options in which each of the following items would appear. Choose the financial statement/report and write only the letter (A–D) next to the question numbers (8.1.1 to 8.1.3) in the ANSWER BOOK. A Cash Flow Statement B Statement of Comprehensive Income (Income Statement) C Statement of Financial Position (Balance Sheet) D Directors' Report 8.1.1. Verbal explanation of the activities of a company for the past year 8.1.2 Bad debts recovered 8.1.3 Net book value of fixed assets (3 x 1) (3) 8.2 ORANGE LTD The information relates to the financial year ended 29 February 2020. REQUIRED: 8.2.1 Calculate the following financial indicators on 29 February 2020: • Debt-equity ratio (3) • Earnings per share (EPS) (4) • Dividend pay-out rate (3) • % return on average equity (ROSHE) (4) 8.2.1 Complete the Cash Flow Statement on 29 February 2020. NOTE: All cash outflows must be shown in brackets to earn full marks. (23) INFORMATION: A. Extract from the Statement of Comprehensive Income on 29 February 2020: Depreciation R 234 000 Interest expense 126 000 Income tax 415 200 Net income after tax 968 800 B. Extract from the Statement of Financial Position: 29 February 2020 28 February 2019 Fixed assets (carrying value) R 9 528 300 R 8 320 300 Fixed deposits 100 000 500 000 Current assets 1 002 000 755 000 Cash and cash equivalents 56 500 5 000 Bank overdraft 0 220 000 Shareholders' equity 8 980 300 7 411 500 Ordinary share capital 8 281 000 7 200 000 Retained income 699 300 211 500 Loan: BB Bank 900 000 1 200 000 Current liabilities 750 000 963 800 SARS: Income tax (Dr) 4 500 (Cr) 23 800 Shareholders for dividends 120 000 160 000 26

2022 Gr 12 Accounting Study Pack Activities/Notes C. Fixed assets: • Old equipment was sold at carrying value, R48 000. • Extensions to the buildings were completed during the financial year D. Share capital: On 1 March 2019, the ordinary share capital comprised 800 000 ordinary shares. A further 200 000 shares were issued on this date. On 29 February 2020, the company repurchased 90 000 shares at R81 000 above the value of the shares based on the average share price of R9,10 per share. These shareholders qualified for final dividends. E. Dividends and earnings: 29 February 2020 28 February 2019 Interim dividends 28 cents 60 cents Final dividends 12 cents 20 cents Earnings per share ? 94 cents 40 ACTIVITY 9: SHARE CAPITAL, FINANCIAL INDICATORS & CASH FLOW STATEMENT (Q2, NSC Nov 2021 (P1)) (35 marks; 25 minutes) The information relates to Brewer Ltd for the financial year ended 28 February 2021. REQUIRED: 9.1 Prepare the Ordinary Share Capital Note on 28 February 2021. (6) 9.2 Calculate the following financial indicators on 28 February 2021: • % operating expenses on sales (2) • Dividend per share (4) • % return on average shareholders’ equity (5) 9.3 Complete the Cash Flow Statement for the year ended 28 February 2021. Certain (18) figures are provided in the ANSWER BOOK. INFORMATION: A. Shares and dividends: DATE DETAILS OF SHARES 1 March 2020 800 000 in issue 30 June 2020 100 000 new shares issued 1 January 2021 30 000 shares repurchased at R1,20 more than the average share price 28 February 2021 ? shares in issue • Interim dividend of R162 000 was paid on 30 September 2020 • A final dividend of 22 cents per share was declared on 28 February 2021. 27

2022 Gr 12 Accounting Study Pack Activities/Notes B. Extract from the Statement of Comprehensive Income (Income Statement) for the year ended 28 February 2021: Sales R7 293 000 Cost of sales 4 862 000 Operating expenses 1 458 600 Net profit before tax 1 350 000 Net profit after tax 985 500 C. Extract from the Statement of Financial Position (Balance Sheet) on 28 Feb. 2021 29 Feb. 2020 R R Petty cash and cash float ? 20 000 Ordinary shareholders' equity 8 038 100 6 450 000 Ordinary share capital 7 395 000 6 400 000 Retained income 643 100 50 000 Loan: Sharks Bank 1 650 000 2 200 000 SARS: Income tax 29 100 35 900 Shareholders for dividends Dr 191 400 Cr 115 300 Bank overdraft 0 95 200 35 ACTIVITY 10: CASH FLOW AND INTERPRETATION (Q5.2/5.3 SC 2020) (66 marks; 50 minutes) 10.1 BOMBAY LTD The information relates to Bombay Ltd for the financial year ended 29 February 2020. REQUIRED: 10.1.1 Fill in the missing amounts on the Cash Flow Statement provided. Show workings. Indicate OUTFLOW in BRACKETS. (22) 10.1.2 Calculate the following financial indicators on 29 February 2020: • % operating profit on sales (3) • Acid-test ratio NOTE: The current ratio is 1,6 : 1 (5) • Net asset value (NAV) per share (5) INFORMATION: A. Extract from the Statement of Comprehensive Income (Income Statement) on 29 February 2020: Sales R4 824 000 Gross profit 1 608 000 Depreciation 312 600 Operating profit 1 122 500 Net profit before tax 984 000 Net profit after tax 688 800 28

2022 Gr 12 Accounting Study Pack Activities/Notes B. Extract from the Statement of Financial Position (Balance Sheet) on 29 February 2020 2019 (R) (R) Fixed assets (carrying value) 4 830 000 3 760 100 Current assets ? 962 000 Current liabilities 774 000 712 800 Trading stock 619 000 538 000 Bank 0 56 400 Petty cash 2 500 0 Ordinary share capital 5 880 000 5 360 000 Retained income 542 800 236 000 Loan: Kan Bank 950 000 1 300 000 SARS: Income tax 26 400 (Cr) 11 600 (Dr) Shareholders for dividends 165 000 126 000 Bank overdraft 28 800 0 C. Share capital and dividends: • The authorised share capital comprises 1 500 000 shares. • On 1 March 2019, 60% of the authorised shares were in issue. • On 30 June 2019, 200 000 additional shares were issued for R1 240 000 • On 29 February 2020, 120 000 shares were repurchased at R96 000 above the average share price. • Total dividends paid and declared in the 2020 tax year were R286 000. D. Fixed assets: • Additions to buildings were completed during November 2018. • Old equipment was sold at carrying value, R34 500 10.2 TWO COMPANIES: LULU LTD AND COCO LTD Noah Lott won R5,6 m in the national lottery five years ago and then decided to invest R2,8 m in each of the two companies below, as follows: Lulu Ltd 400 000 shares at R7,00 each R2,8 m Coco Ltd 100 000 shares at R28,00 each R2,8 m He wants your opinion on these companies. NOTE: When answering the questions below, compare the information given and quote the relevant financial indicators of both companies (percentages, ratios and/or amounts) 29

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION LULU LTD COCO LTD 2020 2019 2020 2019 Total number of shares 1 100 000 shares 700 000 shares Shares originally bought by 400 000 shares 100 000 shares Noah Noah's % shareholding 36% 14% Current market value per share R9,50 R18,80 Ordinary share capital R9 900 000 R11 900 000 Retained income R1 890 000 R600 000 Long-term loan R9 432 000 R2 500 000 Current ratio 1,7:1 1,6:1 4,2:1 4,8:1 Acid-test ratio 0,9:1 0,8:1 3,6:1 3,5:1 % operating profit on sales 16% 16% 14% 18% Debt-equity ratio 0,8:1 0,2:1 Net asset value per share R10,72 R17,86 Earnings per share (EPS) 273 cents 233 cents 171 cents 266 cents Dividends per share (DPS) 110 cents 200 cents % return on equity (ROSHE) 25% 14% 9% 15% % return on capital employed (ROTCE) 20% 12% 10% 14% % Interest on loans 13% 13% 13% 13% % Interest on fixed deposits 6% 6% 6% 6% REQUIRED: 10.2.1 Explain which company has the better liquidity. Quote TWO financial indicators to support your opinion. (4) 10.2.2 Comment on the earnings per share and the % return on equity of Lulu Ltd. Give TWO reasons why the shareholders will be satisfied with these indicators. (5) 10.2.3 Comment on the market value of the shares in Coco Ltd. Explain TWO points. (4) 10.2.4 Compare the dividend pay-out rates of both companies and explain why the directors of EACH company decided on these pay-out rates. (4) 10.2.5 Noah says that the dividend of 110 cents per share he earned from Lulu Ltd is better than the dividend of 200 cents per share from Coco Ltd. Give ONE point to prove that he is incorrect. (4) 10.2.6 Comment on the risk and gearing of EACH company. Quote TWO financial indicators. (6) 10.2.7 Noah wants to buy shares in Lulu Ltd on the JSE at current market value to become the majority shareholder and CEO. Calculate how much Noah will have to pay for the shares that he needs. (4) 66 Activity 8-10 https://wcedeportal.co.za/eresource/209126 30

2022 Gr 12 Accounting Study Pack Activities/Notes INTERPRETATION OF FINANCIAL STATEMENTS ACTIVITY 11: INTERPRETATION OF FINANCIAL STATEMENTS (Q3, NSC Nov 2020 (2)) (35 marks; 30 minutes) 11.1 Choose the question from COLUMN B that matches a category of financial indicators in COLUMN A. Write only the letter (A–E) next to the question numbers (11.1.1 to 11.1.4) in the ANSWER BOOK. COLUMN A COLUMN B 11.1.1 Liquidity A Is the business managing expenses effectively to increase profitability? 11.1.2 Risk and gearing B Is the investment in the company better than investing in a fixed deposit? 11.1.3 Return to shareholders C Will the company be able to pay off its current debts? 11.1.4 Operating efficiency D Will the company be able to pay off all its debts using existing assets? E How is the company managing loans or borrowed capital? (4 x 1) (4) 11.2 SCI-FI GEEKS LTD The business trades in electronic equipment purchased from China. The information relates to the past two financial years, ended 31 March. The COVID-19 lockdown has negatively affected sales over the current financial year REQUIRED: 11.2.1 Liquidity: The directors are satisfied with the improvement in the current ratio and the acid-test ratio. Explain why you would disagree with them. Quote TWO other (6) financial indicators in your response. 11.2.2 Dividends: The directors changed the dividend policy for the current financial year. • Comment on the dividend per share over the two years. Quote figures. (2) • Explain the change in the dividend pay-out rate and give a reason for this (4) change. Quote figures. • A shareholder felt that they should be satisfied with the dividends they received, as it is better than last year. Explain why you agree with him. (3) Quote figures. 11.2.3 Comment on the risk and gearing for both years. Quote TWO financial indicators (with figures). (6) 11.2.4 Existing shareholders are dissatisfied that the new shares issued on 1 April 2020 were sold to the CEO, Ida Shark. Give TWO reasons why you consider their feelings to be justified. Quote figures. (6) 11.2.5 The Cash Flow Statement reflected a positive change of R980 000. Provide TWO points why this should still be a concern to directors. Quote figures. (4) 31

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION A. Financial indicators and additional information: 2021 2020 Mark-up % achieved 60% 60% % net profit before tax on sales 13,9% 20,3% Current ratio 2,4 : 1 1,1 : 1 Acid-test ratio 1,0 : 1 0,4 : 1 Stockholding period 102 days 32 days Average debtors' collection period 46 days 31 days Average creditors' payment period 60 days 60 days Earnings per share 58 cents 130 cents Dividends per share 72 cents 90 cents Dividend pay-out rate 136,5% 69% Debt-equity ratio 0,4 : 1 0,3 : 1 Return on average shareholders' equity 17,7% 31,6% Return on total capital employed 23,2% 39% Net asset value per share 332 cents 409 cents Market price of shares on stock exchange 410 cents 540 cents Interest rate on loans 13,5% 13,5% Interest rate on fixed deposits 6,8% 7,8% B. Share capital: • On 1 April 2020 the company issued an additional 250 000 shares. • On 31 March 2021 there were 1 250 000 shares in issue. C. Extract from the Cash Flow Statement on 31 March: 2021 2020 Cash flows from operating activities (148 080) 910 000 Cash generated from operations 1 281 620 Interest paid (232 000) Taxation paid (272 700) Dividends paid (925 000) Cash flows from investing activities 101 580 (300 000) Cash flows from financing activities 1 026 500 (100 000) Sale of shares 375 000 0 Change in loan 651 500 (100 000) Cash and cash equivalents: Net change 980 000 510 000 Opening (330 000) (840 000) Closing 650 000 (330 000) 35 32

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 12: INTERPRETATION OF FINANCIAL INFORMATION (Q3, NSC Nov 2021 (P1)) (40 marks; 30 minutes) 12.1 Choose a category of indicators from COLUMN B that matches the description in COLUMN A. Write only the letter (A–D) next to the question numbers (12.1.1 to 12.1.4) in the ANSWER BOOK COLUMN A COLUMN B 12.1.1 The benefit that shareholders receive for A liquidity investing in a company B gearing 12.1.2 The ability of a business to pay off its short- term debts C solvency 12.1.3 The extent to which a company is financed on D return on equity borrowed capital (loans) 12.1.4 The ability of a business to settle all its debts using existing assets (4) 12.2 FLEXI LTD AND BROOM LTD The information relates to two companies. BACKGROUND INFORMATION: • Both companies operate in the fashion clothing industry. The financial year ends on the last day of February each year. • Bob Yates owns shares in both companies. On 1 November 2020, he convinced the board of directors of Flexi Ltd to repurchase 150 000 of his shares. He used the money received to purchase additional shares in Broom Ltd. NOTE: Where comments or explanations are required, quote financial indicators, figures and trends to support your answer REQUIRED 12.2.1 Profitability: Quote and explain TWO financial indicators to show which company is managing (4) its expenses more efficiently and is thereby more profitable. 12.2.2 Dividends, earnings and returns: • Comment on the dividend pay-out policy of Flexi Ltd. Explain why this is an irresponsible change in policy. Provide TWO points. (4) • Comment on the % return on shareholders' equity of EACH company. (4) • A shareholder feels that earnings per share (EPS) in Broom Ltd are better (4) than that in Flexi Ltd. Explain why you agree with him. 12.2.3 Shareholding of Bob Yates in both companies: • Comment on the price paid for the shares repurchased by Flexi Ltd. Provide TWO points (4) • Calculate the number of shares that Bob purchased in Broom Ltd with the money he received from the share buyback at Flexi Ltd (2) • Explain the effect of the share repurchase on the % shareholding of Bob Yates in EACH company. (4) 33

2022 Gr 12 Accounting Study Pack Activities/Notes 12.2.4 Financing strategies and gearing: The directors of each company have taken deliberate decisions that are reflected in their Cash Flow Statements. • Explain the decisions taken by the directors of Broom Ltd and how these will benefit the company. (4) • Explain how the decisions taken by Flexi Ltd affected the risk and gearing of the business. Quote TWO financial indicators. (6) INFORMATION: A. Extracts from the accounting records at the end of each year: FLEXI LTD BROOM LTD Feb. 2021 Feb. 2020 Feb. 2021 Feb. 2020 Number of shares in issue 700 000 850 000 1 500 000 1 100 000 Funds used to repurchase R1 980 000 shares Repurchase price R13,20 Increase in share capital 0 R2 640 000 Issue price of additional shares R6,60 Fixed assets purchased R1 000 000 R2 200 000 Increase (decrease) in loan R4 500 000 (R400 000) B. Financial indicators, interest rate and market price of shares FLEXI LTD BROOM LTD Feb. 2021 Feb. 2020 Feb. 2021 Feb. 2020 % operating expenses on 17,5% 14,6% 13,6% 17,0% % operating profit on sales sales 18,2% 21,9% 24,2% 20,5% % net profit on sales 13,8% 18,0% 19,6% 16,0% Debt-equity ratio 1,1 : 1 0,4 : 1 0,2 : 1 0,4 : 1 % return on capital employed 10,2% 16,1% 17,2% 14,7% % return on shareholders' 7,6% 12,2% 14,1% 10,7% equity Net asset value per share 1 081 cents 1 128 cents 632 cents 609 cents Market price of shares 990 cents 1 130 cents 660 cents 615 cents Interest rate on loans 13% 13% 13% 13% Earnings per share 80 cents 138 cents 72 cents 65 cents Dividends per share 92 cents 82 cents 48 cents 70 cents Dividend pay-out rate 115% 59% 67% 108% C. Shareholding of Bob Yates in both companies FLEXI LTD BROOM LTD 2021 2020 2021 2020 Shares in each company 283 500 433 500 ? 460 000 % shareholding in each company ? 51,0% ? 41,8% 40 34

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 13: INTERPRETATION OF FINANCIAL STATEMENTS (Q3, NSC Nov 2020 (1) / Sep 2021) (35 marks; 30 minutes) You are provided with information of Solar-Style Ltd for the financial year ended 29 February 2020. The business provides solar panels to households to supplement their electricity supply. REQUIRED NOTE: Provide figures, financial indicators or calculations in EACH case to support your comments and explanations. 13.1 Solvency and liquidity: 13.1.1 Comment on the solvency of the company. Quote ONE financial indicator with figures. (2) 13.1.2 Explain why the directors are satisfied with the change in the liquidity of the company. Quote TWO financial indicators with figures. (4) 13.2 Earnings, return and share price on the JSE: 13.2.1 Comment on the % return and earnings per share of the company. Quote TWO financial indicators with figures. (4) 13.2.2 Comment on the share price on the JSE and how the % return and earnings per share have affected the share price. Quote figures (4) 13.3 Gearing: Explain how the loan affected the risk and gearing and whether or not it was a good idea to increase the loan. Quote TWO financial indicators with figures. (7) 13.4 Shareholding: Refer to Information D. The directors decided to offer the existing shareholders one share for every five shares they own on 1 September 2019, at a price of R6,50 each. Allen Mbatha currently owns 45% of the shares of Solar-Style Ltd. Allen was one of the few shareholders who decided to accept this offer 13.4.1 Explain how Allen's decision affected his % shareholding. Provide a calculation to support your explanation. (4) 13.4.2 Give TWO reasons why Allen might have made this decision. (4) 13.5 Dividends: 13.5.1 One of the directors feels that the dividend pay-out rate (%) should have remained constant. Give ONE possible reason (with figures) for her opinion. (3) 13.5.2 Refer to Information E Explain (with figures) why one of the shareholders, Erna Naidoo, feels that the dividends she earns in Solar-Style Ltd is not as good as those that she earns in Netgen Ltd. (3) 35

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Extract from the Financial Statements: 29 February 28 February 2020 2019 Net profit after tax R 203 000 R 636 300 Non-current liability: Loan from Credbank 3 500 000 2 000 000 B. Financial indicators calculated: 29 February 28 February 2020 2019 Debt-equity ratio 0,4 : 1 0,3 : 1 Acid-test ratio 0,8 : 1 2,6 : 1 Total assets to total liabilities 2,0 : 1 5,0 : 1 Stock turnover rate 6 times 3 times Earnings per share (EPS) 72 cents 96 cents Dividends per share (DPS) 48 cents 48 cents Dividend pay-out rate 67% 50% % return on average equity (ROSHE) 5,3% 8,7% % return on total capital employed (ROTCE) 6,2% 11,6% Net asset value per share (NAV) 877 cents 912 cents C. Additional information: 29 February 28 February 2020 2019 Market price of shares on JSE 840 cents 920 cents Interest rate on investments 6,5% 6,5% Interest rate on loans 10,5% 12,0% D. Shareholding of Allen Mbatha in Solar-Style Ltd: Number of shares Price per share Total Solar-Style Ltd shares in issue: On 28 February 2019 800 000 shares On 29 February 2020 900 000 shares Shares purchased by Allen On 1 March 2015 360 000 shares 650 cents On 1 September 2019 ? 650 cents E. Shareholding of Erna Naidoo in two companies: Solar-Style Ltd Netgen Ltd Dividends per share for 2020 36 cents 28 cents Price she paid for her shares 820 cents 400 cents Number of shares owned 30 000 shares 30 000 shares 35 Activity 11-13 https://wcedeportal.co.za/eresource/209131 36

2022 Gr 12 Accounting Study Pack Activities/Notes CORPORATE GOVERNANCE & INTERPRETATION OF FINANCIAL INFORMATION ACTIVITY 14: INTERPRETATION OF FIN. STATEMENTS & CORPORATE GOVERNANCE (Q4, June (SC) 2021) (45 marks; 35 minutes) 14.1 Choose a description from COLUMN B that matches the type of director in COLUMN A. Write only the letter (A–C) next to the question numbers (14.1.1 to 14.1.3) in the ANSWER BOOK, e.g. 14.1.4 D. COLUMN A COLUMN B 14.1.1 Executive director A member of the board but not responsible for daily management functions 14.1.2 Delinquent director B member of board who also has management responsibilities 14.1.3 Non-executive director C found guilty of serious misconduct (3 x 1) (3) 14.2 LIBRA LIMITED The business trades in computer hardware and software from international companies. The information relates to the past two financial years, ended 30 April. Anton Buys is the CEO and there are five other directors in the company. REQUIRED: 14.2.1 Refer to Information A. The current ratio and acid-test ratio show that the company's liquidity position has deteriorated over the past two financial years. Identify TWO other liquidity indicators which also show that the company is likely to have serious liquidity concerns in future. Explain ONE point in EACH case (with figures). (4) 14.2.2 Refer to Information A and B. The company increased the loan to finance the purchase of additional property in a new suburb. They hoped that this would improve the demand for their products. • Comment on how the increase in the loan affected the risk and gearing in 2021. Quote TWO financial indicators. State ONE point in EACH case (with figures). (6) • Explain whether the decision to purchase additional property had the desired effect on demand for this product (with figures). (3) 14.2.3 Explain why the public would still not be interested in buying the new shares at R6,00 per share in April 2021. Quote THREE financial indicators (excluding indicators stated in QUESTION 14.2.2). State ONE point in EACH case (with figures). (9) 37

2022 Gr 12 Accounting Study Pack Activities/Notes 14.2.4 Refer to Information A and D. At the AGM, many shareholders complained that the Remunerations Committee had been negligent in their duties and that Anton Buys did not deserve the fees that he was paid as CEO. State TWO different points to justify their opinion. Quote figures or financial indicators. (4) 14.2.5 Refer to Information A, B and C. • Explain why the other directors were unhappy with the price paid for the shares repurchased from Anton Buys. State TWO points. Quote financial indicators or figures to support EACH point. (4) • Give a calculation to show whether the repurchase of these shares affected Anton Buys' status as majority shareholder, or not. (3) 14.2.6 Refer to Information E. • Explain what is meant by good corporate governance and explain why it is important to the shareholders. (3) • Explain a possible reason why Anton Buys says he will vote against the proposal by Excellence Ltd. (2) • The other directors feel that Anton Buys is abusing his position as CEO and majority shareholder. - Explain why you agree with them. (2) - Give the directors advice on how they should handle this. (2) INFORMATION: A. Financial indicators on 30 April: 2021 2020 Mark-up % achieved 60% 75% % operating expenses on sales 44,1% 32% Solvency ratio 1,8 : 1 2,1 : 1 Debt-equity ratio 0,7 : 1 0,2 : 1 Current ratio 0,6 : 1 1,1 : 1 Acid-test ratio 0,3 : 1 0,8 : 1 Stockholding period 78 days 43 days Average debtors' collection period 58,9 days 32,6 days Average creditors' payment period 75,6 days 63,6 days Earnings per share 54 cents 102 cents Dividends per share 25 cents 90 cents Net asset value per share 732 cents 711 cents Return on average shareholders' equity 4,9% 5,3% Return on average capital employed 6,4% 9,1% B. Additional information: 2021 2020 Sales R8 976 000 R11 550 000 Market price of shares on stock exchange 580 cents 610 cents Interest rate on loans 12% 12% Interest rate on fixed deposit 8% 8% 38

2022 Gr 12 Accounting Study Pack Activities/Notes C. Share capital and shareholding of Anton Buys: 2021 2020 Number of authorised shares 5 000 000 shares Number of shares in issue 2 450 000 2 400 000 Number of shares owned by shareholder, 1 240 000 1 270 000 Anton Buys • On 30 April 2020, the company had 2 400 000 shares in issue. • At the directors' meeting on 1 May 2020, it was decided to repurchase 30 000 shares from the CEO, Anton Buys, at R12,00 per share. None of the other five directors supported this decision. • A further 80 000 shares were issued on 30 June 2020. The listed issue price of the purchase was originally R6,00 per share. Due to a poor response from the public at this price, the directors agreed to sell these shares at R4,80 per share D. Directors' fees: 2021 2020 Director's fees paid to CEO R2 900 000 R2 000 000 Total fees paid to 5 other directors R3 000 000 R3 000 000 E. Proposal to purchase the unissued shares: • Excellence Limited is a respected company with a reputation for good corporate governance. They have made an offer to purchase the remaining 2 550 000 shares in this company at a price which is considerably more than the current market value. • Anton Buys says that he will vote against this proposal. The other directors feel strongly that this offer is very generous. They are in favour of accepting the offer. 45 ACTIVITY 15: CORPORATE GOVERNANCE (Q4, NSC Nov 2020 (2)) (15 marks; 10 minutes) Shareholders and employees associated with a company will be particularly interested in whether the company is well governed and managed by the directors. At the AGM, the shareholders will elect two types of directors: • Executive directors: They attend board meetings and work at the company on a full-time basis. • Non-executive directors: They attend board meetings and do NOT work at the company You are provided with four aspects of corporate governance that will be of concern to the stakeholders REQUIRED 15.1 Audit Report: Explain why a qualified audit report is not a good reflection of a company. Provide TWO points. (4) 15.2 The Board of Directors: Explain why it is important for a company to include non-executive as well as executive directors on the Board of Directors. (4) 39

2022 Gr 12 Accounting Study Pack Activities/Notes 15.3 The Remunerations Committee: According to the Companies Act 2008 a company must have a Remunerations Committee. Explain the role/responsibility of this committee and give a reason why this committee is necessary (3) 15.4 Directors engage with clients on a regular basis in an effort to negotiate contracts and to increase sales and services Explain why there should be a company policy that directors must declare to the Board all gifts, donations or favours received by them from clients. Provide TWO points (4) 15 ACTIVITY 16: CORPORATE GOVERNANCE (15 marks; 15 minutes) (Q4, NSC Nov 2020 (1) / Sep 2021) 16.1 Give ONE word/term for each of the following descriptions by choosing a word/term from the list below. Write only the word/term next to the question numbers (16.1.1 to 16.1.3) in the ANSWER BOOK external auditors; internal auditors; shareholders; directors 16.1.1 Their role is to manage and control all aspects of the company's activities. 16.1.2 Their role is to express an unbiased opinion on the reliability of the information in the financial statements. 16.1.3 Their role is to assess the internal control measures in a company on an on- going basis. (3 x 1) (3) 16.2 ELECTRONIC LTD The information relates to Electronic Ltd. In recent months, Electronic Ltd has been receiving negative publicity in the national newspapers. A shareholder, Quinton Miller, is concerned about possible corruption in this company REQUIRED: 16.2.1 Explain, in your own words, why you agree or disagree with the extract below that appeared in a local newspaper. State TWO different points. Sustained (On-going) corruption, fraud and mismanagement will not take place at a listed company unless there is illegal or criminal collusion (dishonest collaboration) on the part of the board of directors and the auditors. [Paraphrased from @TheJaundicedEye, Independent, Saturday 7 March 2020] (4) 16.2.2 Refer to the information on the next page. Explain TWO points to prove possible corruption for each of the following problems. Quote figures or calculations: Problem 1 Payment of directors' fees (4) Problem 2 Control and productivity of other employees (4) 40

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: Information identified from the books of the company. NOTE: Rand amounts are expressed in millions. % 29 Febr 2020 28 Febr 2019 change Directors' fees: Chief executive officer (CEO) 1 72% R11,2 m R6,5 m Chief financial officer (CFO) 1 72% R9,9 m R5,8 m Other full-time directors 12 8,3% R39,0 m R36,0 m Other employees: Number of employees 19% 570 employees 480 employees Salaries and wages 22% R91,0 m R74,4 m General information: Gross profit 11% R289,0 m R260,0 m Operating profit (20%) R61,0 m R76,2 m Operating profit per employee (50%) R0,1 m R0,2 m Net profit (21%) R41 m R52 m 15 41

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 17: CORPORATE GOVERNANCE (20 marks; 20 minutes) (Q4, NSC Nov 2021) 17.1 Explain why a disclaimer audit report would be bad for a company's reputation. Provide TWO points. (4) 17.2 One of the most important decisions that shareholders have to make at the annual general meeting (AGM) is to appoint directors to serve on the board. • Explain why the shareholders have been given this responsibility. (2) • If you were a shareholder, what factors or characteristics would you want to find out about the directors who would get your vote? Explain TWO points and give a reason for EACH. (6) 17.3 A recent news report stated that a major company, Baxco Ltd, had been awarded a tender to supply equipment worth R20 m to a chain of private hospitals. The report accuses the CFO (chief financial officer) of that company of paying R2 m in cash to the CEO of the hospital group As a shareholder, explain what you would say at the AGM. Provide TWO points. (4) 17.4 A major South African company has stated the following on its website and in its Directors' Report. We have set up ways for employees and external stakeholders to report unethical conduct and incidents of individuals not complying with the company's ethical policies. We have set up a tip-off phone line (call centre) controlled by an independent service provider. All information will be treated confidentially. Whistle-blowers (informants) who submit genuine information will be protected and will remain anonymous In your opinion, explain why this major company found it necessary to implement this policy. Provide TWO points (4) 20 Activity 14-17 https://wcedeportal.co.za/eresource/209136 42

2022 Gr 12 Accounting Study Pack Activities/Notes PAPER 1 & PAPER 2 FIXED ASSETS / Basic concepts fixed asset | cost price | accumulated depreciation | carrying value | book value | movement of assets addition | disposal | depreciation | depreciation methods | profit on sale of asset | loss on sale of asset replacement value | residual value | fully depreciated | fixed asset note | fixed asset register | GAAP principles | historic cost | prudence | matching principle ASSET DISPOSAL (GR 11 content revised in Gr 12) Calculation of depreciation: / - Straight line / Fixed amount / % on cost - Diminishing balance / % on Carrying value - NOTE: Consider the residual value of OLD asset items still in use. It is usually R1 per item, but is determined by policy. - An asset item will be FULLY depreciated in the LAST year of its useful life. Dr ASSET DISPOSAL / (useful for calculations) Cr Vehicles/Equipment Accumulated depr on .... (original cost price of asset item sold) (TOTAL over the life of the asset item) (previous depr + proportional depr for the current year) Bank / Debtors control / Creditors Control / Donations / Drawings (depend on how the asset was sold) PROFIT on sale of asset LOSS on sale of asset OR IMPORTANT INFORMATION ON ASSET DISPOSAL ▪ Profit on sale of asset will appear under Income in SCI (Statement of Comprehensive Income) ▪ Loss on sale of asset will appear under Expenses in SCI ▪ Proportional depreciation for this year must be ADDED to Depreciation inSCI. ▪ Asset disposal may also be assessed in the Fixed Asset Note of the Balance sheet under movements ▪ Cost price of sold item must be subtracted from the COST of total Assets at beginning of the year Paper 1: Focus on the valuation and movement (acquire and disposal) of assets for financial statements Usually Included in the financial statement questions. See Activities 2 - 6 above Paper 2: Focus on the management of fixed assets, i.e. the use / misuse / replacement / buy or rent, etc. Usually included in budgeting, inventory or a problem-solving type of question. ACTIVITY 1: FIXED ASSETS (P1) (21 marks; 15 minutes) (Q5.3, Nov 2018) MINDEW LIMITED The financial year-end is 31 May 2018. REQUIRED: 1.1 Calculate the missing figures indicated by (i) to (v) in the table below. (17) 1.2 Explain how the internal auditor should check that movable fixed assets were not (2) stolen. 1.3 Land and buildings were bought five years ago for R6 m. Property prices have increased by 20% since then. The directors want to increase the value of this asset and reflect a profit of R1 200 000 in the financial statements. As an independent auditor, what advice would you give? Provide ONE point. (2) 43

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION FOR YEAR-END 31 MAY 2018: A. LAND AND FIXED ASSETS BUILDINGS COMPUTERS EQUIPMENT VEHICLES Carrying value: Begin 6 000 000 13 000 1 027 500 1 300 000 Cost 6 000 000 108 000 1 250 000 2 100 000 Accumulated depreciation - (95 000) (222 500) (800 000) Movements Additions (i) 0 172 500 0 Disposals 0 0 0 (iv) Depreciation 0 (ii) (iii) (256 000) Carrying value: End Cost Accumulated depreciation (v) B. Land and buildings: Grant Construction was paid R882 000 for building new offices (R610 000) and repairing windows (R272 000). C. Computers: • The three computers were all bought on the same day at R36 000 each. • Depreciation is 33⅓% on cost. • These computers are expected to last another two years. D. Equipment: • Additional equipment was purchased on 1 February 2018. • Depreciation is 10% p.a. on cost. E. Vehicles: • Depreciation is 20% p.a. on carrying value. • A vehicle was sold for cash at carrying value on 31 December 2017. The Fixed Assets Register reflected the following: Cost R176 000 Accumulated depreciation (1 June 2017) R128 000 21 ACTIVITY 2: FIXED ASSETS NOTE  (8 marks; 10 minutes) (Q4.3, SC May/June 2019) MVVS LTD The information relates to the financial year ended 31 March 2019. REQUIRED: 2.1 Complete the following note to the Statement of Financial Position (Balance Sheet): • Fixed/Tangible Asset Note (8) 44

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: Figures extracted from the Pre-adjustment Trial Balances on 31 March: 2019 2018 R R Land and buildings 12 500 000 12 500 000 Vehicles 1 377 000 750 000 Equipment ? 398 000 Accumulated depreciation on vehicles ? 475 000 Accumulated depreciation on equipment ? 117 500 Depreciation (on equipment sold) 1 750 Adjustments and additional information: Fixed assets and depreciation: (i) Vehicles: • Details for the three vehicles are as follows: Accumulated depreciation Cost price Date purchased 31 March 2018 1 R350 000 R315 000 1 October 2013 2 R400 000 R160 000 1 April 2016 3 R627 000 30 November 2018 • Vehicles are depreciated at 20% p.a. on cost. (ii) Equipment: • Equipment was sold for R9 600 cash on 31 August 2018. Only the following entries in respect of this sale were processed: Cost price 28 000 Accumulated depreciation at the date of disposal 21 500 Depreciation for the current financial year 1 750 • Depreciation on the remaining equipment is calculated at R92 500 after taking all of the above into account. 8 ACTIVITY 3: FIXED ASSETS NOTE  (23 marks; 20 minutes) (Q4.2, NSC Nov 2021 (P2)) The following information relates to the fixed/tangible assets of Justime Footwear (Pty) Ltd. The financial year ended on 28 February 2021. REQUIRED: 3.1 List THREE point for good internal control over movable fixed assets. (3) 3.2 Refer to Information A and B. Calculate the cost of land and buildings purchased on 31 August 2020. (3) 3.3 Refer to Information A and C. Calculate depreciation on the vehicle for the year ended 28 February 2021. (2) 45

2022 Gr 12 Accounting Study Pack Activities/Notes 3.4 Refer to Information A and D. The business depreciates equipment at 30% p.a. on the diminishing- balance method. On 30 November 2020, they decided to trade in a photocopy machine for a new model. • Calculate the loss on the photocopy machine that was traded in on 30 November 2020. (6) • Calculate depreciation on the new photocopy machine and on the remaining old equipment for the year ended 28 February 2021. (7) 3.5 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. (2) INFORMATION: A. Extract from Trial Balances on 28 February: 2021 2020 R R Balance Sheet accounts section Land and buildings 6 250 000 5 500 000 Vehicle 480 000 480 000 Accumulated depreciation on vehicles ? 450 000 Equipment 2 190 000 2 100 000 Accumulated depreciation on equipment ? 1 440 000 B. Land and Buildings: Glamour Construction provided an invoice on 31 August 2020 after completing the new storage facilities. The full invoice amount was paid and debited to land and buildings. However, the auditor found that repairs to the old storeroom, R60 000, were included in the invoice. This has not been corrected. C. Vehicles: The company has only one vehicle. The depreciation rate is 25% p.a. on cost. D. Equipment: A photocopy machine was traded in on 30 November 2020 for R88 000 for a better model. The cost price of the new model that was delivered on 1 December 2020 was R410 000. The fixed asset register reflected the following: Fixed Asset register: Category: Photocopy machine Model: Clearfont X23 Date purchased: 1 March 2019 Cost price: R320 000 Depreciation rate: 30% on diminishing-balance method Date Depreciation Carrying value 28 February 2020 R96 000 R224 000 30 November 2020 ? ? 23 Activity 1-3 Fixed Assets: https://wcedeportal.co.za/eresource/209141 46

2022 Gr 12 Accounting Study Pack Activities/Notes PAPER 2 INVENTORY / [Paper 1: Inventory valuation for preparing / reporting in financial statements; Refer to Activities 2 - 4 in Companies above for typical P1 Inventory questions] [Paper 2: Stock systems; Valuation, management and internal control of stock] Basic concepts Stock systems Perpetual stock system: Cost of sales is calculated at point of sale (Differences) Periodic stock system: Cost of sales is calculated at end of financial year after physical stock taking Stock valuation FIFO Weighted average Specific identification methods - Based on the assumption - Used when selling large - Used when selling small (Differences) that stock bought first will volumes (numbers) of quantities where the be sold first. Suitable for identical small items, cost of each item can be business selling e.g., T-shirts, chocolates. easily identified (looked separate items, e.g., - The average cost price of up) in a register/ computers, TVs, etc. stock is used at all times. catalogue. - Stock with a limited - Stock values are realistic shelf life may also be as it is based on actual valued by this method. cost price of each item. Calculation of closing stock FIFO Weighted average Specific identification Work from bottom up; Opening stock (R) + Purchases (R) – Returns + Carriage Actual price of each unit Add carriage on Opening units + Purchases (units) – Returns (units) or model on hand purchases and subtract goods returned = Answer in Rand Answer (R) X closing stock (units) = R… Other calculations Periodic Perpetual Cost of sales Opening stock + Purchases + Carriage Based on mark-up % at - Returns - Closing stock point of sale Gross Profit Sales - Cost of sales Stolen goods Opening units + Purchases units – Returns - Sold units - Closing units Financial indicators (Paper 1 OR Paper 2) Mark-up % (Sales - Cost of sales) x 100 Answer given as: Cost of sales 1 …% Stock turnover rate Cost of sales Average stock OR ½(Opening stock + Closing stock) ... times Period/Days of stock Average stock x 365 on hand Cost of sales 1 … days GAAP principles for inventories (Paper 1) - Historical cost; - Rule of prudence Internal control of stock (Paper 2) Division of duties; Documentation; Authorisation; Physical security measures; changing suppliers, etc. 47

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 1: INVENTORY VALUATION (45 marks; 35 minutes) (Q3, NSC Nov 2019) George Grande is the majority shareholder and CEO of Grande Ltd. The company supplies hotels with cabinets and lamps. The periodic system is used. The year-end is 30 September 2019. REQUIRED: CABINETS 1.1 Calculate the value of closing stock for cabinets on 30 September 2019 using the first-in first-out method. (6) 1.2 In 2019, the company decided to extend the target market and to grant trade discounts to increase sales. 1.2.1 Calculate the % mark-up achieved in 2019. (4) 1.2.2 Provide TWO points (with figures) to prove that this decision achieved its aims. (4) 1.2.3 The CEO feels that this decision also negatively affected the company. (4) • Provide TWO points (with figures) to support his opinion. (2) • Give the directors advice to solve this problem. Explain TWO points. LAMPS 1.3 Calculate the stockholding period for lamps (use closing stock). (3) 1.4 George is concerned about the control of lamps. An investigation revealed that the store manager was supplying local boarding houses with lamps without documentation. (5) • Calculate the number of missing lamps. • Give TWO suggestions to solve this problem. (4) TELEVISION SETS 1.5 During April 2019, while George was in hospital, Bruce Swann (the chief financial officer) decided to include television sets in their product range. He was able to secure bulk discounts from Roseway on two TV set models, namely LYN and KYA. Calculate the value of the closing stock of TV sets on 30 September 2019 using the specific identification method. (7) 1.6 An employee of Roseway told George that Bruce received a 10% 'commission' from Roseway for buying excess stock. George wants to discuss this at the next board meeting. Explain THREE different concerns that George would have about this problem. (6) 48

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Stock records of cabinets and lamps: CABINETS LAMPS UNITS UNIT PRICE TOTAL UNITS TOTAL Stock balances 1 Oct. 2018 370 R800 R296 000 600 R108 000 30 Sep. 2019 280 ? 265 R59 625 Purchases: 2019 January 800 R920 R736 000 1 200 R240 000 April 1 200 R990 R1 188 000 1 800 R432 000 July 250 R1 100 R275 000 800 R210 000 Total 2 250 R2 199 000 3 800 R882 000 Returns 20 R1 100 Sales 3 675 Cost of sales R930 375 B. Information relating to cabinets: 2019 2018 Sales R3 480 000 R3 375 000 Cost of sales R2 170 500 R1 950 000 Units sold 2 320 2 500 Selling price per unit R1 500 R1 400 % mark-up achieved ? 73% Customers on record 37 26 C. Stock records of television sets: MODELS UNITS UNIT PRICE TOTAL Purchases May 2019 LYN 800 R6 000 R4 800 000 KYA 950 R7 200 R6 840 000 July 2019 LYN 500 R6 000 R3 000 000 KYA 500 R7 200 R3 600 000 TOTAL 2 750 R18 240 000 Sales LYN 430 R8 400 R3 612 000 KYA 540 R10 080 R5 443 200 45 49

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 2: INVENTORY VALUATION (40 marks; 30 minutes) (Q3, SC 2020) 2.1. CONCEPTS Complete the sentences by filling in the correct stock valuation method. Write only the answer next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK. 2.1.1 The … method assumes that stock is sold in order of date purchased. 2.1.2 The … method divides the total cost of goods available for sale by the number of units. 2.1.3 The … method is used for very expensive, individually recognisable items. (3 x 1) (3) 2.2 JJ FASHION HOUSE JJ Fashion House uses the periodic stock system. Janine Naidoo owns the business. REQUIRED Refer to Information A: Jeans 2.2.1 Calculate the following on 29 February 2020: • Value of the closing stock using the weighted-average method (6) • Gross profit (4) 2.2.2 Calculate how long (in days) it will take to sell the closing stock of the jeans. (4) 2.2.3 Janine is considering a change in the method of valuing stock. • Calculate the value of closing stock using the FIFO method. (7) • State ONE advantage of using the FIFO method (2) Refer to Information B: Jackets 2.2.4 The owner is concerned about the theft. • Calculate the number of jackets stolen. (4) • Give TWO solutions to solve the problem. (4) 2.2.5 The internal auditor is concerned about the stock levels and the selling price of jackets. Explain reasons for his concern, with FIGURES and give different advice in EACH case. (6) INFORMATION: A. Jeans: UNIT UNITS TOTAL PRICE Opening stock (1 March 2019) 240 R124 500 Purchases 3 150 R1 813 000 May 2019 1 300 R560 R728 000 October 2019 1 450 R580 R841 000 January 2020 400 R610 R244 000 Subtotal 3 390 R1 937 500 Returns from January purchases 130 R610 R79 300 Sales 2 880 R960 R2 764 800 Closing stock (29 February 2020) 380 ? ? 50

2022 Gr 12 Accounting Study Pack Activities/Notes B. Jackets: 2020 2019 (UNITS) Opening stock 1 760 Purchases (less returns) 6 500 Units available for sale 8 260 Closing stock 2 980 Units sold 5 020 Weighted-average cost per unit R700 R630 Selling price per unit R1 450 R1 070 Stock-holding period 216 days 103 days Mark-up % achieved 107% 70% 45 ACTIVITY 3: INVENTORY VALUATION (35 marks; 30 minutes) (Q4, Nov 2020 (2)) 3.1. CONCEPTS Give ONE word/term for each of the following statements. Write only the word/term next to the question numbers (3.1.1 to 3.1.4) in the ANSWER BOOK. periodic system; FIFO; perpetual system; specific identification; weighted average 3.1.1 This method is most suitable for inexpensive goods purchased regularly. 3.1.2 The closing stock balance is recorded at the most recent prices paid. 3.1.3 Individual stock items are valued at the cost price on the purchase invoice. 3.1.4 The cost of sales is recorded for every sales transaction. (4 x 1) (4) 3.2 LOTUS ACCESSORIES The owner is Alex Lotus. The business uses the first-in first-out method to value gas lamps. They decided to sell gas stoves as well, expecting a demand due to increased load shedding. The specific identification method is used to value these stoves. The financial year-end is 30 April each year. 51

2022 Gr 12 Accounting Study Pack Activities/Notes REQUIRED: 3.2.1 Calculate the following for the gas lamps on 30 April 2021: • Value of closing stock (using FIFO) (6) • Stockholding period in days (using closing stock) (6) 3.2.2 Alex suspects that the stock of gas lamps is not well controlled. Calculate the number of gas lamps missing. (4) 3.2.3 An investigation revealed that Alex's brother (employed at the store) orders gas lamps using the business ordering system and sells them privately to his friends. What should Alex say to his brother when dealing with this matter? Provide TWO points. (4) 3.2.4 Calculate the closing stock value for gas stoves on 30 April 2021 (using the specific identification method). (5) 3.2.5 Alex thinks he should stop selling gas stoves as they are causing a liquidity problem and the profit is low. • Provide figures to support his opinion. (2) • Explain TWO points to convince him NOT to discontinue trading in gas stoves. (4) INFORMATION: A. STOCK RECORDS FOR GAS LAMPS: UNIT PRICE AMOUNT UNITS (R) (R) Stock balance on 1 May 2020 230 R12 650 Purchases during the year: 2 770 R193 500 July 2020 650 R60 39 000 September 2020 800 R68 54 400 January 2021 1 100 R75 82 500 March 2021 220 R80 17 600 Returns (from March 2021) 40 ? ? Available for sale 2 960 Stock balance: 30 April 2021 270 ? ? Total sales 2 180 R140 R305 200 B. STOCK RECORDS FOR GAS STOVES: PURCHASES: MONTH MODEL UNITS UNIT PRICE AMOUNT August 2020 B-LITE 80 R495 R39 600 B-LITE 80 R495 R39 600 October 2020 SMART 100 R700 R70 000 B-LITE 120 R495 R59 400 February 2021 SMART 60 R700 R42 000 52

2022 Gr 12 Accounting Study Pack Activities/Notes SALES: MODEL UNITS SOLD SELLING PRICE AMOUNT B-LITE 132 R790 R104 280 SMART 54 R980 R52 920 GROSS PROFIT AND MARK-UP: MODEL COST OF SALES GROSS PROFIT MARK-UP B-LITE R65 340 R38 940 60% SMART R37 800 R15 120 40% 35 ACTIVITY 4: INVENTORY VALUATION (35 marks; 30 minutes) (Q4, SC June 2021) 4.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question numbers (4.1.1 to 4.1.4) in the ANSWER BOOK. 4.1.1 The (specific identification/first-in first-out) method assumes that the closing stock is valued at the most recent batches purchased. 4.1.2 The (periodic/perpetual) system requires a year-end stock count to be able to calculate cost of sales. 4.1.3 The (weighted-average/first-in first-out) method is suitable for similar goods that are bought in bulk. 4.1.4 The (periodic/perpetual) system requires that all products are scanned at the point of sale. (4) 4.2 GWEN BOUTIQUE The information relates to ALUZE bags for the financial year ended 28 February 2021. The business uses the first-in first-out method to determine the value of these bags. The periodic inventory system is in use. REQUIRED: 4.2.1 Calculate the following for the year ended 28 February 2021: • Value of the closing stock (5) • Cost of sales (5) 4.2.2 Stockholding period: • Calculate the average stockholding period (in days). (5) • Explain whether Gwen should be satisfied with this figure, or not. State TWO points. NOTE: The average stockholding period on 29 February 2020 was 52 days. (4) 4.3 PROBLEM-SOLVING Refer to Information D. Gwen Boutique also sells jackets and jerseys. Gwen has provided the information and requested advice. Identify TWO problems in EACH product for 2021. In each case, give ONE piece of advice to address the problem identified. (12) 53

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Stock balances: TOTAL VALUE DATE UNITS (including carriage) 1 March 2020 420 R68 120 28 February 2021 380 ? B. Purchases and returns for the year: TOTAL CARRIAGE TOTAL COST UNIT DATE UNITS PURCHASE COST (including COST AMOUNT (per bag) carriage) 30 Jun. 2020 500 R155 R77 500 R12 R83 500 31 Oct. 2020 750 R160 R120 000 R13 R129 750 15 Feb. 2021 320 R170 R54 400 R15 R59 200 TOTAL 1 570 R272 450 Returns 20 R3 700 C. Sales: Total sales amounted to R393 750 (1 590 bags). D. Problem-solving: JACKETS JERSEYS 2021 2020 2021 2020 Units: Opening stock 407 120 218 200 Units: Purchases 800 800 1 800 2 200 Units sold (gross) 550 500 1 970 2 260 All sales are for cash. Units returned by customers 0 0 90 78 Units: Closing stock 615 407 138 218 Stock turnover rate 0,9 1,9 10,6 10,4 Mark-up % achieved 75% 50% 25% 25% R R R R Cost price per item 360,00 360,00 170,00 160,00 Selling price 630,00 540,00 212,50 200,00 Income from sales deposited in the bank 346 500 268 920 349 500 436 400 35 54

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 5: INVENTORY VALUATION (30 marks; 25 minutes) (Q3, NSC Nov 2020 (1) / Sep 2021) On-Time Watches (Pty) Ltd has two shareholders, Lizzy and Patsy Ndou. The business sells watches. The periodic inventory system and the first-in-first-out (FIFO) method is used to value the watches. The financial year-end was 30 June 2020. The business sold only one type of watch, the XS Sports, in the past. Even though these watches were selling well, Lizzy felt that the business was not earning enough profit. She convinced Patsy that importing exclusive watches (the Euroclox) would be a good solution for this problem. REQUIRED: 5.1 Calculate the following for the imported Euroclox watches on 30 June 2020, using the FIFO method: • The value of the closing stock (5) • Stock-holding period (in days) using the closing stock amount (3) • % mark-up on cost (3) 5.2 Patsy was still not convinced about the decision to import the Euroclox watches, but it appears that Lizzy's decision was beneficial to the business. In each case below, quote figures or indicators. 5.2.1 Compare the mark-up % achieved on each model and comment on how this has affected the sales and profitability of the two models. (4) 5.2.2 Compare the stock-holding period for each model and the demand for each model and comment on how these affected the management of the stock items of the two models. (4) 5.3 Lizzy is interested in finding out if the weighted-average method of valuing the Euroclox watches will result in a significantly different stock value. • Calculate the value of the 270 watches using the weighted-average method. (5) • Explain the effect this would have on the gross profit. Quote figures. (2) • Explain why it would not be appropriate for her to use the weighted- average method for the new watches in the future. State TWO points (4) INFORMATION: A. Stock records for imported Euroclox watches: DATE NUMBER OF UNIT PRICE TOTAL UNITS AMOUNT Purchases: 1 July 2019 200 R 1 615,50 R 323 100 30 September 2019 500 1 700 850 000 20 December 2019 1 200 1 900 2 280 000 25 March 2020 400 2 000 800 000 15 May 2020 250 2 400 600 000 Total purchases 2 550 R4 853 100 Returns: 15 May 2020 90 ? Available for sale 2 460 ? Stock on 30 June 2020 270 ? Sales 2 190 R2 700 R5 913 000 Cost of sales R4 033 100 55

2022 Gr 12 Accounting Study Pack Activities/Notes B. Information obtained from the financial records on 30 June 2020: EUROCLOX XS SPORTS MODEL MODEL Mark-up % ? 75% Stock-holding period ? 120 days Selling price per watch R2 700 R560 Average cost price per watch R1 842 R320 Average gross profit per watch R858 R240 Gross profit R1 879 900 R840 000 Sales of watches R5 913 000 R1 960 000 Units sold 2 190 watches 3 500 watches Closing units on hand 270 watches 1 381 watches 30 Activity 1-5 Inventory: https://wcedeportal.co.za/eresource/209146 56

2022 Gr 12 Accounting Study Pack Activities/Notes MANUFACTURING / COST ACCOUNTING Basic concepts and calculations Opening stock (OS)+ Purchases + Carriage on purchases - Closing stock (CS) Direct material cost (DMC) = Raw materials used Direct labour cost (DLC) Normal wages (no. of workers x no. of hours x rate) ADD Overtime (no. of workers x no. of hours x rate) ADD UIF/Medical/Pension contributions Factory / Manufacturing Indirect material (Opening stock (OS) + Purchases - Closing stock (CS)) overheads (FOHC) Indirect labour (Cleaners, security, foreman) ADD contributions UIF/Pension Depreciation of Factory equipment Water & Electricity (Factory) All other factory expenses Unit costs Total cost divided by number of units produced Fixed cost FOHC + Administration costs (AC) Variable cost DMC + DLC + Selling & Distribution costs (SDC) FORMAT OF THE PRODUCTION COST STATEMENT FORMAT OF THE ABRIDGED INCOME STATEMENT (short format) Direct material cost Sales +Direct labour cost Less Cost of Sales (CoS) (…….) [OS + Cost of finished goods** - CS] =Prime cost Gross profit +Factory overhead cost Selling & Distribution costs =Total cost of production Administration costs +Work in process beg year Net profit -Work in process end year ( ) =Total cost of production of finished goods ** ANALYSING PRODUCTION COSTS STATEMENTS Calculating the cost per unit of certain cost items will reveal: = which costs are higher/ lower as the budgeted costs, = which items are exceptionally high and need to be controlled carefully = how costs compare to previous years. Calculate the break-even point (BEP): = BEP determines the quantity produced where no profit or loss is shown; = Income generated from sales is just enough to cover costs. = FORMULA: TOTAL FIXED costs = .... Number of products/units (selling price per unit - variable costs per unit) Comment on BEP / production levels: = Compare BEP with the total number of units produced e.g. In 2001 100 (BEP) of 1000 units BUT in 2002 80 (BEP) of 1000 units covered costs. Therefore, more effective production levels in 2002 as 20 less units covered costs (or more units available for profit). 900 units will earn a profit in 2001, but 920 units will earn a profit in 2002. A drop / increase in production units and/or the BEP per year will influence your comment. It may help to work with %s... (2001: BEP was 10% and in 2002 BEP was 8% of total production = lower production costs) POSSIBLE SOLUTIONS TO SAVE / DECREASE / CUT PRODUCTION COSTS: - Bulk buying (buy in large quantities) to receive bulk discount - Cash purchases to receive cash discounts - Use alternative suppliers that offer more promising buying conditions - Do a work study in the factory to determine whether the factory is using efficient production methods, e.g. reduce wastage of materials and labour time 57

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 1: MANUFACTURING (40 marks; 35 minutes) (Q1, NSC Nov 2019) Sihle Sangweni owns two separate factories that manufacture products according to orders received. There is no work-in-progress stock. The year-end is 28 February. 1.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK. 1.1.1 Wages of factory cleaners is a direct labour cost. 1.1.2 Delivery costs of finished goods to retailers are a selling and distribution cost. 1.1.3 Depreciation on office equipment is an administration cost. (3 x 1) (3) 1.2 DESKS FACTORY REQUIRED: 1.2.1 Complete the Factory Overhead Cost Note. (8) 1.2.2 Calculate the total cost of production of finished goods. (5) 1.2.3 Sihle wants to produce an additional 1 500 desks, while maintaining the selling price and costs. (4) 1.3 CHAIRS FACTORY REQUIRED: 1.3.1 Provide a calculation to confirm the break-even point for 2019. (4) 1.3.2 Comment on the break-even point and the production level achieved. Quote figures. (4) 1.3.3 Raw material consists of wood only. In 2019 the cost is R120 per square metre (m2) and 1,2 m2 of wood is needed to make one chair. During the year, 22 000 m2 wood was dispatched to the factory. Sihle feels that the wood raw material was not well controlled. • Provide a calculation to support his opinion. (4) • Identify TWO possible causes of this problem. Provide a solution for EACH. (4) 1.3.4 Give TWO reasons for the increase in direct labour cost. Provide a solution for EACH. Note that wages and salaries increased by 5% in the current financial year. (4) INFORMATION: A. DESKS FACTORY Extract of pre-adjustment amounts on 28 February 2019 R Indirect labour 296 500 Depreciation of factory plant 166 000 Advertising 24 500 Water and electricity 248 000 Rent expense 345 600 Insurance allocated to sales department 12 600 Factory sundry expenses 107 700 Adjustments to factory overheads for desks: • Water and electricity for February 2019, R18 000, must be taken into account. 80% is allocated to the factory. The balance is an administration cost. • Rent must be allocated according to floor area: Factory: 810 m2 Office: 180 m2 Sales department: 90 m2 • 75% of insurance must be allocated to the factory. The balance applies to the sales department. 58

2022 Gr 12 Accounting Study Pack Activities/Notes B. INFORMATION FOR BOTH FACTORIES DESKS CHAIRS COSTS 2019 (Unit costs) Amount Per unit 2019 2018 Direct material R3 060 000 R340 R165 R124 Direct labour ? R160 R90 R70 Variable Selling and distribution R720 000 R80 R50 R60 Total variable costs R580 R305 R250 Factory overheads R76 R75 Fixed Administration R360 000 R40 R20 R18 SELLING PRICES Per unit R750 R390 R370 UNITS Produced and sold 9 000 16 000 15 000 Break-even point 8 471 18 071 12 400 40 ACTIVITY 2: MANUFACTURING (45 marks; 35 minutes) (Q1, SC 2020) 2.1 Choose an example in COLUMN B that matches the cost category in COLUMN A. Write only the letter (A–E) next to the question numbers (1.1.1 to 1.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 2.1.1 Selling and distribution A raw material issued for production 2.1.2 Direct labour B bad debts 2.1.3 Administration C depreciation on factory machinery 2.1.4 Factory overhead cost D production wages 2.1.5 Direct material E bank charges 5 x 1 (5) 2.2 BERGVIEW MANUFACTURERS This information relates to the financial year ended 29 February 2020. The business manufactures buckets. REQUIRED: Prepare the following on 29 February 2020: 2.2.1 Factory Overhead Cost Note (16) 2.2.2 Production Cost Statement (10) 59

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Stock balances 29 February 2020 28 February 2019 R R Work-in-progress ? 130 000 Finished goods 140 000 155 500 Indirect material 14 300 12 400 B. Amounts extracted from the records on 29 February 2020 R Salary: factory foreman 150 000 Depreciation on factory equipment 145 000 Direct material cost 2 200 000 Direct labour cost 1 209 300 Indirect material purchased 33 100 Insurance 60 000 Water and electricity 115 000 Rent expense 113 000 Sales 6 500 000 Cost of sales (mark-up on cost: 60%) ? • Insurance is shared by the factory, administration and the selling department in the ratio 3 : 2 : 1. • Water and electricity for February 2020 is still outstanding, R12 000. The factory uses 80% of the water and electricity. • Rent expense is distributed according to floor space used. The factory occupies 7 200 m2 of the total floor space of 9 000 m2 2.3 EASY FOODS Easy Foods manufactures snack bars. The financial year ends on 31 December. REQUIRED: 2.3.1 Explain why the change in units produced affected the fixed costs per unit. (2) 2.3.2 Give TWO possible reasons for the increase in direct material cost per unit. (4) 2.3.3 Explain why the business should not be satisfied with the level of production and the break-even point. Compare and quote figures for both years. (6) 2.3.4 The owner, Mike, wants to reduce the weight of the snack bars from 80 grams to 75 grams while keeping the selling price at R12,50 each. Explain ONE reason against this option. (2) INFORMATION: 2019 2018 Total Per unit Total Per unit Sales R675 000 R12,50 R617 500 R9,50 Variable costs R472 500 R8,75 R390 000 R6,00 Fixed costs R191 160 R3,54 R191 160 R2,70 Direct material cost R270 000 R5,00 R279 500 R4,30 Break-even units 50 976 50 000 Units produced and sold 54 000 65 000 45 60

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 3: COST ACCOUNTING (MANUFACTURING) (50 marks; 40 minutes) (Q2, NSC Nov 2020 (2)) 3.1 PERFECT FIT MANUFACTURERS The business produces formal shirts. The financial year ended 28 February 2021. REQUIRED: 3.1.1 Prepare the Production Cost Statement. (14) 3.1.2 Calculate: • Gross profit earned on sale of shirts (5) • Mark-up % achieved on shirts (2) INFORMATION: A. Stock on hand: 28 FEBRUARY 2021 1 MARCH 2020 Work-in-progress ? R230 000 400 shirts, valued using 900 shirts at R380 Finished goods FIFO method = R342 000 B. The bookkeeper calculated the costs below. Some errors were made. Direct material cost R1 575 000 Selling and distribution cost R385 000 Administration cost R256 400 Direct labour cost ? Factory overhead cost R518 800 C. Errors and omissions: • Payment to Quick Deliveries, R75 000 for carriage on raw materials, was incorrectly allocated to selling and distribution cost. • The entire insurance amount of R25 200 was transferred to the Administration Cost Account. Two-thirds (2/3) of this expense should be allocated to the factory. • The Factory Overhead Cost Account included an amount of R117 600 for water and electricity. The bookkeeper had incorrectly allocated this expense to factory, administration, and selling and distribution in the ratio 6 : 3 : 1. The correct ratio is 5 : 4 : 1. D. Prime cost: R2 550 000 (after adjustments) E. Production and sales for the year: • 7 600 shirts were produced at a unit cost of R420 each. • 8 100 shirts were sold for R4 860 000. 61

2022 Gr 12 Accounting Study Pack Activities/Notes 3.2 LEATHER MANUFACTURERS Leather Manufacturers is owned by Tello Andrews. They produce leather purses and leather jackets. The financial year ends on 28/29 February each year. REQUIRED: PURSES 3.2.1 Calculate the break-even point for purses for the year ended 28 February 2021. (4) 3.2.2 Comment on the level of production achieved and the break-even point for purses for 2021. Quote figures. (4) 3.2.3 Apart from inflation and wage increases, give TWO other possible reasons for the increase in the direct labour cost per unit for purses. (4) 3.2.4 Give TWO reasons for the decrease in the direct material cost per unit for purses. (2) JACKETS 3.2.5 Although Tello was aware that importing leather for the jackets would increase the direct material cost per unit, he thought that this would improve the quality of the jackets. • Explain why the direct material cost per unit for jackets would probably increase if raw material were imported. State TWO points. (2) • Provide figures to prove that Tello was correct about the effect this decision would have on the cost of the jackets. (2) 3.2.6 Calculate the % increase in the selling price of the jackets. (3) 3.2.7 Explain the impact of the increase in the selling price of jackets on the sales and profit. Quote figures or calculations. (4) 3.2.8 Tello wants to increase profits on jackets by an additional R250 000 in the next financial year. Assuming the cost structure remains the same, calculate the total number of additional units he must produce to achieve this target. (4) INFORMATION: PURSES JACKETS 2021 2020 2021 2020 Direct material cost per unit R100 R125 R360 R180 Direct labour cost per unit R135 R105 R280 R240 Selling and distribution cost per unit R20 R30 R60 R45 Total variable cost per unit R255 R260 R700 R465 Total fixed costs R936 000 R836 000 R1 706 250 R2 000 000 Number of units produced and sold 24 000 22 000 3 750 5 000 Break-even number of units ? 20 900 3 631 6 350 Selling price per unit R295 R300 R1 170 R780 50 62

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 4 COST ACCOUNTING (35 marks; 25 minutes) (Q2, SC Jun 2021) 4.1 Choose a cost category from COLUMN B that matches a description in COLUMN A. Write only the letter (A–E) next to the question numbers (4.1.1 to 4.1.3) in the ANSWER BOOK, e.g. 4.1.4 F. COLUMN A COLUMN B 4.1.1 Commission to salespersons A factory overhead cost 4.1.2 Wages of factory maintenance B administration cost staff 4.1.3 Office stationery expenses C direct labour cost D direct material cost E selling and distribution cost (3 x 1) (3) 4.2 MEISIES OUTFITTERS The business manufactures clothing products. The owner is Minnie Zitha. The information relates to school dresses which is one of the products they manufacture. Dresses are manufactured according to orders received and there is no work-in- progress. The financial year ended on 30 April 2021. REQUIRED: 4.2.1 Refer to Information D. Complete the Factory Overhead Cost Note for the school dresses. (10) 4.2.2 Calculate the total cost of production of school dresses produced. (4) 4.2.3 Minnie is concerned about wastage of fabric in the dressmaking section. Calculate the cost of this wastage to the business. (5) 4.2.4 The internal auditor expressed concern about the direct labour cost for the school dresses. • Explain the problem that is of concern to the auditor. Quote figures. (3) • State TWO possible causes of this problem. (2) 4.2.5 Provide a calculation to confirm that the break-even point for the current financial year is 17 000 units. (3) 4.2.6 Comment on the level of production achieved and the break-even point calculated above. Quote figures. (2) 4.2.7 Calculate the extra profit that would be earned if an additional 500 dresses are made and sold. Assume that all costs are unchanged. (3) INFORMATION: A. Raw material stock (fabric used to make the dresses): Fabric is issued to the factory using the weighted-average method. UNITS COST TOTAL COST (metres) per metre Stock of fabric on 1 May 2020 9 000 R14,20 R127 800 Fabric purchased during the year 33 000 R17,00 R561 000 42 000 R688 800 Fabric issued to the factory 29 000 R16,40 R475 600 63

2022 Gr 12 Accounting Study Pack Activities/Notes B. Production and sales: • Manufacturing one dress requires 1,6 metres of fabric. • 17 800 dresses were produced and sold during the financial year at R75 per dress. C. Direct labour cost for the year: HOURS PER WORKERS RATE TOTAL WORKER Basic wage (normal time)* 8 1 250 R25 R250 000 Total overtime worked 8 720 R45 R259 200 Total employer's R26 250 contributions TOTAL 1 970 R535 450 *Normal time comprises a 5-day week of 8 hours per day. The factory operates for 46 weeks each year. D. Factory overhead costs: The following costs were extracted from the records on 30 April 2021: Factory rent expense R122 400 Water and electricity 81 600 Insurance on factory equipment 20 720 Salary of the dressmaking supervisor 76 960 Delivery expenses 36 800 Wages of cleaners 155 760 Depreciation: dressmaking machines 30 300 Sundry factory expenses (dressmaking section) 10 670 • Factory rent is split according to floor space occupied. The dress-making section occupies 320 m2 of the total factory space of 1 280 m2. • 15% of the total water and electricity account must be allocated to the dressmaking section. • Insurance on factory equipment was paid up to 30 June 2021. Dress-making equipment comprises ⅓ of the total factory equipment. • Only one of the six cleaners, Susan, was allocated to the dressmaking section. Susan earns 10% less than the other five cleaners. E. Additional information relating to the dressmaking section: • Total variable costs amounted to R1 094 700 (R61,50 per unit) • Fixed costs, comprising factory overhead costs and administration costs, totalled R229 500. 35 64

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 5 MANUFACTURING (45 marks; 35 minutes) (Q1, Sep 2021 / Nov 2020 (1)) 5.1 Choose the cost item in the list provided that matches the example below. Write only the cost item next to the question numbers (5.1.1 to 5 .1.3) in the ANSWER BOOK. indirect labour; direct labour; direct materials; indirect materials 5.1.1 Cleaning materials used in the factory 5.1.2 Salary of the factory foreman 5.1.3 Cost of the raw materials used in the production process (3 x 1 ) (3) 5.2 AFRESH CREATIONS Afresh Creations manufacture one type of bath towels. The financial year ended on 29 February 2020 REQUIRED: 5.2.1 Calculate the direct material cost. (4) 5.2.2 Prepare the Production Cost Statement for the year ended 29 February 2020. (18) 5.2.3 Refer to Information C Normal time for all workers is 40 hours per week. The information provided in James' job card for the last week is a reflection of his attendance over the financial year Identify TWO concerns regarding the above situation. Also provide ONE suggestion to address the concerns identified. (6) INFORMATION: A. Stock balances: 29 FEBRUARY 2020 1 MARCH 2019 Raw material stock R 314 500 R 115 200 Work-in-progress stock ? 53 500 B. Extract from the records on 29 February 2020: (See Information C for adjustments.) Raw materials bought on credit R 738 900 Damaged raw materials returned to suppliers 15 300 Factory overheads 322 100 Production wages (direct labour) 598 750 C. Additional information: • One worker, James, was omitted from the Production Wages Register. Details from his job card for the last week in February 2020 are as follows: Hours worked Normal rate Overtime hours Overtime rate 30 R120 5 R180 Total employer's contribution amounts to 10% of gross wage. • Insurance of R15 880 was incorrectly omitted from factory overhead costs. This includes a premium of R2 220 paid for the period 1 January 2020 to 30 June 2020. This expense must be allocated between the factory and the sales department in the ratio 3 : 1 • The bookkeeper included R39 600 (75%) of the wages to cleaners in the factory overhead cost. Only 2/3 of this expense should be allocated to the factory. 65

2022 Gr 12 Accounting Study Pack Activities/Notes D. The business produced 22 500 towels during the financial year, at R60 per unit. 5.3 FRAGRANCE MANUFACTURERS This business manufactures perfumes and shampoo. The owner, Marie Klasen, has compared the profit she earned over the past two years (2019 and 2020). REQUIRED: 5.3.1 Identify ONE variable cost of each product that was not well controlled. Note that the inflation rate is 6%. Quote figures. In each case, give a solution for the problem identified. (6) 5.3.2 Provide a calculation to prove that the break-even point of 26 250 units for perfumes in 2020 is correct. (4) 5.3.3 Comment on the break-even point and level of production of perfumes. State TWO points with figures. (4) INFORMATION: A. UNIT COSTS AND SELLING PRICES PERFUMES SHAMPOO (Unit costs) (Unit costs) 2020 2019 2020 2019 R R R R FIXED COSTS 36,75 30,00 18,48 22,00 Factory overhead cost Administration cost VARIABLE COSTS 108,00 88,00 50,00 38,50 Direct material cost 50,00 48,00 25,00 15,00 Direct labour cost 40,00 30,00 18,00 17,00 Selling and 18,00 10,00 7,00 6,50 distribution cost SELLING PRICE 150,00 140,00 90,00 80,00 B. UNITS AND BREAK-EVEN POINT Total units produced and 30 000 35 000 12 500 10 000 Break-even sold point (units) 26 250 20 200 5 775 5 300 45 Activity 1-5 Manufacturing https://wcedeportal.co.za/eresource/209151 66

2022 Gr 12 Accounting Study Pack Activities/Notes RECONCILIATIONS BANK RECONCILIATION Basic concepts bank statement | bank reconciliation statements | electronic funds transfer (EFT) | future-dated EFT | outstanding deposit | advantages of EFTs Bank (Ledger a/c): favourable (Dr) vs unfavourable (overdraft) bank balances (Cr) Bank statement: favourable (Cr) vs unfavourable (overdraft) bank balances (Dr) ITEM PROCEDURE / RULE(S) 1. EFT made/generated (payments) Enter in CPJ 2. Direct deposits / EFTs received Enter in CRJ 3. Outstanding/Late deposit (in CRJ; not in BS yet) Enter in BRS (as an outstanding deposit) 4. Outstanding / Future dated EFTs (in CPJ, not in BS yet) Enter in BRS (as outstanding EFTs) 5. Errors on EFTs (incorrect amount and/or payee) Bookkeeper needs to inform the bank to cancel the EFT; (cancelled) Reverse entry in CRJ (NB: An incorrect payee needs to pay back before the CRJ-entry can be made) 6. Bank charges - items debited on BS Enter in CPJ as ONE total 7. Interest on credit (favourable) balance received Enter in CRJ (a credit entry on BS) 8. Interest on overdraft (a debit entry on BS) Enter in CPJ 9. Debit- and stop orders (payments in BS) Enter in CPJ 10. Withdraw cash from business bank a/c Enter in CPJ (per debit- and/or credit card for wages, petty cash, etc.) 11. Debit- and/or credit card payments (instead of EFOs) to Enter in CPJ (in the same month as the payment) suppliers and/or at pay points 12. Errors in CPJ (EFT entry too much / too little and posted Too much: Enter difference in CRJ; as such) Too little: Enter difference in the CPJ 13. Bank errors (shown on the BS) Enter in BRS (Bank will show correction on the next BS) 14. Fraud or negligence Transaction/Corrective entry(entries) will be determined by the type of fraud or negligence (EFT or deposits??) Format of Bank Reconciliation (BRS) Dr Cr Balance on bank statement unfavourable favourable 'New' calculated Bank CR outstanding deposits X account balance taken DR outstanding EFTs*: 1 X FROM the updated 2 X Bank account in the Cr or Dr Correction of error ledger Balance of bank account favourable unfavourable Column Total Column Total *Outstanding EFT made: EFT generated but it does not appear on the Bank statement yet Dr Format of BANK account Cr Balance b/d (favourable) OR Balance b/d (unfavourable) New calculated Bank Total receipts CRJ Total payments CPJ account balance to be Balance c/o (Cr – Dr) (unfavourable) OR Balance c/o (Dr – Cr) (favourable) shown in BRS TOTAL TOTAL Balance b/d (Dr – Cr) (favourable) OR Balance b/d (Cr – Dr) (unfavourable) Comments EFTs (future-dated or post-dated) issued at the end of a financial year In the Statement of Fin Position: ADD to Bank (Dr); ADD to Trade and other creditors. SUBTRACT from Bank overdraft, ADD to Trade and other creditors GAAP principal for writing off AMOUNT: Rule of Prudence (e.g. cash deposit recorded in CRJ but does not appear in Bank statement [cashier could have been robbed OR he/she is rolling over cash on a monthly basis] Internal control to avoid such issues: Division of duties (one person handles cash, another makes deposits) Ethics Roll over of cash (using cash and then making deposits towards end of month) EFTs generated without supporting documents 67

2022 Gr 12 Accounting Study Pack Activities/Notes DEBTORS RECONCILIATIONS Basic concepts debtors' age analysis | debtors' control account | debtors' list | bad debts | bad debts recovered | interest on overdue accounts Reconciliation: Balance of Debtors Control MUST be equal to the total of the Debtors List Understand the debtors' cycle Invoice (DJ) Credit note (DAJ) Receipt (CRJ) Petty cash voucher (PCJ) Journal vouchers (GJ) Sold on credit Goods returned by Debtors paid their Small cash payments made Correction of incorrect debtors debt on behalf of debtor(s) posting/errors Dr Debtors’ control Cr Balance b/d (opening) Bank and Discount CRJ Sales DJ Debtors allowance DAJ Petty cash PCJ Journal credits GJ Journal debits GJ Balance o/d (closing) Debtors Ledger Fol DR CR Bal Balance b/d **** Invoice DJ *** + Receipt CRJ *** - Discount allowed CRJ *** - Credit note DAJ *** - Journal debits GJ *** + Journal credits GJ *** - How to reconcile (possible reasons for differences and how to act on it) ▪ No entry in books: correct an error in the control account and on list ▪ Error on source documents: correction in the control account and debtors' list ▪ Posted to wrong debtors’ account: correct error in the debtors' list ▪ Totals in journals are incorrect: correct the total in the control account Internal control ▪ Check creditworthiness / Limit bad debts by doing proper background investigation ▪ Each debtor must have an individual account ▪ Accurate/Complete records must be kept ▪ Send regular statements/ SMSs/ emails ▪ Give discounts for prompt payments ▪ Charge interest on overdue accounts / Hand over to lawyers DEBTORS AGE ANALYSIS TWO important items to look for when analysing debtor or credit management: - Credit terms - Credit limits ▪ This analysis provides details of amounts owed by debtors and for how long. ▪ Most businesses give debtors 30 days to pay. (credit term) ▪ 30 days may be determined on invoice OR statement basis. ▪ Statement basis - means 30 days from the date of the statement. 68

2022 Gr 12 Accounting Study Pack Activities/Notes CREDITORS RECONCILIATIONS Basic concepts creditors' control account | creditors' list | interest on overdue accounts Reconciliation: Creditors Control balance MUST be equal to the total of the Creditors List A Creditor's Ledger a/c balance MUST correspond with monthly statement received from a creditor Understand the creditors cycle Source documents involved with Creditors (and the effect of each on the Creditors' control (CC) and monthly statement (CMS)) Doc Invoice (CJ) Debit note (CAJ) EFT made (CPJ) Reason for Bought on credit Goods returned to creditors Payment made to creditor the doc (may receive discount) Effect on CC Add to CC (cr) Subtract from CC (dr) Subtract from CC (dr) and CMS Add to CMS (dr) Subtract from CMS (cr) Subtract from CMS (cr) Internal control 1. Decisions regarding: ▪ can supplier provide goods on a regular basis ▪ does supplier allow trade discount? ▪ payment terms ▪ does supplier give cash discounts 2. All items received - correct documents: ▪ Control if goods received correspond with the invoice when delivery is made ▪ Check for damaged items. ▪ If goods are damaged, return goods to supplier with a debit note ▪ If frequent problems occur, find alternative supplier BANK RECONCILIATION (no cheques) ACTIVITY 1: BANK RECONCILIATION (16 marks; 20 minutes) (Q1.3, NSC Mar 2017, adjusted) The following information relates to Sizwe Traders for July 2016. REQUIRED: 1.1 Calculate the correct balance of the Bank Account in the General Ledger on 31 July 2016. State if this balance is favourable or unfavourable. (8) 1.2 Prepare the Bank Reconciliation Statement on 31 July 2016. (6) 1.3 Refer to Information D Explain ONE internal control measure that the business should implement to ensure that this will not happen in the future. (2) 69

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Extract from the Bank Reconciliation Statement on 30 June 2016: Favourable balance as per Bank Statement R42 555 Outstanding deposit: (dated 11 June 2016) R37 800 Outstanding EFT: No. 305 (dated 3 August 2016) R8 400 B. The balance in the Bank Account was provisionally calculated as a favourable balance of R16 785 on 31 July 2016, before taking into account the items listed below. C. The following items appeared only on the July Bank Statement: Interest earned on favourable bank balance, R285 Bank charges, R950 Unidentified debit order of R1 950. The bank promised to correct this error on the August 2016 Bank Statement. D. EFT No. 374 appeared correctly on the Bank Statement as R8 450. The Cash Journal shows it as R4 850. E. The outstanding deposit of R37 800 does not appear on the Bank Statement for July 2016. An investigation revealed that this money was never deposited. The cashier has disappeared. F. The following entries were only in the Cash Journals for July 2016: A deposit of R27 180 made on 31 July 2016 EFT No. 401 (dated 18 August 2016), R18 600 G. The balance on the Bank Statement on 31 July 2016 is the missing figure. 16 ACTIVITY 2: BANK RECONCILIATION AND INTERNAL CONTROL (30 marks; 25 minutes) (Q1, Nov 2017, adjusted) 2.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question number (2.1.1–2.1.3) in the ANSWER BOOK. 2.1.1 A favourable balance on the Bank Statement is indicated as a debit on the reconciliation statement. 2.1.2 A post-dated EFT made must be entered on the date generated. 2.1.3 An error on the bank statement is corrected in the bank reconciliation statement. (3 x 1) (3) 70

2022 Gr 12 Accounting Study Pack Activities/Notes 2.2 MENZIES TRADERS The given information relates to Menzies Traders for June 2017. REQUIRED: 2.2.1 Calculate the following on 30 June 2017: Correct totals for the CRJ and CPJ Bank account balance (14) 2.2.2 Prepare the Bank Reconciliation Statement on 30 June 2017. (9) 2.2.3 Explain the problem relating to deposits. Quote evidence. (4) Explain TWO strategies to prevent this in future. INFORMATION: A. The Bank Reconciliation Statement on 31 May 2017 showed the following: Unfavourable balance on the Bank Statement R1 450 Outstanding deposits: • 17 May 2017 30 000 • 31 May 2017 16 200 Outstanding EFTs: • 812 (dated 5 June 2017) 8 550 • 816 (dated 12 June 2017) 13 590 • 819 (dated 15 August 2017) 7 650 • 823 (dated 31 May 2017) 2 900 Favourable balance on the Bank account in the Ledger R12 060 B. Provisional Cash Journal totals on 30 June 2017: • Cash Receipts Journal: R90 500 • Cash Payments Journal: R85 920 C. Entries in the Cash Journals for June 2017 that do not agree with the June Bank Statement: JOURNAL DOCUMENT DATE DETAILS AMOUNT EFT 850 11 Paintco R5 500 CRJ Deposit slip 451 25 Cash sales R40 500 NOTE: EFT 850 was incorrectly entered in the CRJ instead of the CPJ. JOURNAL DOCUMENT DATE DETAILS AMOUNT EFT 870 25 VN Ltd R16 800 CPJ EFT 871 30 SJ Stores R2 250 71

2022 Gr 12 Accounting Study Pack Activities/Notes D. Items on the Bank Statement dated 30 June 2017 that do not agree with the June Cash Journals: DATE DETAILS DEBIT CREDIT 02 Deposit (17/5) 30 000 05 EFT 812 8 550 09 Debit order (insurance) 2 290 11 Direct transfer to Paintco (EFT 850) 5 500 12 EFT 816 13 590 16 Deposit (31/5) 16 200 18 Direct transfer from S Smit (rent) 16 500 22 EFT 823 (see note below) 9 200 Direct deposit from B Blast 23 750 (Debtor settled his debt of R795) 24 Service fee 1 220 NOTE: EFT 823: Bank Statement figure is correct. Service fees were overstated by R900. The bank will rectify the problem next month. E. The Bank Statement on 30 June 2017 reflected a balance of R?. 30 ACTIVITY 3: BANK RECONCILIATION (20 marks; 15 minutes) (Q1.3, May/Jun 2019, adjusted) The following information relates to Thandeka Traders for May 2019. REQUIRED: 3.1 Calculate the correct Bank Account balance on 31 May 2019. Indicate whether this is favourable or unfavourable. (8) 3.2 Prepare the Bank Reconciliation Statement on 31 May 2019. The bank statement balance is the missing figure. (8) 3.3 Refer to Information B(iii). State TWO internal control measures that the business can use to ensure that this will not happen in the future. (4) INFORMATION: A. Before the bank statement was received, the Bank Account showed a favourable balance of R19 400 on 31 May 2019. 72

2022 Gr 12 Accounting Study Pack Activities/Notes B. Extract from the Bank Reconciliation Statement on 30 April 2019: Outstanding deposit (dated 23 April 2019): R31 560 Outstanding payments: EFT (electronic funds transfer) R15 400 EFT 705 (dated 30 June 2019) R9 450 NOTE: (i) The EFT payment of R15 400 appears in the May Bank Statement. (ii) The outstanding deposit of R31 560 does not appear in the May Bank Statement. An investigation shows that this is cash paid by a debtor and has never been deposited. The amount must be written off. C. The following items must also be taken into account: c (i) Items appearing in the May Bank Statement but not in the journals: • Bank charges, R1 060 • A deposit of R4 500 made by another business. The bank will correct this error in June 2019. • Interest on favourable balance, R313 (ii) Items appearing in the journals but not in the May Bank Statement: • A deposit of R21 343 made on 31 May 2019 • EFT 797 (dated 15 June 2019), R14 350 (iii) An EFT payment appeared correctly in the Bank Statement as R5 678. The Cash Journal shows this EFT as R6 578. 20 ACTIVITY 4: BANK RECONCILIATION (30 marks; 20 minutes) (Q2, Nov 2019) The information relates to Klonex Traders. REQUIRED: 4.1 The owner, Ben Joseph, realises that many people are now using electronic funds transfers (EFTs) instead of cheques. 4.1.1 State THREE advantages of EFTs. (3) 4.1.2 Janet, the bookkeeper, has been assigned the duty of processing and controlling all EFTs. Explain TWO reasons why the internal auditor is concerned about this. (4) 4.2 Show changes in the Cash Journals for June 2019. (10) 4.3 Calculate the correct Bank Account balance on 30 June 2019. (4) 4.4 Prepare the Bank Reconciliation Statement on 30 June 2019. (9) 73

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Extract: Bank Reconciliation Statement on 31 May 2019 Outstanding deposit R9 500 Outstanding EFTs No. Date 444 27 July 2019 R4 670 516 28 May 2019 R7 950 Favourable balance on Bank Account R9 200 NOTE: • The outstanding deposit appeared on the June Bank Statement. • EFT 444 did not appear on the June Bank Statement. • EFT 516 appeared on the June Bank Statement with the correct amount of R5 250. B. Provisional totals in the Cash Journals on 30 June 2019 before receiving the Bank Statement: • Cash Receipts Journal: R30 370 • Cash Payments Journal: R33 600 C. Entries in the Cash Journals NOT on the June Bank Statement: • Deposit, R9 675 • EFT 526 (30 June 2019), R3 800 • EFT 527 (12 August 2019), R4 580 D. Entries on the June 2019 Bank Statement NOT in the Cash Journals: DATE DETAILS R 15 Debit order: Micro Insurance* 1 125 Debit order: Micro Insurance* 1 125 25 M Malan (EFT by tenant) 2 800 30 Interest income 130 30 Service fees 175 *Insurance appeared twice in error. This will be rectified next month. E. Bank Statement balance on 30 June 2019: …? 30 ACTIVITY 5 (BANK RECONCILIATION & INTERNAL CONTROL) (27 marks; 21 minutes) (Q2.2, SC 2020) The information relates to Plaston Traders for April 2020. REQUIRED 5.1 Show the entries to be recorded in the Cash Journals. (10) 5.2 Calculate the Bank account balance in the ledger on 30 April 2020. (4) 5.3 Prepare the Bank Reconciliation Statement on 30 April 2020. (7) 5.4 As the internal auditor you are not happy with the control of cash in this business. • Explain TWO problems to confirm your concerns. Quote figures. • Give advice on how EACH problem can be avoided in future. (6) 74

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION A. Information for the Bank Reconciliation Statement prepared on 31 March 2020 Unfavourable balance as per Bank Statement R19 500 Deposit in the Cash Journal, but not on March 2020 bank statement 50 400 EFTs entered in CPJ Nr 615 22 500 Nr 690 11 850 Unfavourable balance on the Bank account in the Ledger 350 NOTE: The deposit appeared on the bank statement on 3 April 2020. EFT 690 was reflected on the April Bank Statement on 2 April 2020 as R14 550. The Bank Statement was correct. B Provisional Cash Journal totals on 30 April 2020 before receiving the April Bank Statemen via email from the bank: • Cash Receipts Journal (CRJ): R65 570 • Cash Payments Journal (CPJ): R64 790 C. Information on April 2020 Bank Statement not recorded in the April Cash Journals Debit Credit EFT (Z. Nkosi - tenant) R31 350 Debit order (Quick Insurers) R9 750 EFT (X GlassFit - repairs to shop windows) R2 975 Interest 150 Internet banking fees 800 Internet banking fees 800 NOTE: The bank duplicated the internet banking fees in error. It will be corrected in May 2020. D. Deposit entries In the April CRJ that did not agree with the April Bank Statement: • R27 750 on 28 April 2020 • R44 000 on 29 April 2020. The Bank Statement reflected this as R33 500. An investigation revealed that the cash slips added to R44 000, but only R33 500 was deposited. The shortfall cannot be traced and must be written off E. Entries In the April CPJ that did not appear In the April Bank Statement: • EFT 880 (PNP Suppliers) 29 April, R8 600 • EFT 889 (P. Sithole - owner, for private use) on 30 April, R7 300 F. Bank Statement balance on 30 April 2020 is the balancing figure. 27 Activity 1-5 Bank Reconciliation https://wcedeportal.co.za/eresource/209156 75

2022 Gr 12 Accounting Study Pack Activities/Notes DEBTORS’ RECONCILIATION ACTIVITY 1: DEBTORS’ AGE ANALYSIS (8 marks; 7 minutes) (Q2.3; SC 2020) The information relates to Tonga Hardware. REQUIRED: 1.1 Explain how the Debtors' Age Analysis will assist the business in managing debtors more effectively. (2) 1.2 Explain TWO separate problems highlighted by the age analysis. Provide evidence for EACH. (4) 1.3 State TWO strategies that Tonga Hardware can use to ensure that only reliable applicants are granted credit. (2) INFORMATION: A. Debtors are granted 30 days to settle their accounts. B. Debtors' age analysis on 29 February 2020: CREDIT AMOUNT CURRENT 30 60 90 DEBTORS LIMIT OWING AMOUNT DAYS DAYS DAYS N Nene 9 000 7 500 3 150 4 350 P Palm 5 250 6 300 5 700 600 D Duma 10 500 2 175 750 1 425 S Swart 19 500 18 750 1 500 4 500 6 750 6 000 44 250 34 725 11 100 9 450 6 750 7 425 8 ACTIVITY 2: DEBTORS' AGE ANALYSIS & INTERNAL CONTROL (8 marks; 10 minutes) (Q1.1; Feb/March 2018) The information below relates to Witbank Hardware. REQUIRED: 2.1 Explain why the debtors' age analysis is considered to be an effective internal control measure. State ONE point. (2) 2.2 Explain TWO different problems highlighted by the debtors' age analysis. In EACH case, provide the name of a debtor and figure(s). (6) INFORMATION: A. Debtors are granted 30 days to settle their accounts. B. Debtors' age analysis on 31 October 2017: CREDIT AMOUNT CURRENT 30 60 90 DEBTORS LIMIT OWING MONTH DAYS DAYS DAYS Z Zulu 6 000 5 000 2 100 2 900 P Botha 3 500 4 200 3 800 400 M Valley 7 000 1 450 500 950 S Walker 13 000 12 500 1 000 3 000 4 500 4 000 O Klein 3 000 3 000 1 900 1 100 26 150 9 300 6 300 5 600 4 950 100% 36% 24% 21% 19% 8 76

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 3: DEBTORS' RECONCILIATION & AGE ANALYSIS (27 marks; 20 minutes) (Q2, NSC Nov 2020 (1) / Sep 2021) The information relates to Mamela Traders for September 2020. REQUIRED: 3.1 Calculate the correct Debtors' Control balance on 30 September 2020. Show figures and indicate '+', '–' or 'no change' at each adjustment (8) 3.2 Calculate the correct total of the Debtors’ List on 30 September 2020. (11) 3.3 Despite sending monthly statements timeously, the accountant noticed that this was not effective in improving debtors’ collections. • Refer to Information C. Calculate the % of debtors who do not comply with the credit terms. (4) • Refer to Information A. Identify ONE other problem with regard to the control over debtors. (2) • Provide TWO suggestions to address the problems identified. (2) INFORMATION: A. Balances on 30 September 2020 before taking into account the errors and omissions: (i) Debtors' control balance in the General Ledger, R100 310. (ii) List of debtors' balances: Credit Limit Balance D. Dlamini R20 000 R27 000 G. Swardt 30 000 22 470 N. Nomandla 15 000 17 600 L. Vos 40 000 34 440 X. Meyer 10 000 (2 000) B. Errors and omissions: (i) The total of the Debtors' Journal was overcast by R3 600. (ii) No entry was made for a sales invoice issued to Vos for R2 760. (iii) Interest of R230 must be charged on the overdue account of Swardt. (iv) Goods returned by Nomandla, R1 400, were posted to the wrong side of his account in the Debtors' Ledger. The entry in the General Ledger was correct. (v) The amount of R6 300 received from Dlamini was incorrectly recorded as R3 600 in the Cash Receipts Journal and posted as such to the Ledger Accounts. (vi) The balance of Meyer must be transferred to his account in the Creditors' Ledger C. On 30 September 2020, the Debtors' Age Analysis revealed the following: Current Balance 30 days 60 days 90 days Month R99 000 R15 420 R22 200 R44 500 R16 880 Credit terms: Debtors are granted 30 days to settle their accounts. 27 Activity 1-3 Debtors Reconciliation https://wcedeportal.co.za/eresource/209161 77

2022 Gr 12 Accounting Study Pack Activities/Notes CREDITORS’ RECONCILIATION ACTIVITY 1: CREDITORS' RECONCILIATION (13 marks; 10 minutes) (Q1.2, NSC Nov 2020 (2)) Ekasi Traders buys goods on credit from Thembeka Suppliers. REQUIRED: 1.1 Use the table provided to indicate changes to the: • Creditors' Ledger Account in the books of Ekasi Traders • Creditors' Reconciliation Statement on 30 April 2021 (9) 1.2 Refer to Information C(c) about Invoice 395. It was discovered that the purchasing manager, Bradley, had taken these goods for his personal catering business. The owner regards Bradley as a valued member of staff and does not regard this as theft. What should the owner say to Bradley regarding this incident? Explain TWO points. (4) INFORMATION A. Creditors' Ledger Account in the books of Ekasi Traders THEMBEKA SUPPLIERS (CL6) DEBIT CREDIT BALANCE 2021 1 Balance b/d R81 000 April 12 Invoice 220 97 200 178 200 EFT 40 500 137 700 18 Debit Note 702 10 300 127 400 Invoice 289 49 100 176 500 Invoice 333 30 000 206 500 24 Debit Note 877 9 700 216 200 25 Journal voucher 585 6 400 209 800 31 EFT and discount 92 600 117 200 B. Statement of account from Thembeka Suppliers Ekasi Traders 225 Crocodile Road 25 April 2021 DEBIT CREDIT BALANCE 2021 1 Balance R81 000 April 12 Invoice 220 97 200 178 200 Receipt 742 40 500 137 700 18 Credit Note 791 13 100 124 600 Invoice 333 30 000 154 600 22 Invoice 395 12 500 167 100 24 Credit Note 888 9 700 157 400 78

2022 Gr 12 Accounting Study Pack Activities/Notes C. Errors, omissions and other information (a) Invoice 289 was incorrectly reflected in the account of Thembeka Suppliers in the Creditors' Ledger. These goods were purchased from Thami Suppliers. (b) Credit Note 791 was recorded incorrectly on the statement of account. This relates to the correct entry for Debit Note 702 in the Creditors' Ledger. (c) Invoice 395 on the statement of account was for goods ordered by Ekasi Traders. (d) Thembeka Suppliers also purchased goods on credit from Ekasi Traders. Ekasi Traders has transferred a debit balance from the Debtors' Ledger (Journal voucher 585). Thembeka Suppliers will include this on the next statement. (e) The transaction on 24 April 2021 is for merchandise returned to Thembeka Suppliers. (f) The statement of account reflects transactions up to 25 April 2021. 13 ACTIVITY 2: CREDITORS' RECONCILIATION (20 marks; 15 minutes) (Q1.2, SC May/June 2021) KHAYA STORES Khaya Stores is owned by Peter Sithole. The business buys goods on credit from PN Suppliers. The business received a statement of account for February 2021. REQUIRED: 2.1 Refer to Information A, B and C. Use the table that is provided. Indicate the changes to the Creditors' Ledger account in the books of Khaya Stores and the statement received from PN Suppliers to take into account the errors and omissions on 28 February 2021. Indicate + or – for each amount. (12) 2.2 Refer to Information D. • State TWO benefits of using electronic funds transfers (EFTs) for payments to creditors. (2) • The internal auditor feels that this incident of fraud should never have occurred in this business. - Explain why he feels this way. (2) - Explain how this could have been prevented. State TWO points. (4) 79

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION A. Creditors' Ledger of Khaya Stores PN SUPPLIERS (CL8) DATE DETAILS DEBIT CREDIT BALANCE R R R 2021 1 Balance 86 900 Feb. 5 Invoice 353 18 800 105 700 7 Debit note 72 600 105 100 13 EFT 428 22 800 82 300 Discount 1 140 81 160 14 Invoice A417 6 100 87 260 16 Invoice 390 11 800 99 060 23 Invoice 401 8 900 107 960 24 EFT 676 12 000 95 960 25 Journal voucher 221 2 660 93 300 27 Invoice 556 7 700 101 000 B. Statement of account received from PN Suppliers Khaya Stores 228 Rhino Street 25 February 2021 DATE DETAILS DEBIT CREDIT BALANCE R R R 2021 1 Balance 86 900 Feb. 5 Invoice 353 10 800 97 700 7 Credit note 109 600 98 300 14 Receipt 632 22 800 75 500 16 Invoice 390 12 980 88 480 23 Invoice 401 8 900 97 380 24 Receipt 961 12 000 85 380 C. Errors, omissions and other information: (i) Invoice 353 on 5 February 2021 was correct according to the statement. (ii) PN Suppliers made an error in recording the goods returned on 7 February 2021. (iii) Khaya Stores entered a discount with the EFT payment on 13 February 2021. PN Suppliers informed the business that they do not qualify for this discount. (iv) Invoice A417 in the Creditors' Ledger Account of PN Suppliers was for goods purchased from LM Suppliers. (v) The trade discount on Invoice 390 was not deducted by PN Suppliers. (vi) The bookkeeper transferred a debit balance from the Debtors' Ledger Account of PN Suppliers (Journal voucher 221) to their account in the Creditors' Ledger. (vii) The statement shows entries up to 24 February 2021 only. 80

2022 Gr 12 Accounting Study Pack Activities/Notes D. During an internal audit, the auditor noticed the following account in the Creditors' Ledger of Khaya Stores: EXCESS TRADERS CL24 DATE DETAILS DEBIT CREDIT BALANCE 2021 20 Invoice 11 334 R120 000 R120 000 Feb. 22 EFT R120 000 R0 It was discovered that an EFT payment of R120 000 was made to Frank Adams, the sole owner of Excess Traders. Further investigation by the internal auditor revealed that this business is not operational, and that Frank Adams is a close relative of the accountant of Khaya Stores. 20 Activity 1-2 Creditors Reconciliation https://wcedeportal.co.za/eresource/209166 81

2022 Gr 12 Accounting Study Pack Activities/Notes BUDGETING Basic concepts budgeting | forecasting | cash budget | projected statement of comprehensive income ( aka projected income statement) | budgeted (or projected) figures | actual figures | budget period | debtors' collection schedule creditors payment schedule | cash from debtors | payments to creditors | cash sales | credit sales cash purchases | credit purchases | cash surplus | cash shortfall Debtors' collection schedule - This schedule is based on credit sales only - MAY be required to calculate total sales first and work back to credit sales e.g. If Cash sales is 80%, then total sales will be: Cash sales x 100/80 Now calculate credit sales, which is 20% of total sales: = Total sales less cash sales NB: ALTERNATIVE calculation to save time: Credit sales = Cash sales x 20/80 - REMEMBER to TOTAL the debtors’ collection or creditors' payment schedule Cash Budget - You will not be required to prepare a complete cash budget, but you will be expected to analyse a cash budget and complete certain calculations. - Only do calculations that are required. - The Receipts from debtors’ amount will be calculated in debtors’ collection schedule - Payments to creditors: amount could be calculated in Creditor's payment schedule OR directly in the budget. - REMEMBER: Purchases are Cost of Sales (Cash or Credit) where purchases amounts are not given directly - Any deficit (payments are more than receipts) must be indicated in brackets ( ) and must be subtracted from a favourable or debit bank balance. - The first month’s closing balance is ALWAYS the opening balance of the second month. Calculations Mark-up % Sales - Cost of sales X 100 Answer must be in: Cost of sales …% % Increase/Decrease New amount - Old amount X 100 Old amount …% Given: Interest on loan: Interest amount X 100 X 12 months % p.a. and monthly interest amount % interest R …. NB: Use the same calculation for fixed deposit Required: Calculate total Loan Items NOT in Cash budget (Non-cash items) Depreciation; Bad debts; Discount allowed; Discount received Projected Income Statement Format for Projected Income Statement is similar to an Income Statement but is prepared per month for budget period. Items NOT in Projected Income Statement Purchase of assets; Purchase of stock; Receipts from debtors; Payments made to creditors; Drawings; Capital contributions; Issued shares; Buy back of shares Internal control - Compare the actual with the budgeted amounts. Possible problems related to expenses or income can be identified and recommendations made based on these comparisons. - Decide whether the expense or income has been well controlled/managed or not. - Identify the LINK between budgeted income and budgeted expense/payment items, e.g. Advertising & Sales; Consumable stores & Fee income; Delivery expenses & Sales; - Comment on 'challenges' e.g. office expenses / delivery expenses & working from home during lockdown; buying or renting/leasing an asset; spending on services, e.g. cleaning services outsourced vs paying cleaners.... 82

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 1 BUDGETING (40 marks; 30 minutes) (Q6, NSC Nov 2019) The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019. Thembi Tsomi is the sole shareholder and director. 1.1 Indicate amounts in the appropriate blocks for the Cash Budget and Projected Income Statement for three months ending 31 January 2020. • A printer costing R40 800 will be bought for cash on 30 November 2019. Depreciation will be R680 per month. • On 1 January 2020, R48 000 will be paid for a 12-month insurance contract. • A loan of R100 000 will be received from Viva Bank on 31 December 2019. This will be repaid in equal instalments over 20 months, commencing on 31 January 2020. Interest at 12% p.a. is paid monthly and is not capitalised. (11) 1.2 Refer to Information A: Debtors' Collection Schedule. Thembi is preparing projections for the period commencing 1 November 2019. Thembi does not grant discount for early payment. Calculate the % of debtors: • Who settle their accounts in the 2nd month following the credit sales transaction month (3) • Written off as bad debts at the end of the 3rd month following the credit sales transaction month (4) 1.3 Refer to Information B: Projected Income Statement for September and October. 1.3.1 Office workers are unhappy with the increase that Thembi gave them on 1 October 2019. Explain what she should say to them. Provide TWO points. Quote figures or a calculation. (6) 1.3.2 Thembi pays her son, Jacob, to deliver and install carpets for customers. She budgets R2,80 per metre for this. Comment on the control of this expense. Quote figures or a calculation. (4) 1.3.3 A new competitor commenced trading in the area on 1 September 2019. • Provide figures to illustrate the impact on sales in September. (2) • Explain THREE decisions that Thembi took in October in response to the new competitor. Quote figures or a calculation. (6) 1.3.4 Stock sold is replaced in the same month. 50% of the stock is bought on credit. Creditors are paid in the month following the purchases month to receive a 5% discount. Calculate the actual amount payable to creditors in November 2019. (4) INFORMATION: A. Debtors' Collection Schedule for the period ending 31 January 2020: CREDIT COLLECTIONS SALES NOV. 2019 DEC. 2019 JAN. 2020 August R80 000 R17 600 September 90 000 67 500 R19 800 October 100 000 75 000 R22 000 November 120 000 90 000 R94 800 R112 000 83

2022 Gr 12 Accounting Study Pack Activities/Notes B. Information identified from the Projected Income Statement: SEPTEMBER 2019 OCTOBER 2019 Projected Actual Projected Actual Metres sold 5 000 m 3 800 m 5 000 m 6 000 m Selling price per metre R100 R100 R100 R88 Cost price per metre R60 R60 R60 R60 Sales: cash R400 000 R310 000 R400 000 R132 000 : credit 90 000 70 000 100 000 396 000 Total sales 490 000 380 000 500 000 528 000 Cost of sales (300 000) (228 000) (300 000) (360 000) Gross profit 190 000 152 000 200 000 168 000 Director's fees 50 000 50 000 50 000 40 000 Wages: Office workers 9 200 9 200 9 200 11 040 Salary: Salesperson 20 000 20 000 20 000 0 Commission: Salesperson 0 0 0 52 800 Advertising 5 000 5 000 5 000 5 000 Packing materials 2 500 1 900 2 500 2 550 Delivery and installation 14 000 14 000 14 000 16 800 of carpets Staff training 15 000 0 15 000 40 000 40 ACTIVITY 2 BUDGETING (35 marks; 30 minutes) (Q6, SC 2020) 2.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK. 2.1.1 Bad debts are an example of a payment in a Cash Budget. 2.1.2 A Projected Income Statement estimates the expected profit or loss for a specified period. 2.1.3 A decrease in a fixed deposit will be shown as a receipt in the Cash Budget. (3 x 1) (3) 2.2 KURUMAN (PTY) LTD John Peters is the majority shareholder and CEO. You are provided with information for the period ending 31 July 2020. There are five other shareholders. Refer to Information A 2.2.1 • Calculate the missing amounts indicated by (i) and (ii) in the Debtors' collection schedule. (4) • Calculate the percentage discount allowed to debtors who settle in the month of the sales transactions. (5) 2.2.2 Calculate the following budgeted amounts: • Total sales for July 2020 (3) • Payment to creditors during June 2020 (4) • Additional loan to be acquired on 1 June 2020 (4) 84

2022 Gr 12 Accounting Study Pack Activities/Notes 2.2.3 The directors did not adhere to the Cash Budget during May 2020. • Identify TWO overpayments in May 2020. Provide figures. • Give a valid reason for EACH overpayment identified, to support their decisions. (6) Refer to Information E. 2.2.4 Why are the auditors concerned that the agreement with Tradecor is unethical or possibly a crime? Explain THREE points. (6) INFORMATION A. Sales and debtors' collection: • Estimates of total sales for 2020: April R150 000 May R165 000 June ? • 25% of all sales are on credit. The rest is for cash. • Debtors are expected to settle as follows - 60% within the same month of sale, subject to a cash discount allowed. - 38% in the month following the month of sale. - 2% of debts are written off in the 2nd month following the month of sale. • Partially completed Debtors' Collection Schedule: CREDIT SALES MAY JUNE JULY May R41 250 R23 760 (i) June (ii) R25 056 R16 530 July R48 000 R27 648 R44 178 B. Purchases of merchandise and payments to creditors: • The business uses a fixed-stock base with stock sold being replaced monthly. • The business uses a mark-up of 50% on cost. • 20% of all merchandise is purchased for cash. • Creditors are paid in full in the month following the month of purchase. C. Loan and interest: The loan from Bokke Bank will be increased on 1 June 2020. Interest at 20% p.a. is not capitalised and is payable at the end of each month. 85

2022 Gr 12 Accounting Study Pack Activities/Notes D. Extract from the Cash Budget for the three months ending 31 July 2020: MAY JUNE JULY Budgeted Actual Budgeted Budgeted RECEIPTS R R R R Cash sales 123 750 142 400 130 500 144 000 Collection from debtors 38 010 26 000 44 178 Loan ? Sale of property 0 320 000 Sale of old vehicle 40 000 95 000 PAYMENTS Cash purchase of stock 22 000 18 000 23 200 ? Payment to creditors 80 000 80 000 ? ? Salaries 28 000 28 000 28 000 42 000 Advertising 5 600 8 400 5 600 5 600 Staff training 30 000 Interest on loan 6 000 6 000 7 500 7 500 Vehicle maintenance 12 200 36 350 5 800 5 800 Purchase of vehicle 235 000 235 000 - - Rent expense 0 0 0 0 Security personnel 8 000 6 500 8 000 8 000 E. Agreement with Tradecor: The CEO, John Peters, decided to sell one of the company's properties at book value. This property was originally bought for R320 000 in 1980. According to the sale agreement, the purchaser, Tradecor, would rent the property back to Kuruman (Pty) Ltd for R26 000 per month with effect from 1 June 2020. The auditors of Kuruman (Pty) Ltd discovered that the sole owner of Tradecor is John Peters' wife. They regard this agreement as unethical and possibly a crime. 35 ACTIVITY 3: BUDGETING (40 marks; 30 minutes) (Q3, NSC Nov 2020 (2)) Blossom (Pty) Ltd sells expensive ladies' dresses of high quality. They also repair dresses for customers, but they aim to break even on this service. Customers are allowed to buy dresses for cash or on credit, but they are required to pay cash for all repairs. The information relates to the budget period ending 31 May 2021. REQUIRED: 3.1 Complete the Debtors' Collection Schedule for March to May 2021. (9) 3.2 Calculate the missing amounts indicated by (a) to (d) in the Cash Budget. (14) 86

2022 Gr 12 Accounting Study Pack Activities/Notes 3.3 Refer to Information G and H. Advertising: • Explain the decisions that the directors took regarding the budgeted and actual expenditure for advertising in May 2021. Quote figures or calculations. (4) • The directors ask you for a report on the effect that the advertising decisions have actually had on customers and sales in May 2021. - Provide TWO points that you would include in your report. Quote figures or calculations. (4) - Explain how the decline in the national economy has affected the average amount that customers spent in May 2021. Quote figures. (3) Consumable stores: Comment on whether the consumable stores have been well controlled or not. Quote figures or calculations. (2) 3.4 Refer to Information F and H. Rental and customers: The owners of the property, Propco Ltd, informed the directors of Blossom Ltd of the increase in rent planned with effect from 1 April 2021. In order to economise on rent, the directors asked the owners, Propco Ltd, for a reduction of the area rented from 1 May 2021. Propco Ltd agreed to this request. Calculate the reduction of the area rented (in square metres). (4) INFORMATION: A. Total sales and cost of sales: MARCH APRIL MAY Sales R560 000 R630 000 R770 000 Cost of sales 320 000 360 000 440 000 • Goods are sold at a mark-up of 75% on cost. • Credit sales are expected to be 65% of total sales. B. Expected debtors' collection based on the past: • 40% collected in the month of sale, less 6% discount for early payment • 50% collected in the month following the month of sale • 8% collected two months after the sale • 2% regarded as uncollectable two months after the sale C. Purchases of stock: • All purchases of stock are on credit. • Trading stock is replaced in the month of sale. A fixed stock level is maintained. • Creditors are paid in full in the month after purchasing stock. D. Loan from Janet Bloom: • Janet Bloom has provided a loan to the business at an interest rate of 9% p.a. Interest is not capitalised and one-third of the loan is repaid to her on 31 December each year. • As the company was still experiencing cash flow problems owing to the Coronavirus lockdown in 2020, Janet agreed to increase her loan to the business on 1 April 2021. 87

2022 Gr 12 Accounting Study Pack Activities/Notes E. Salaries of sales assistants: • The sales assistants all earn the same monthly salary. • They were promised a 5% increase in salaries with effect from 1 April 2021. • The business employed two sales assistants in March and planned to employ an additional assistant from 1 April 2021. The new assistant will not get the 5% increase this year. F. Rent and number of customers: • The directors secured premises in a local shopping mall from Propco Ltd with enough space to cater for the expected number of customers. • Rent is charged per square metre according to the floor area. The rent increased by 11% p.a. commencing on 1 April. • The following figures were identified for planning purposes: MARCH APRIL MAY Floor area in square metres (m2) 120 m2 120 m2 ? Rent expense per m2 ? ? ? Expected average sales per customer R7 000 R7 000 R7 000 Expected number of customers 80 customers 90 customers 110 customers G. Extract from the Cash Budget: MARCH APRIL MAY RECEIPTS R R R Cash sales 196 000 (a) 269 500 Cash from debtors 278 369 355 992 ? Fee income (for repairs) 15 000 15 000 15 000 Loan from Janet Bloom (see Information D) (b) PAYMENTS Payments to creditors 220 000 320 000 360 000 Salaries of sales assistants (see Information E) 22 400 (c) ? Wages of repair staff 9 000 10 000 10 000 Consumable stores (for repairs) 4 200 4 200 4 200 Interest on loan 1 365 2 625 2 625 Rent expense (see Information F) (d) 39 960 39 960 Advertising 10 000 12 000 30 000 Audit fees 60 000 H. Comparison of budgeted figures to actual figures for May 2021: BUDGETED ACTUAL Number of customers 110 customers 135 customers R R Sales 770 000 690 000 Fee income (repair service) 15 000 21 000 Advertising 30 000 42 000 Consumable stores (for repairs) 4 200 5 520 Wages (for repair staff) 12 000 18 000 Audit fees 60 000 48 000 Rent expense 39 960 31 968 Salaries (shop assistants) 35 280 37 044 Delivery expenses 6 930 4 850 Packing material 19 250 13 480 40 88

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 4: BUDGETING (45 marks; 40 minutes) (Q3, SC June 2021) 4.1 Insert the relevant amount(s) for EACH transaction below into the appropriate columns for the following Cash Budget and Projected Income Statement for July 2021. Example: Monthly telephone costs are expected to be R4 200. PROJECTED INCOME CASH BUDGET FOR JULY NO. STATEMENT FOR JULY RECEIPT PAYMENT INCOME EXPENSE e.g. 4 200 4 200 (8) TRANSACTIONS FOR JULY 2021: 4.1.1 A three-month advertising contract for R6 000 will be paid on 1 July 2021. R2 000 of this amount relates to the next financial year. 4.1.2 On 1 July 2021, R45 000 will be invested in a fixed deposit at 8% interest p.a. Interest is not capitalised and is received at the end of each month. 4.1.3 Budgeted cash sales, R23 200 (cost of sales; R16 000). 4.2 ANOKHI (PTY) LTD The business sells electrical appliances. The financial year ends on 30 April. Kayla Bester is the sole shareholder and CEO of the business. REQUIRED: 4.2.1 Complete the Creditors' Payment Schedule for the budget period ending 31 July 2021. (9) 4.2.2 Calculate the amounts for (a) to (d) in the Cash Budget. (16) 4.2.3 Kayla extracted the following actual and budgeted figures for May 2021: BUDGETED ACTUAL Total sales R882 000 R705 600 Cash from debtors 522 828 402 600 Advertising 35 280 35 280 Delivery expenses (ABC Deliveries) 57 330 51 200 Comment and quote figures on the: • Effectiveness of the advertising • Control over delivery expenses Quote figures in EACH case. (6) 4.2.4 Kayla decided that the business will purchase a delivery vehicle on 1 June 2021. • State TWO benefits of this decision. (2) • Apart from the items reflected in the Cash Budget (Information F), list FOUR other items that Kayla should include in the budget. (4) 89

2022 Gr 12 Accounting Study Pack Activities/Notes INFORMATION: A. Total sales: ACTUAL SALES BUDGETED SALES APRIL 2021 MAY 2021 JUNE 2021 JULY 2021 R878 400 R882 000 R918 000 R936 000 B. Credit sales comprise 60% of total sales. C. Goods are sold at a mark-up of 80% on cost. D. The business maintains a fixed-stock base level. Stock sold in a month is replaced in the same month. The cash purchases are 65% of total purchases. E. Creditors are paid according to the following trend: • 40% – settled in the month of purchase to earn 5% discount • 50% – settled in the month following the purchase month • 10% – settled in the second month after the purchase month F. Extract: Cash Budget for the three months ended 30 July 2021: MAY 2021 JUNE 2021 JULY 2021 R R R Receipts Cash sales 352 800 367 200 374 400 Cash from debtors 522 828 535 140 548 640 Rent income 15 500 15 500 (a) Loan: Jane Investments 0 (b) 0 Payments Cash purchases 318 500 331 500 338 000 Payments to creditors 167 020 170 660 ? Salaries of sales assistants 41 000 41 000 (c) Directors' fees (d) 98 880 98 880 Advertising 35 280 36 720 37 440 Interest on loan 0 3 150 3 150 Delivery expenses 57 330 59 670 0 (ABC Deliveries) Delivery vehicle deposit 140 000 (a) Rent income is expected to increase by 9% p.a. from 1 July 2021. (b) The business has negotiated a loan which will be received on 1 June 2021. Interest at 13,5% p.a. is payable at the end of each month, commencing from 30 June 2021. (c) The business employed five sales assistants in May and June on the same salary scale. Three of them will receive an annual bonus of 75% of their earnings in July 2021. A part-time sales assistant will be employed during July 2021 and will earn 50% of the monthly amount applicable to the others. (d) Kayla earns directors' fees of R720 000 for the year. The company also employed another director, Martin, for the entire year. Martin will receive an increase of 8% p.a. on his directors' fees from 1 June 2021. 45 90

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 5: BUDGETS (35 marks; 30 minutes) (Q4, Sep 2021 / Nov 2020 (1)) You are provided with information of Fantasy Laptops, a business owned by Ray Rennie, for the budget period December 2020 to February 2021. The business sells various types of laptop computers and does not sell on credit. They also repair these items for customers at a fee REQUIRED: 5.1 Refer to Information A and B. Complete the Creditors' Payment Schedule for February 2021. (7) 5.2 Refer to Information C and D. Calculate: • % increase expected in security costs from 1 February 2021 • % commission paid to salespersons during February 2021 • Water and electricity budgeted for December 2020 • The loan repayment to be made on 31 December 2020 (12) 5.3 Refer to Information E. The internal auditor has noticed that packing material was R800 overspent and consumable stores were R1 500 overspent. Comment on the control of packing materials and consumable stores. Quote figures or calculations. (6) 5.4 Refer to Information D. During the Coronavirus lock-down in April and May 2020, the business lost money because there were no sales and fee income. However, Ray had to continue making payments to keep the business afloat (as a going concern). • Give ONE reason why he did not want to stop paying salaries and wages. (2) • Identify ONE other payment in the list in Information D that he would not have been able to stop and give a reason. (2) • Identify ONE payment in the list in Information D that he would have stopped and give a reason. (2) 5.5 Refer to Information F. Ray Rennie, the owner, requires help in making a financial decision. He is undecided as to whether he should lease or buy a delivery vehicle. His two options are reflected as Option X and Option Y Apart from generating more sales or having the use of the vehicle, state TWO advantages of EACH option. (4) INFORMATION: A. Mark-up % and sales: A mark-up of 75% on cost is used to set the sales prices of the laptops. ACTUAL SALES PROJECTED SALES October November December January February 2020 2020 2020 2021 2021 R490 000 R490 000 R770 000 R560 000 R525 000 91

2022 Gr 12 Accounting Study Pack Activities/Notes B. Purchases and payment to suppliers (creditors): • All stock is bought on credit. • Stock sold is replaced in the month of sales. • Some creditors offer a discount for payment in the month of purchase. • 50% is paid in the month of purchase to earn a 10% discount. • 30% is settled in the month after the purchase transaction month. • 20% is settled in the second month after the purchase transaction month C. Information on specific items from the Cash Budget: • Security: The guards are outsourced from Keepsafe Guarding. • Commission: Salespersons are paid commission in the same month on sales only. They do not receive a fixed salary. • Water and electricity: The expected increase from 1 January 2021 is 24%. • Loan and interest: The loan from Delta Bank bears interest at 12,5% per year. Interest is not capitalised, and a fixed loan repayment is made on 31 December each year. • Consumable stores: These are used to repair laptops for customers D. Extract from the Cash Budget: December January February 2020 2021 2021 R R R Fee income: repair services 100 000 150 000 150 000 Interest on loan (12,5% p.a.) 9 375 8 125 Repayment of loan ? Commission to salespersons 123 200 89 600 84 000 Consumable stores for repairs 42 000 63 000 63 000 Security 18 000 18 000 28 500 Water and electricity ? 18 600 18 600 Salaries and wages Packing materials Insurance E. The internal auditor identified the following figures for October 2020: Budgeted Actual Variance R R % Sales 490 000 400 000 -18,4% Fee income 85 000 126 000 +48,2% Packing materials 22 000 22 800 +3,6% Consumable stores 24 500 26 000 +6,1% 92

2022 Gr 12 Accounting Study Pack Activities/Notes F. Options for securing a delivery vehicle: Ray feels that he should buy a delivery vehicle for R520 000 or lease (hire) the vehicle on a monthly basis to enable his business to generate more sales after the Coronavirus lockdown. He has only R100 000 in his investments that he can use. These investments are currently earning interest at 6,5% p.a. He has TWO options to consider: Option X (buy the vehicle): Purchase the vehicle by using the money in his investments and take out a new 5-year loan for R420 000 at a high interest rate. He will have to repay the loan over five years. Interest over the five years will be R176 000. Option Y (hire/lease the vehicle): Hire (lease) the vehicle from Sentinel Ltd for R15 000 per month over 60 months. 35 Activity 1-5 Budgeting https://wcedeportal.co.za/eresource/209171 VAT Basic Concepts ▪ Compulsory / Voluntary registration ▪ VAT rate 15%. ▪ Zero-rated items + examples; Exempted items + examples ▪ Output VAT; Input VAT Calculations: Required Calculation VAT amount Total x 15 (exclusive total given) 100 VAT amount Total x 15 (inclusive total given) 115 OUTPUT VAT & INPUT VAT (Effect on the amount to SARS) INPUT VAT OUTPUT VAT Stock purchased + Sales + Discount received ( ) Bad debts ( ) Returns of purchases ( ) Discount allowed ( ) Water and electricity + Debtor's allowance ( ) Drawings of stock ( ) TOTAL INPUT VAT TOTAL OUTPUT VAT (receivable from SARS) (payable to SARS) + = an increase; ( ) = a decrease VAT payable = Output VAT – Input VAT VAT receivable = Input VAT – Output VAT (Output VAT is less than Input VAT) Ethics ▪ Incorrect / Missing documentation ▪ Claim VAT from SARS, although the vendor is not registered 93

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 1: VAT (12 marks; 9 minutes) (Q1, NSC Nov 2020 (2)) Amahle Traders is registered for VAT. The standard VAT rate is 15%. REQUIRED: 1.1 Calculate the figures indicated by (a) to (d) in the table below. (9) 1.2 The internal auditor discovered that Amahle has been underpaying the amount due to SARS in respect of VAT, at each submission date. On enquiry, Amahle stated that she used the money to pay business expenses and adjusted the payments later. Comment on this practice and give Amahle advice. (3) INFORMATION: EXCLUDING INCLUDING VAT VAT VAT AMOUNT Invoices received from suppliers R78 000 R89 700 (a) Discount received from suppliers R12 400 (b) Credit notes issued to customers (c) R210 Invoices issued to customers R158 700* (d) * This includes sales for R9 200 which should have been sold at zero rate. The bookkeeper incorrectly included VAT of R1 200 on these goods 12 ACTIVITY 2: VAT (8 marks; 6 minutes) (Q2.1, SC 2020) The following relates to Lunga Stores for the VAT period ended 30 April 2020. VAT at 15% applies to all goods. REQUIRED: Calculate the VAT amounts denoted by (i) to (iii) on the table. Indicate the effect of EACH answer on the amount payable to SARS. Refer to the example. (8) INFORMATION: A. Amount owed to SARS on 1 April 2020, R5 500 B. Amounts from April 2020 journals: EXCLUDING INCLUDING VAT DETAILS EFFECT VAT VAT AMOUNT Total sales R544 500 R626 175 R81 675 Increase Purchases of stock 174 900 201 135 (i) ? Drawings of stock 32000 (ii) ? Bad debts 7 015 (iii) ? 8 94

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 3: VAT (13 marks; 10 minutes) (Q2.2, NSC 2020 (1)/Sep 2021 FOREVER TRADERS Tom Smith is the sole owner. The information relates to the VAT period ended 31 August 2020. The standard VAT rate of 15% is applicable to all goods purchased and sold. REQUIRED: 3.1 Calculate the VAT amount that is payable to SARS on 31 August 2020. (9) 3.2 During September, the accountant came across a document for furniture bought by Tom Smith for his personal home, for R46 000 cash. Tom said that R6 000 VAT included in this amount must be regarded as input VAT. Further investigation revealed that similar documents were regularly entered in the books over the past year. Advise the accountant on dealing with this matter. State TWO points. (4) INFORMATION A. Amount due to SARS on 1 August 2020 is R31 470. B. The following transactions appeared in the records for August 2020: EXCLUDING VAT INCLUDING DETAILS VAT AMOUNT VAT Total sales R535 000 R80 250 R615 250 Purchases of stock 385 000 57 750 442 750 Discount received from 11 500 ? suppliers Goods returned by debtors 22 500 ? 25 875 Stock taken by owner at cost 9 600 ? Debtors' accounts written off ? 36 800 13 95

2022 Gr 12 Accounting Study Pack Activities/Notes ACTIVITY 4: VAT (15 marks; 10 minutes) (Q1.1, SC May/June 2021 HILDA GROCERIES Hilda Groceries are registered for VAT. The standard VAT rate of 15% is applicable to most goods. REQUIRED: 4.1 Implementation of VAT: • Explain why the government implemented VAT in South Africa. State ONE point. (2) • Explain why some products are zero-rated products. State ONE point. (2) 4.2 Calculate the amount payable to SARS in respect of VAT for the two months ended 30 April 2021. (11) INFORMATION: A. Balance due to SARS on 1 April 2021, R9 450 B. Transactions for April 2021: AMOUNT VAT AMOUNT EXCLUDING AMOUNT INCLUDING VAT VAT R R R Total sales 412 000 ? 473 800 Purchases of trading stock 230 000 ? Discount allowed to debtors 1 890 Goods returned by customers ? 19 320 Bad debts recovered 1 140 Drawings of trading stock by the 1 380 owner 15 Activity 1-4 VAT https://wcedeportal.co.za/eresource/209176 96