Accounting Balance Sheet

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TABLE OF CONTENTS 1. INTRODUCTION 2 2. HOW SHOULD WE USE THIS STUDY GUIDE? 3 3. STATEMENT OF FINANCIAL POSITION 4 3.1 KEY CONCEPTS 4 3.2 STRUCTURE OF THE STATEMENT OF FINANCIAL POSITION 7 3.3 NOTES TO THE STATEMENT OF FINANCIAL POSITION 9 (BALANCE SHEET) 4. CONSOLIDATION ACTIVITIES 36 5. ANSWER BOOK 47 6. SUGGESTED ANSWERS AND MARKING GUIDELINES 60 7. EXAMINATION GUIDANCE 74 (SPECIFIC TO STATEMENT OF FINANCIAL POSITION) 8. GENERAL STUDY AND EXAMINATION TIPS 75 9. ACKNOWLEDGEMENTS 76

1. INTRODUCTION The declaration of COVID-19 as a global pandemic by the World Health Organisation led to the disruption of effective teaching and learning in many schools in South Africa. The majority of learners in various grades spent less time in class due to the phased-in approach and rotational/ alternate attendance system that was implemented by various provinces. Consequently, the majority of schools were not able to complete all the relevant content designed for specific grades in accordance with the Curriculum and Assessment Policy Statements in most subjects. As part of mitigating against the impact of COVID-19 on the current Grade 12, the Department of Basic Education (DBE) worked in collaboration with subject specialists from various Provincial Education Departments (PEDs) developed this Self-Study Guide. The Study Guide covers those topics, skills and concepts that are located in Grade 12, that are critical to lay the foundation for Grade 12. The main aim is to close the pre-existing content gaps in order to strengthen the mastery of subject knowledge in Grade 12. More importantly, the Study Guide will engender the attitudes in the learners to learning independently while mastering the core cross-cutting concepts. 2|Page

2. HOW SHOULD WE USE THIS STUDY GUIDE? 1. This study guide addresses content and offer strategies to understand the preparation of the Statement of Financial position, in a piecemeal approach, with consolidation activities to conclude. 2. The explanations and activities are intended to supplement the work you may have covered in class or have gained from textbooks. 3. They proceed from the short, simple focused examples to more complex calculations and interpretation of information. 4. It is important to allocate sufficient time to: • Carefully read the explanations provided and underline or highlight key concepts, difficult vocabulary, important dates and relevant amounts. • Interrogate the worked example to gain an understanding of the message being conveyed or the sequence of events being illustrated. 5. Attempt the activities on your own; make constant reference to the explanatory notes, but avoid referring to the suggested answers before completing an activity. 6. Compare your answers to the suggested answers attached, and do your corrections using a different colour ink. Note that you will learn more by discovering your weaknesses (when you get things wrong), and making an effort to understand why your thinking was out of line with what was expected. 7. The activities provided may not be sufficient to perfect your skills. Always refer to similar questions from past examination papers for this purpose. Repetitive practice is always valuable. 8. Become familiar with the use of Answer Books and prepared writing material as this is the trend with all Accounting examinations. PRE-AMBLE: • The Statement of Financial Position is covered in Term 1, under Financial Statements of Companies. • It will feature in the Accounting P1 (Financial Reporting and Evaluation). • Recent trends on this topic focus mainly on preparation of the complete Statement of Financial Position and specific notes, assessment can also focus at the preparation of Statement of Comprehensive Income and a section of the Statement of Financial position. • Missing amounts can also be calculated using the financial indicators relevant to the Statement of Financial Position. • Statement of Financial Position can be integrated with the “Interpretation of Financial Statements, Auditing or Corporate Governance and all this these integrated topics are assessed in a separate Question. 3|Page

3. STATEMENT OF FINANCIAL POSITION A BASIC EXPLANATION The Balance Sheet is a Financial Statement that is usually prepared at the end of the accounting period (a financial year) to show the financial position of a business in terms of its assets, liabilities and equity. A list of commonly used concepts with explanations is provided below. You are advised to compile a list of additional concepts relating to Balance Sheet. 3.1 KEY CONCEPTS CONCEPT EXPLANATION Assets These are business possessions used to generate profit and are classified into two categories, namely Non-current Assets and Current Assets. Non-current Assets These are not intended for resale and they last for a long period, more than a year. Examples are Land and buildings, equipment etc. Current Assets These are liquid and include assets that can be easily converted into cash within a short period of time (within a year), e.g. cash and cash equivalents, inventories and trade and other receivables. Liabilities These are amounts owed by a person or business to another. They are classified into two categories namely, Non-current Liabilities and Current Liabilities. Non-current Liabilities Are long-term debts repayable beyond the period of one year, example is a mortgage loan. Current Liabilities Are short-term debts repayable within a period of 12 months e.g. trade and other payables and current portion of loan. Shareholders’ Equity Total amount attributable to shareholders, it consist of ordinary share capital and retained income. Ordinary shares A type of shares that entitle the owners to dividends that vary in amount according to the profits made by the business. Authorised share capital The maximum number of shares a company may sell according to the company’s Memorandum of Incorporation. Issued share capital The number of shares that have been sold to the public. Retained Income A portion of the profit after tax that has not been paid out to the shareholders in dividends but kept (retained) for future growth of the company. Income tax Tax levied by the government (SARS) on income earned by individuals or companies. SARS The government department to whom the company must pay income tax on the profits and VAT when due. Dividends Profits shared amongst the shareholders in proportion to the number of shares held, it is normally expressed as cents per share Interim Dividends paid to the shareholders during the financial year. Final Dividends declared (recommended) to the shareholders at the end of the financial year. Shareholders for The amount owing to shareholders for dividends declared but not yet dividends paid. Short term loan The portion of long term debt that is payable within a period of one year, in the next financial year. 4|Page

PRIOR KNOWLEDGE (Content you would have covered in previous Grades) • General Ledger and Accounting Equation • Balance Sheet accounts and Nominal accounts (Trial Balance) • An understanding of the Income Statement and adjustments • Balance Sheet of a sole trader and Balance sheet of a partnership The Statement of Financial Position and the Balance Sheet will be used interchangeably throughout this study guide. A REFLECTION OF THE YEAR-END CYCLE OF ACTIVITIES PRE-ADJUSTMENT TRIAL BALANCE ADJUSTMENTS POST – ADJUSTMENT TRIAL CLOSING TRANSFERS BALANCE FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE INCOME (Income Statement) EXPENSES INCOME • Cost of sales • Sales • Rent expense • Rent Income Operating expenses and • Salaries and wages • Discount received • Packing material • Bad debts recovered • Insurance • Profit on sale of asset • Discount allowed • Trading stock surplus • Telephone • Provision for bade debts adjustment • Loss on sale of asset (decrease) income • Depreciation • Trading stock deficit • Provision for bad debts adjustments (increase) • Audit fees • Directors fees Financing • Interest on loan • Interest on fixed deposit • Interest on bank overdraft • Interest on current account • Interest on overdue accounts of • Interest on overdue accounts of creditors debtors Net profit before taxation LESS taxation EQUAL to net profit after tax STATEMENT OF FINANCIAL POSITION (Balance Sheet) 5|Page

BASELINE ACTIVITY REQUIRED Provide a list of accounts that will be recorded in the Balance Sheet ,use the following structure to classify: Assets Liabilities Equity SUGGESTED ANSWER Assets Liabilities Equity l Tangible assets l Loan l Ordinary share capital l Fixed deposit l Trade and other payables l Retained income l Inventories l Shareholders for l Trade and other dividends receivables l Short term loan l Cash and cash l SARS - income tax equivalents l Bank overdraft CLASSIFICATION OF BALANCE SHEET ACCOUNTS Non- Current Current Assets Shareholder’s Current Liabilities Assets Equity Tangible Assets Inventory o Ordinary Trade and other o Land and o Trading stock share capital payables Buildings o Consumable stores *** o Creditors Control o Vehicles on hand o Retained o Accrued expenses o Equipment Trade and other Income *** o Income received in receivables Non-Current advance / Financial Assets o Debtors Control Liabilities Deferred income o Fixed Deposit o Provision for bad o SARS –Income o Long term debts ## Tax *** loan o Accrued income o Shareholders for o Prepaid expenses dividends *** o SARS –Income Tax o Short term loan *** (payable within 12 months) Cash and cash equivalents Bank Overdraft o Bank o Petty cash o Cash float o Fixed deposit (receivable within 12 months) ## this account will *** New items reduce the Debtors Control 6|Page

3.2 STRUCTURE OF THE STATEMENT OF FINANCIAL POSITION The content progression and content overlap across the FET phase is illustrated in the table below: EQUITY SECTION OF THE BALANCE SHEET Grade 10 Grade 11 Grade 12 Owner’s Partners’ Shareholders’ xxxx xxxx xxxx Equity Equity Equity Capital 7 Capital 7 Ordinary Share xxxx Accounts xxxx Capital 7 xxxx Current 8 xxxx Retained 8 xxxx Accounts Income FORMAT OF COMPANIES STATEMENT OF FINANCIAL POSITION (BALANCE SHEET ) Notes R ASSETS NON-CURRENT ASSETS xxxxx Tangible/ Fixed assets 3 xxxx Financial assets Fixed deposits xxxx CURRENT ASSETS xxxxx Inventories 4 xxx Trade and other debtors 5 xxx Cash and cash equivalents (Include fixed deposit maturing in 12 months ) 6 xxx TOTAL ASSETS XXXXX New EQUITY AND LIABILITIES items CAPITAL AND RESERVES / SHAREHOLDERS’ EQUITY xxxxx• Ordinary Share Ordinary share capital 7 xxxx capital Retained income 8 xxx • Retained Income NON-CURRENT LIABILITIES xxxx Mortgage bond (repaid over a long period ,longer than 12 months) xxxx Creditors include CURRENT LIABILITIES xxxxxSARS-income Trade and other creditors 9 xxx tax payable Bank overdraft xxx and Shareholders Short-term loans (portion of long term loan payable within 12 months) xxxxfor dividends TOTAL EQUITY AND LIABILITIES XXXXX 7|Page

Relationship between the Balance Sheet and the Accounting Equation Balance Sheet Basic Accounting Equation Non- Assets = Equity + Liabilities Current Equity Assets EQUAL PLUS TO PLUS Current Liabilities Assets Note the following : Assets Equity Liabilities Debit Credit Debit Credit Debit Credit Increase + Reduce - Reduce - Increase + Reduce - Increase + When equity and liabilities: o Increase they are CREDITED o Reduce they are DEBITED 8|Page

3.3 NOTES TO THE STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) 3.3.1 ORDINARY SHARE CAPITAL AND RETAINED INCOME NOTES Ordinary Share Capital xxx Ordinary shares at beginning of xxx If shares are repurchased BEFORE an year additional issue, use the opening balance to calculate the average share price. xxx Shares issued during the year at xxx If shares are repurchased AFTER the Rx issue: !"#$% '( )*"+%) ", -%./00/0. 1234 /))$%5 6$7-%+ '( )*"+%) ", -%. 1#$) /))$%5 = Average price (xxx) Shares repurchased at average (xxx) Shares repurchased are recorded at the price average share price (below the price paid for shares). xxx Ordinary shares in issue at end of xxx The closing balance can also be used to year calculate the average share price, if the repurchase is the last transaction for the year. Number of shares Value of shares Retained Income Balance at the beginning of the year xxx Retained income balance at the beginning of the year (closing balance of the previous year) Net profit after tax xxx Net profit after tax as it appears on the Income Statement Repurchase of shares (xxx) Amount paid above AVERAGE PRICE for the repurchased shares Ordinary share dividends (xxx) Interim PLUS final dividends - paid xxx Interim dividends PAID during the year - recommended xxx Final dividends DECLARED but not paid / dividends owed to shareholders Balance at the end of the year xxx This balance is transferred to the Balance sheet ALL the bracketed figures reduce the retained income. 9|Page

EXAMPLE 1 JOZI LIMITED You are presented with information from the records of Jozi Limited. The financial year-end is 28 February 2021 Prepare the following notes to the Balance Sheet: • Share capital • Retained income INFORMATION A The authorised share capital consists of 750 000 ordinary shares. On 1 March 2020, only 60% of the shares were in issue. B Information extracted from financial records of Jozi Limited: 28 Feb 29 Feb 2021 2020 Ordinary share capital ? 3 215 000 Retained income ? 322 500 Total ordinary shareholders' equity ? 3 537 500 Interim dividends paid on 31 August 2020 270 000 Net profit after tax 812 700 ADDITIONAL INFORMATION • On 1 November 2020, the company issued a further 80 000 shares at R9, 50 per share. • On 28 February 2021, the directors decided to repurchase 75 000 ordinary shares from the estate of a shareholder who had died. This shareholder had originally purchased his shares on the JSE at various times and at different prices. A repurchase price of R10, 40 was accepted as a fair price. • On 27 February 2021, a final dividend of 40 cents per share was declared. All shares, including the new shares issued and repurchased, qualify for final dividends. 10 | P a g e

WORKED EXAMPLE 1 ORDINARY SHARE CAPITAL AUTHORISED SHARE CAPITAL 750 000 ordinary shares ISSUED SHARE CAPITAL 450 000 Ordinary shares on 1 March 2020 3 215 000 80 000 Ordinary shares issued during the year 760 000 Ordinary shares repurchased (75 000) (562 500) (75 000x7.50) Ordinary shares in issue on 28 February 455 000 3 412 500 2021 Shares issued at beginning : Repurchased shares: Average share 750 000 x 60% = 450 000 R3 215 000 + R760 000 = R7.50 price: Shares issued in November : 450 000 + 80 000 ADD the issued 80 000 x 9.5 =760 000 shares during the year to the opening balance NOTE: o The shares bought will be recorded in the above note at an average price of R7.50 o The difference of R2.90 will be recorded in the Retained income note (R10.40 – R7.50) RETAINED INCOME Balance on 1 March 2020 322 500 10.40 - 7.50 (217 500) This figure should be in Funds used for share buyback (75 000 X 2.90) brackets. Reduces RI Net profit after tax 812 700 Ordinary share dividends (482 000) Dividends reduce the retained income • Interim dividends 270 000 Paid during the year Declared-will be • Final dividends (530 000 x 40 cents) 212 000 recorded under current liabilities Balance on 28 February 2021 435 700 NOTE: The final dividends are paid to all the shares (issued and bought back) Calculations : 450 000 + 80 000 = 530 000 OR 455 000 +75 000 = 530 000 11 | P a g e

EXAMPLE 2 2.1 POOBIE LTD You are provided with information for the financial year ended 28 February 2021. REQUIRED: Complete the following notes to the Balance Sheet (Statement of Financial Position) on 28 February 2021, the financial year-end: 2.1.1 Notes to the Balance Sheet (Statement of Financial Position) for: • Ordinary share capital • Retained income INFORMATION: A. Balances/Totals for February: 2021 2020 Ordinary share capital 8 960 000 6 020 000 Retained income ? 434 000 Fixed assets at book value 9 823 405 Loan: Protea Bank ? 360 000 SARS: Income tax (Dr) 11 340 B. Additional information Share capital and dividends: Authorised share capital: 2 000 000 ordinary shares 1 March 2020 1 000 000 of the shares were in issue. 31 April 2020 Interim dividends paid: 35 cents per share. 1 May 2020 New shares issued at a price of R5 per share. 31 January 2021 100 000 shares were repurchased at 25% above the average share price. These shares qualify for final dividends. The relevant entries have not been made in this respect. 28 February 2021 NOTE: Only 80% of shares were in issue. A final dividend of 10 cents per share was declared. 12 | P a g e

WORKED EXAMPLE 2 ORDINARY SHARE CAPITAL AUTHORISED SHARE CAPITAL 2 000 000 ordinary shares ISSUED SHARE CAPITAL 1 000 000 Ordinary shares at the beginning 6 020 000 700 000 Ordinary shares at R5 3 500 000 (100 000) Repurchase of shares at R5,60 (560 000) 1 600 000 Ordinary shares on 28 February 2021 8 960 000 • Number of issued shares at end of year is 2000 000 x 80% = 1 600 000 • Average share price is R8 960 000 ÷ 1 600 000 = R5.60 • Number of shares issued is: 1 600 000 + 100 000 -1 000 000 = 700 000 • BOTTOM UP calculations –change the signs as you move upward, the sign for 1 600 000 shares WILL NOT CHANGE. • The T Account can also be used to determine the shares issued RETAINED INCOME Balance on 1 March 2020 434 000 Net profit after tax 850 000 Repurchase of shares (140 000) (100 000 x 1,40 ) OR (560 000 x 25/100) Ordinary share dividends (520 000) Paid (1 000 000 x 35/100) 350 000 Recommended (1 700 000 x 10/100) 170 000 Balance on 28 February 2021 624 000 • INTERIM DIVIDENDS- used 1000 000 shares in issue at the beginning of year, movement in shares took place in May. • Shares are bought at 25% above i.e., R5.60 x 25 % = R1.40 o The actual cash paid for each share is R5.60 + R1.40 = R7.00 [This amount will be recorded in the Cash flow statement] OR o R5.60 x 125/100 = R7.00 13 | P a g e

ACTIVITY 1 STONEY LTD The information below was extracted from the accounting records of Stoney Ltd on 28 February 2021 REQUIRED: 1.1 Prepare the following notes to the Financial Statements for the year ended 28 February 2021: l Ordinary Share Capital l Retained Income INFORMATION: A. Balances The balances for 2021 were extracted from the accounting records before the adjustments and additional information were taken into account: 28 February 2021 29 February 2020 Balance Sheet accounts section Ordinary share capital R? R1 275 000 Retained income ? 28 900 B. Figures extracted from the financial records on 28 February 2021 R Depreciation 78 350 Income tax paid 112 000 Money received from the issue of new shares 220 000 Payment for shares repurchased 120 000 C. Share capital and dividends l Stoney Ltd has an authorised share capital of 400 000 shares. l 300 000 shares were in issue on 1 March 2020. l 20 000 shares were repurchased on 1 October 2020 from the estate of a deceased shareholder. l 40 000 new shares were issued on 28 February 2021.These shareholders do not qualify for final dividends. l An interim dividend of 10 cents per share was paid on 28 August 2020. l A final dividend of 20 cents per share was declared on 28 February 2021. D. Income tax was calculated at 28% of the net profit for the year. 14 | P a g e

3.3.2 TRADE AND OTHER PAYABLES NOTE Trade and other payables Trade creditors The balance of creditors at the end of year amongst others will be affected by TRANSFER of creditors to debtors or TRANSFER from debtors to creditors. Accrued expenses/payable expenses Expenses ADDED in the Income statement Income received in advance (deferred) DEDUCTED from income statement –not relevant to current year Creditors for salaries Gross Wages LESS deductions SARS (PAYE) DEDUCTED from the salaries or gross wages Pension Fund Pension DEDUCTED from employees’ salaries PLUS employers’ contribution. Medical Aid Fund Medical fund deducted from employees’ salaries PLUS employers contribution. Shareholders for dividends Dividends declared at end of year and is still due. SARS (income tax) Amount owing to SARS at end of year. Refer to ledger below. Short term loan / Current portion of loan Portion of loan DEDUCTED from Long term loan GENERAL LEDGER SARS – Income Tax Account 2020 2020 20 Bank CPJ 9 000 01 Balance b/d 9 000 Mar Mar 2020 2021 31 Bank CPJ 125 000 28 Income Tax GJ 375 000 Aug Feb 2021 15 Bank CPJ 200 000 Feb 30 Balance c/d 50 000 384 000 384 000 2021 1 Balance b/d 50 000 Mar • This amount will be recorded in the Balance Sheet OR under Trade and other payables • A debit balance of SARS-Income tax will be recorded under trade and other receivables NOTE : The figures above are used to illustrate the different transactions that affect this account over the financial period. 15 | P a g e

ACTIVITY 2 PHESWA LTD You are presented with information from the records of Pheswa Ltd. The financial year- end was 28 February 2021. REQUIRED: 2.1 Prepare the following notes to the Balance Sheet: 2.1.1 Ordinary share capital (11) 2.1.2 Retained income (14) 2.1.3 Trade and other payables (9) INFORMATION: A. List of balances extracted on 28 February 2021, unless otherwise stated: Ordinary share capital (1 March 2020) R4 022 000 Retained income (1 March 2020) 413 220 Inventories (Trading Stock) 442 700 Debtors’ Control 305 240 Creditors’ Control 219 400 Bank overdraft 57 480 Fixed deposit (R60 000 matures on 30 June 2021) 230 000 Long term loan 946 500 SARS: Income tax (provisional income tax payments) 147 770 Accrued expenses 16 490 Income received in advance 8 880 B. Share capital and dividends: • The authorised share capital comprised 1 200 000 ordinary shares. • On 1 March 2020, 60% of the shares were in issue. • On 30 June 2020, the directors issued a further 200 000 at R6, 80 each. • On 31 August 2020, in interim dividend of 13 cents per share was paid to all shareholders on the share register. • On 31 October 2020, 100 000 ordinary shares were repurchased at R7, 00 per share. These shareholders did not qualify for final dividends. • A final dividend of 27 cents per share was declared on 28 February 2021. C. Net profit and income tax • The net profit before tax amounted to R535 000. • The provisional tax payments did not cover the total income tax for the year. An amount of R12 730 was still due to SARS. D. 20% of the long term loan is payable in the next 12 months. 16 | P a g e

3.3.3 TANGIBLE ASSETS AND TRADE AND OTHER RECEIVABLES Tangible Assets Land and Vehicles Equipment H=A–B Buildings Cost LESS Acc Carrying value at beginning (H) xxx xxx xxx Depreciation equals to Carrying Value Cost (A) xxx xxx xxx Accumulated depreciation (B) (xxx) (xxx) (xxx) Asset disposed @ Movements Carrying value = Cost Price LESS Additions at cost (C) xxx xxx xxx Accumulated depreciation Disposals at carrying value (D) (xxx) (xxx) (xxx) Depreciation for the year (E) (xxx) (xxx) Carrying value at end of year (I) xxx xxx xxx F = A + C - Cost price of Asset Cost (F) xxx xxx xxx disposed OR Cost at beginning Accumulated depreciation (G) (xxx) (xxx) PLUS additions LESS Cost price of asset disposed G = (B + E) LESS Accumulated depreciation on asset sold Trade and other receivables Trade debtors xxx Refer to explanation on trade and other payables (3.3.2) and the information provided below (NOTE). Provision for bad debts (xxx) Debtors from balance(s) LESS OR PLUS adjustments affecting debtors multiplied by a percentage provided. Net trade debtors xxx Balance of debtors REDUCED by provision for bad debts Accrued income xxx Accrued income is also ADDED in the Income statement Prepaid expenses xxx These amounts are DEDUCTED in the Income statement SARS (income tax) (Dr) xxx Amount owed by SARS at the end of the year .Refer to the note on trade and other payables NOTE : • Adjustments on goods returned will reduce debtors balance • Goods sold will increase the debtors balance • Transfer of debtors with credit balances will increase the debtors balance • Bad debts written off will reduce the debtors balance 17 | P a g e

EXAMPLE 3 –TANGIBLE ASSETS REQUIRED You are presented with information from the records of Fanyana Ltd. The financial year ends on 28 February 2021. 3.1.1 Calculate depreciation on the following assets: • Equipment (16) • Vehicles 3.1.2 Calculate the profit or loss on sale of an asset (5) 3.1.3 Complete the note on tangible assets (20) INFORMATION A TANGIBLE ASSETS Land and Equipment Vehicles Buildings Carrying Value on 01-03-2020 800 000 50 000 ? Cost 800 000 400 000 300 000 Accumulated Depreciation - (350 000) ? INFORMATION B EQUIPMENT • Fanyana Ltd has two ovens that were bought for R 200 000 each. Accumulated depreciation on these ovens on 1 March 2020 was R 350 000.The business has had these ovens for more than five years, and they are expected to be used productively for another three years. • A new oven was bought on credit from Diane Suppliers for R250 000 on 1 December 2020. • Depreciation on equipment is calculated at 15% p.a. on cost price. VEHICLES • A van (Isuzu 225), bought on 1 March 2018 for R300 000, was sold for R220 000 cash on 1 September 2020. • Two Hino 365 vans were bought on 31 May 2020 for R 325 000 each. The funds were transferred electronically to the motor dealer. • Depreciation is calculated at 20% p.a. on the carrying value. 18 | P a g e

WORKED EXAMPLE 3 CALCULATIONS FOR DEPRECIATION Old Equipment New Equipment 50 000 – ( R1 x 2) = 49 998 250 000 x 15% x 3/12 = 9 375 Vehicles Sold: Year one 300 000 x 20% = 60 000 Year two (300 000 – 60 000) x 20% = 48 000 240 000 Year three (300 000 - 60 000 - 48 000) x 6/12 x 20% = 19 200 192 000 New : ( 325 000 x 2) x 9/12 x 20% = 97 500 650 000 Calculation for profit or loss on sale of an asset 300 000 – (60 000 + 48 000 + 19 200 ) - 220 000 = 47 200 Cost price Accumulated depreciation Cash sales Profit on sale of asset OR Asset Disposal Account Vehicle 300 000 Acc Depreciation on Vehicles 127 200 (60 000+48 000+19 200) Profit on sale of an asset 47 200 Bank 220 000 347 200 347 200 STRATEGY • Old equipment –always check the cost price and accumulated depreciation, if amounts or closer to each other, the depreciation calculated is likely to exceed the carrying value. • The accumulated depreciation of assets must not exceed the cost price of an asset or the current depreciation must not exceed the carrying value. • Always verify the calculations before subtracting the residual value of R1 • Separate the calculations for :New assets ,old assets and sold asset (SON) 19 | P a g e

NOTE ON TANGIBLE ASSETS – 28 FEBRUARY 2021 Land and Vehicles Equipment Buildings Carrying value (01 March 2020) 800 000 192 000 50 000 Cost 800 000 300 000 400 000 Accumulated depreciation (108 000) (350 000) MOVEMENTS Additions at cost 200 000 650 000 250 000 Disposal at carrying value A (172 800) - (300 000 -127 200) - Depreciation - B (116 700) C (59 373) Check depreciation Carrying value (28 February 2021) 1 000 000 552 500 240 627 Cost 1 000 000 D 650 000 650 000 Accumulated depreciation - E (97 500) F (409 373) CALCULATIONS A. 300 000 – (60 000+48 000+19 200) = 172 800 127 200 Cost LESS accumulated depreciation EQUALS to carrying value B. 19 200 + 97 500 = 116 700 (current depreciation) C. 49 998 + 9 375 + 59 373 (current depreciation) D. 300 000 + 650 000 -300 000 = 650 000 (Bal at beginning PLUS new LESS sold) E. (60 000 + 48 000 + 19 200 + 97 500) – (60 000 + 48 000 +19 200) = 97 500 108 000 116 700 127 200 (Accumulated depreciation of asset sold) F. 350 000 + 59 373 = 409 373 STRATEGY • Before you calculate the depreciation check the difference between cost and accumulated depreciation or the carrying value. • A small balance of carrying value or the cost price that is closer to accumulated depreciation is a sign that our asset is about to be fully depreciated. • Always check the number of assets that are about to be fully depreciated ,for one asset the residual value will be R1 ,but if there are three assets your residual value will be R3 (R1 x3). • Asset disposed at carrying value: the calculation is cost price less accumulated depreciation at beginning of year and current depreciation affecting the asset disposed. • If there are missing figures from the note use the BOTTOM UP calculation approach, as suggested in your note for share capital (example 2). 20 | P a g e

ACTIVITY 3 The following information relates to Jama Limited on 30 June 2020. The business uses the perpetual inventory system. REQUIRED: Prepare the Notes to the Statement of Financial Position (Balance Sheet) for: • Tangible Assets • Trade and other receivables Extract from the accounting records on 30 June 2020: Debit Credit Land and Buildings (carrying value) - 1 July 2019 1 500 000 Vehicles at cost - 1 July 2019 980 000 Vehicles at carrying value - 1 July 2019 185 000 Equipment at cost - 1 July 2019 500 000 Accumulated depreciation on Equipment - 1 July 2019 210 000 Debtors’ control 138 500 Provision for bad debts 7 850 Equipment traded-in (trade-in value) 65 050 Rent income 191 100 Advertising 22 950 Repairs 510 340 Adjustments and additional information: A. On 10 October 2019, N. Kokolo, a debtor, returned goods. A credit note for R2 100 (cost price, R1 200) was issued to her. No entries were made for the return of goods and the goods were returned to stock. B. Provision for bad debts must be increased to R10 000. C. The monthly rent was increased by R700 from 1 March 2020. The tenant paid R3 500 for repairs to premises and he deducted the amount from the rent that he paid in May 2020. Repairs were not recorded and the rent for June 2020 has not yet been received. D. Advertising contract for the 9 months ending 30 September 2020 was signed and paid on 1 January 2020. E. An amount of R750 received from a debtor whose account had previously been written off as bad was recorded in Debtors Control. F. A debtor with a credit balance of R1 700 must be transferred to the Creditors’ Ledger. G. An additional storeroom was built during the year and the full amount has been 21 | P a g e

debited to repairs. An invoice for R400 000 was received. H. A new vehicle was bought on credit for R590 000 on 1 March 2020. A tracking device was installed costing R10 000. This was only recorded under Creditors control. I. On 30 June 2020, equipment which was bought for R200 000 was traded-in against new equipment which cost R240 000 at a loss of R15 000. J. Depreciation is calculated as follows: l On vehicles at 20% p.a. on cost l On Equipment at 25% on diminishing balance method 22 | P a g e

3.3.4 STATEMENT OF FINANCIAL POSITION EXAMPLE 4 SASA LTD You are presented with the Balance sheet of SASA LTD, fill in the missing amounts to complete this financial statement. BALANCE SHEET FOR THE YEAR ENDED 28 FEBRUARY 2021 ASSETS Notes NON-CURRENT ASSETS 4 980 000 Fixed/tangible assets 3 Financial assets 160 000 CURRENT ASSETS 1 820 000 Inventories 4 956 000 Trade and other receivables 5 Cash and cash equivalents 6 2 500 TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital 7 Retained income 8 218 200 NON-CURRENT LIABILITIES Mortgage Loan (740 000) CURRENT LIABILITIES 921 800 Trade and other payables 9 Bank overdraft 45 300 Current portion of loan 148 000 6 800 000 23 | P a g e

WORKED EXAMPLE 4 BALANCE SHEET FOR THE YEAR ENDED 28 FEBRUARY 2021 ASSETS Notes NON-CURRENT ASSETS 4 980 000 Fixed/tangible assets (4 980 000 - 160 000) 3 4 820 000 Financial assets 160 000 CURRENT ASSETS 1 820 000 Inventories 4 956 000 Trade and other receivables (1 820 000 - 956 000 - 2 500) 5 861 500 Cash and cash equivalents 6 2 500 TOTAL ASSETS 6 800 000 EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY 5 286 200 Share capital (5 286 200 – 218 200) 7 5 068 000 Retained income 8 218 200 NON-CURRENT LIABILITIES 592 000 Mortgage Loan (740 000 – 148 000) 592 000 CURRENT LIABILITIES 921 800 Trade and other payables (921 800 - 45 300 -148 000) 9 728 500 Bank overdraft 45 300 Current portion of loan 148 000 6 800 000 24 | P a g e

STRATEGY AND CALCULATIONS • The total assets are equal to equity and liabilities, the given amount for equity and liabilities will be recorded as total assets. • Alternative calculation for total assets in this activity is current assets plus non- current assets (4 980 000 + 1 820 000) = 6 800 000 • To determine the amount for long term loan, subtract 148 000 of short term loan from the total mortgage loan of 740 000. • If the short term loan was not provided the following calculation could have been used : 740 000 – 592 000 = 148 000 • If you were given the short term loan (148 000) and 592 000 payable over a long period the calculation for the total mortgage loan would be : 592 000 + 148 000 = 740 000 • To calculate your share capital, you need to first determine the shareholders equity as indicated: o SUBTRACT non-current liabilities and current liabilities from the total equity and liabilities. (6 800 000 - 921 800 - 592 000) = 5 286 200 • To determine the share capital, deduct Retained income from Shareholders equity (check the equity section of the Balance sheet) EXAMPLE 5 DELUHLAZO LTD You are provided with information for the financial year ended 28 February 2021. REQUIRED: Complete the Statement of Financial Position (Balance Sheet) for the year ended 28 February 2021. (Show workings in brackets). 25 | P a g e

INFORMATION: A. Balances/Totals for February: 2021 2020 Ordinary share capital 8 960 000 6 020 000 Retained income 624 000 434 000 Fixed assets at book value 9 823 405 Loan: Protea Bank ? 360 000 Fixed deposit ? Trading stock 75 680 Debtors control 45 100 Creditors control 285 000 Petty cash 2 500 Cash float 8 900 Accrued expenses 7 850 Accrued income 4 700 Provision for bad debts 5 150 Bank overdraft 792 000 SARS: Income tax (Dr) 11 340 Interim dividends paid 350 000 B. Additional information to be used to complete the statement of financial position (Balance sheet): (a) Share capital and dividends: • The company has an authorised share capital of 2 000 000 ordinary shares • 100 000 shares were repurchased on 31 January 2021, these shares qualify for final dividends. • On 28 February 2021, 80% of shares were in issue. • A final dividend of 10 cents per share was declared. (b) Consumable stores: Consumable stores amounted to R9 500 and only 75% were used. (c) Fixed deposit: The interest on the fixed deposit was R112 500 for the financial year ended 28 February 2021. The fixed deposit was invested on 1 June 2020 at Ivory Bank at 12, 5% interest p.a. Interest is not capitalised. 26 | P a g e

(d) Debtors: A debtor with a credit balance of R5 450 is to be transferred to the creditors’ ledger. (e) Loan: Protea Bank • Interest on loan is capitalised. Interest for the year ended 28 February 2021 was R36 000. • Fixed monthly repayments excluding interest is R2 500. • R30 000 is expected to be settled during the next financial year. (f) Income tax for 2021: • The correct net profit after tax is R850 000. WORKED EXAMPLE 5 BALANCE SHEET OF DELUHLAZO LTD ON 28 FEBRUARY 2021 ASSETS NON-CURRENT ASSETS 11 023 405 Fixed assets 9 823 405 Fixed deposit (112 500 x 100/12,5 x 12/9 ) 1 200 000 CURRENT ASSETS 150 895 Inventory (75 680 + 2 375 ) 78 055 Trade and other receivables 61 440 (45 100 – 5 150 + 4 700 + 11 340 + 5 450 ) Cash and cash equivalents (2 500 + 8 900) 11 400 TOTAL ASSETS 11 174 300 EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY 9 584 000 Ordinary share capital 8 960 000 Retained income 624 000 NON-CURRENT LIABILITIES 300 000 Loan (360 000 - 30 000 – 30 000 ) 300 000 2 500 x 12 CURRENT LIABILITIES 1 290 300 Trade and other payables (285 000 + 7 850 + 5 450 ) 298 300 Shareholders for dividends 170 000 Current portion of loan 30 000 792 000 Bank overdraft 27 | P a g e

TOTAL EQUITY AND LIABILITIES 11 174 300 Strategy and calculations • Basic formula to calculate the interest on fixed deposit is : Fixed deposit 12.5 9 Note :The amount invested is X = 112 500 X 100 12 unknown The calculation for amount invested is : 112 500 100 12 The denominator will be a numerator X = 1 200 000 X 12.5 9 except for 112 500 ( interest amount ) • If a debtor with a credit balance is transferred to creditor’s ledger it is always advisable to use the T account to indicate the effect of transferred funds. DR Debtors’ Account CR The debtors will Transfer to creditors 5 450 Balance 5 450 increase by 5 450 DR Creditors’ Account CR The creditors Transfer to creditors 5 450 will increase by 5 450 • Final dividends are calculated as follows: Number of shares issued at the end of year multiplied by 80% plus number of shares bought back multiplied by dividend per share (2 000 000 x 80% ) + 100 000 x 0.10 = 170 000 1 600 000 • To calculate the closing balance on the long term loan ,you need to deduct only the capital repayment (exclude interest) from the opening balance .The calculation is: 360 000 – (2 500 x 12) = 330 000 30 000 o When you are given the loan statement it is advisable to use the Loan Account or do bottom up and top down calculations to determine the interest, capital repayment and balances. 28 | P a g e

3.3.5 STATEMENT OF FINANCIAL POSITION AND FINANCIAL INDICATORS In grade 12 the Statement of Financial Position is integrated with the financial indicators, most of the indicators integrated are covered in grade 10 and 11. In order to improve understanding of this section you need to master the format of the Balance Sheet and the calculations of figures recorded in the Balance Sheet. The financial indicators will be covered extensively in booklet number three. BASELINE ASSESSMENT REQUIRED Identify the financial indicators denoted by letter A - D from the information provided below: INFORMATION FORMULA SHEET EXTRACTED FROM GRADE 12 ACCOUNTING FINANCIAL INDICATORS Total assets : Total liabilities (A) Current assets : Current liabilities (B) (Current assets – Inventories) : Current Non-current liabilities : Shareholders' liabilities equity (C) (Trade & other receivables + Cash & cash equivalents) : Current liabilities (D) Shareholders' equity x 100 Number of issued shares 1 EXPECTED ANSWER A. Solvency ratio B. Current ratio C. Acid test ratio D. Acid test ratio In this manual you will be expected to use financial indicators to determine certain figures that must be recorded in the Balance sheet. 29 | P a g e

Financial indicators that are relevant to calculation of missing figures from the financial information or the Balance Sheet: Financial Formulae Answer Source of Indicators expressed as : information Solvency ratio Total assets : Total liabilities Ratio Balance Sheet !:1 Current ratio Current assets : Current liabilities Ratio Balance Sheet !:1 Acid test ratio Current assets - inventories : Ratio Balance Sheet Current liabilities !:1 Debt-equity Non-current liabilities : Ratio Balance Sheet ratio (gearing) Shareholders’ equity !:1 Net Asset value Shareholders’ Equity x 100 Cents B/S, Note 7 and 8 per share Number of shares issued 1 NOTE : • The first three indicators are covered in grade 10 and 11. • Debt equity ratio is covered in grade 11, the only difference is that grade 11 content focus at partners’ equity and in grade 12 the focus is shareholders equity (retained income plus share capital) is used to determine the ratio. • Net asset value per share will be covered in booklet three. The information or figures used to calculate the indicator is obtainable from the Share capital and Retained income note. Ratios/Financial indicators that are important for Balance Sheet calculations Calculate the value of current assets using the following information: Current Ratio 2:1 Current liabilities 200 000 Current Assets ? Easy calculation for Current Assets is: R200 000 x 2 = R400 000 OR 2 = x (Current assets - unknown) 1= 200 000 (Current liabilities) Cross multiply :1 x X = X and 200 000 x 2 = 400 000 X = 400 000 If Assets were given you would say : 2 = 400 000 (Current assets) 1= x (Current liabilities - unknown) Cross multiply :2 x X = 2X and 400 000 x 1 = 400 000 OR 400 000 ÷ 2 = 200 000 2X = 400 000 2 2 X = 200 000 NOTE : the above steps will assist you to calculate the: • Stock figure using the Acid test ratio • Shareholders’ equity or the loan figure using the Debt equity ratio • Net asset value per share - to calculate the Retained income or Share capital 30 | P a g e

EXAMPLE 6 Extract from the Pre-adjusted Trial Balance on 28 February 2021 Debit Credit Balance sheet section Trade debtors ? Inventories 90 000 Bank 120 000 Trade creditors 400 000 Financial indicator Current ratio 2 : 1 REQUIRED: 1. Calculate the Current Assets 2. Complete the Current Assets section of the Balance Sheet WORKED EXAMPLE NOTE: current assets are twice the amount of current liabilities Current liabilities = 400 000 (1) Current asset = Unknown (2) 400 000 x 2 = 800 000 1 Extract of the Balance sheet Current assets Current liabilities x 2 800 000 Trade debtors balancing figure 590 000 Inventories 90 000 Bank 120 000 Current liabilities 400 000 Trade creditors 400 000 Use 800 000 (current assets) to calculate the current liabilities 800 000 x 1 OR 800 000 ÷ 2 = 400 000 2 31 | P a g e

EXAMPLE 7 Extract of Pre-adjusted Trial Balance on 28 February 2021: Debit Credit Balance sheet section Ordinary share capital 4 000 000 Retained income 800 000 Loan: Poobie Bank ? Financial indicator Debt: Equity ratio 0,1 : 1 REQUIRED: 1. Complete the Equity and Liabilities section of the Balance Sheet WORKED EXAMPLE NOTE: Shareholders equity = (Retained income + Ordinary share capital) 4 000 000 + 800 000 = 4 800 000 Loan = 0,1 (unknown figure) Equity = 1 (known) 4 800 000 x 0,1 = 480 000 Loan NOTE: Unknown (Always a numerator) 1 Known (Always a denominator) Extract of the Balance sheet Equity & Liabilities Ordinary shareholders’ equity 4 800 000 Ordinary share capital 4 000 000 Retained income 800 000 Non-current liabilities Loan: Poobie Bank 480 000 NOTE: the following calculation would be applied in the calculation of Shareholders equity: 480 000 x 1 = 4 800 000 shareholders’ equity 0,1 32 | P a g e

EXAMPLE 8 Extract from the Pre-adjusted Trial Balance on 28 February 2021: Debit Credit Balance sheet section Ordinary share capital 5 200 000 Retained income ? Note: The Share Capital comprised of 800 000 ordinary shares. Financial indicator Net asset value per share 700 cents REQUIRED: 1. Complete the Ordinary Shareholders’ Equity section of the Balance Sheet. WORKED EXAMPLE Net asset value per share is : Shareholders Equity/Number of Shares = x cents X (unknown) = 700 cents ( equals to R7.00 ) 800 000 x = R7.00 800 000 x x 800 000 = R7.00 x 800 000 OR R7.00 x 800 000 800 000 X = 5 600 000 Extract of the Balance sheet Equity and Liabilities Ordinary shareholders’ equity 5 600 000 Ordinary share capital 5 200 000 Retained income (5 600 000 – 5 200 000) balancing figure 400 000 NOTE: To calculate the number of shares: Shareholders’ equity ÷ NAV 5 600 000 ÷ R7.00 = 800 000 33 | P a g e

EXAMPLE 9 NTOKOZO LTD The information below relates to Ntokozo Ltd. The financial year ended on 28 February 2021. REQUIRED Calculate the following amounts for the year ended 29 February 2021: A. Current assets B. Inventory C. Cash and cash equivalents INFORMATION: A. List of balances extracted from the accounting records of Sicwetsha Ltd on 28 February 2021 R Retained income (28 Feb 2021) 2345 000 Fixed assets at carrying value (28 Feb 2021) 12 208 400 Long term loan (28 Feb 2021) 735 000 Trading stock (balancing figure) ? Trade and other receivables 345 000 Bank (favourable) ? Creditors' control 478 000 Accrued expenses (expenses payable) 12 000 SARS: Income tax (provisional tax payments) 1 012 000 B. Inventory (calculations) = Current Ratio less Acid Test Ratio Formula = Current Assets x Inventory (ratio) . Current Assets (ratio) = 3 538 600 x 0,5 1,3 = 1 361 000 C. Cash and Cash Equivalents = Current Assets – (inventory + Trade and other receivables) = 3 538 600 – (1 361 000 + 345 000) 1 706 000 = 1 832 600 D. Dividends A final dividend of 50 cents per share was declared, 3 520 000 shares were in issue .All the shares qualified for dividends. E. The following financial indicators were calculated after all adjustments had been taken into account: Current ratio 1,3 : 1 Acid-test ratio 0,8 : 1 34 | P a g e

SUGGESTED ANSWER AND STRATEGY A Current assets Current Ratio is : 1,3 : 1 • Calculate the value of current liabilities first by taking into account the information and adjustments provided in the activity. • Calculations: Current Liabilities Creditors Control 478 000 Accrued expenses 12 000 Short term loan 420 000 Shareholders for dividends (3 520 000 x 50 cents) 1 760 000 SARS – Income tax (3 800 000 x 28%) - 1 012 000 52 000 2 722 000 Current Liabilities = 2 722 000 Current assets = unknown ∴ 1 = 2 722 000 (known) 1,3 = x (unknown) 2 722 000 x unknown known 2 722 000 x 1,3 = 3 538 600 Current assets 1 B Inventory Current ratio less current liabilities 1,3 – 0,8 = 0,5 ( Inventory ) Formula = current assets x inventory (unknown) Current assets (known) 3 538 600 x 0.5 = 1 361 000 (Inventory) 1.3 C Cash and cash equivalents or Bank : Total Assets – (inventory + trade and other receivables) = Bank 3 538 600 - (1 361 000 + 345 000) = 1 832 600 1 706 000 35 | P a g e

4. CONSOLIDATION ACTIVITIES ACTIVITY 4 : STATEMENT OF FINANCIAL POSITION & SHARE CAPITAL NOTE BABI LTD The information provided is for the year ended on 31 August 2020. REQUIRED: 4.1 Complete the Ordinary Share Capital Note. (9) 4.2 Complete the Statement of Financial Position (Balance Sheet) on 31 August 2020. (21) INFORMATION: A. The following were extracted from the records on 1 March 2020. Fixed Asset (carrying value) R 8 121 000 Fixed Deposit: Zako Bank 830 200 Inventory (Refer to Information C) ? Trade and other receivables (balancing figure) ? Bank (favourable) 864 800 Cash float 3 000 SARS Income Tax (Provisional tax) 560 000 Ordinary Share Capital ? Retained Income 14 960 Loan: Tambo Bank ? Trade and other payables 463 840 B. Share capital and dividends: • Authorised shares consists of 3 000 000 shares. • On 1 September 2019, there were 1 800 000 shares in issue. • On 1 July 2020, the company repurchased 120 000 shares at R7, 20 each, which was 20% above the average share price. These shares do not qualify for final dividends. • 20% of unissued shares on 1 September 2019 were issued at R6, 60 per share on 25 August 2020. • A final dividend of 22 cents per share was declared on 31 August 2020. C. Inventory: The business sells satellite decoders. Closing stock of 1260 units must be valued using the first-in-first-out method. Two batches of stock were purchased during the year. There were no missing items. 36 | P a g e

NUMBER COST PRICE TOTAL OF UNITS PER UNIT COSTS R Opening stock 1 500 R1 600 2 400 000 Purchases: Batch 1 (Nov. 2019) 1 800 R1 750 3 150 000 Batch 2 (June 2020) 1 200 R1 950 2 340 000 D. Loan Statement from Tambo Bank Balance 1 September 2019 1 840 000 Capitalised interest for the year 130 800 Annual Repayment (Including Interest) 307 200 The capital portion for the repayment of the loan in the next financial year remains the same as the current financial year. E. Amount owed to SARS on 31 August 2020 is a balancing figure. 30 37 | P a g e

ACTIVITY 5 2018 DBE MATERIAL Adapted You are provided with information relating to JOB Taylor Ltd for the year ended 28 February 2021. REQUIRED: 5.1 Complete the Retained Income Note to the Balance Sheet or Statement of Financial Position. (10) 5.2 Complete the Balance Sheet (Statement of Financial Position) on 28 February 2021. (Show workings in brackets). (40) INFORMATION: A. Extract from the Pre-adjustment Trial Balance on 28 February 2021. Debit Credit Ordinary share capital (900 000 shares) R 4 050 000 Retained income (1 March 2016) 345 000 Loan: Vivian Bank (1 March 2016) 750 000 Fixed assets at cost R 4 350 000 Accumulated depreciation 650 520 Trading stock 258 740 Debtors Control 195 000 Provision for bad debts 4 000 Fixed deposit: Santa Bank ? Bank 464 000 Creditors’ Control 101 000 SARS (Income tax) 364 000 Rent Income 80 150 38 | P a g e

B. Additional information: (i) Share Capital 600 000 Shares were in issued at the beginning of the current financial year (Average Share Price; R4, 00). 300 000 Additional shares were issued on 1 May 2020 at R5, 50 per share. 75 000 On 28 February 2021, shares were bought back from a shareholder for R450 000. This transaction was not recorded yet. They are entitled to a final dividend. (ii) Loan agreement with Vivian Bank: Opening balance: 1 March 2020. R 750 000 Repayment during the year, including interest 192 300 Closing balance: 28 February 2021 615 000 • The interest on loan is capitalised. • R125 000 of the loan will be paid in the next financial year. (iii) Dividends: • An interim dividend of R240 000 was paid on 31 August 2020. • A final dividend of 28 cents per share was declared on 28 February 2021 and must still be brought into account. (iv) The following adjustments must be taken into consideration for the drafting of the Balance Sheet only: • Audit fees still outstanding on 28 February 2021, R19 000. • A debtor owing R6 500 was declared insolvent, was not recorded. • The provision for bad debt must increase by R1 500. • Consumable stores on hand, R2 180. • The rent for February 2021 was not received yet. Note that the rent was increase by 15% on 1 November 2020. (v) SARS (income tax): • Income tax for the year is calculated at 28% of the net profit. • Net profit before tax (after all adjustments) amounted toR1 250 000. 65 39 | P a g e

ACTIVITY 6 2017 NSC NOV Adapted FIXED ASSETS AND BALANCE SHEET The following information relates to Odette Ltd. The financial year ended on 28 February 2021. REQUIRED: 6.1 Refer to Information B. Calculate the missing amounts denoted by (a) to (e). (22) 6.2 Complete the Balance Sheet (Statement of Financial Position) on 28 February 2021. Show workings. (37) INFORMATION: A. Amounts extracted from the records on 28 February 2021: Balance Sheet accounts section R Ordinary share capital ? Retained income (28 February 2021) 520 000 Fixed assets (carrying value) ? Loan from Beque Bank 284 000 Trading stock 408 880 Net trade debtors 67 200 Fixed deposit: Elze Bank ? Bank (favourable) ? SARS: Income tax (provisional payments) 209 000 Creditors' control 184 000 Nominal accounts section (pre-adjustment amounts) Insurance 30 200 Rent income 108 450 Electricity 42 000 B. Fixed assets: LAND AND VEHICLES EQUIPMENT TOTAL BUILDINGS Cost 350 000 460 000 Accumulated depreciation (315 000) Carrying value (01/03/2020) (a) 35 000 Movements: Additions 325 000 422 550 0 Disposals 0 0 (d) Depreciation (b) (13 766) Carrying value (28/02/2021) 2 550 000 (c) 50 994 (e) Cost 772 550 340 000 Accumulated depreciation 40 | P a g e

• Depreciation on vehicles is calculated at 20% p.a. on cost. • The company has two vehicles on 28 February 2021. One of these vehicles was purchased on 1 September 2020. • Extract from the Fixed Assets Register in respect of equipment sold: Fridge (Model X3) Date purchased: 1 March 2018 Date sold: 31 December 2020 Sold for: R81 250 Depreciation rate: 10% p.a. (diminishing-balance method) COST DEPRECIATION BOOK VALUE 28 February 2019 R120 000 R12 000 R108 000 29 February 2020 ? ? 31 December 2020 ? ? C. The electricity account for February 2021, R5 600, was still outstanding. D. The provision for bad debts must be increased by R270. E. An additional insurance policy was taken out on 1 November 2021. The annual premium of R10 200 was paid and recorded. F. The rent for February 2021 has not been received yet. The rent increased by 15% on 1 July 2020. G. Net profit after tax, R518 000, was calculated after taking into account all the adjustments above. Income tax is 30% of the net profit. H. 75% of the authorised share capital of 900 000 shares was in issue. The directors declared a final dividend of 24 cents per share on 28 February 2021. I. Extract from Beque Bank loan statement: Balance on 1 March 2020 R376 000 Instalments (including interest) R92 000 Interest capitalised R48 000 Balance on 28 February 2021 ? NOTE: • Interest has not been entered in the books. • R50 000 of the loan balance will be settled in the next financial year. J. The net asset value per share on 28 February 2021 is 620 cents. K. The current ratio is 2, 1: 1 on 28 February 2021. 41 | P a g e

ACTIVITY 7: BALANCE SHEET 2018 NSC NOV Adapted 7.1 Choose a description from COLUMN B that matches the term in COLUMN A. Write only the letter (A–E) next to the question number (7.1.1– 7.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 7.1.1 Income Statement A an explanation of the operations of the company during a financial year 7.1.2 Balance Sheet B reflects whether or not the 7.1.3 Cash Flow Statement shareholders can rely on the financial statements 7.1.4 Directors' report C reflects the profit/loss of the company 7.1.5 Independent audit for the year report D reflects the effect of the operating, financing and investing activities on the cash resources E reflects the net worth of the company (5 x 1) (5) 7.2 ORBIT LTD Refer to the information from the records of Orbit Ltd for the financial year ended 30 June 2021. REQUIRED: 7.2.1 Prepare the following notes to the Balance Sheet: (a) Ordinary share capital (8) (b) Retained income (11) 7.2.2 Complete the Balance Sheet on 30 June 2021. Where notes are not required, show ALL workings in brackets. (28) 7.2.3 The CFO (chief financial officer), Barry Wright, has convinced the company to buy back a further 400 000 shares from his close relative during the next financial year. Barry currently owns 1 904 400 shares in this company, which is 46% of the issued shares. As a shareholder, explain your concern regarding the proposed buy-back of shares. Provide calculations to support your concern. (6) 42 | P a g e

INFORMATION: A. Extract from the books on 30 June 2021: Fixed/Tangible assets (carrying value) ? Fixed deposit: Morocco Bank 380 000 Ordinary share capital (1 July 2020) 3 150 000 Retained income (1 July 2020) 874 000 Bank (favourable) 250 700 Loan: Helping Bank 302 400 Trading stock 478 000 Debtors' control 317 000 Creditors' control 239 800 Income received in advance 6 600 SARS: Income tax (provisional payments) 390 000 Dividends on ordinary shares (interim dividends) 630 000 B. Share capital: • The business has an authorised share capital of 6 000 000 shares. • 70% of the shares were in issue on 1 July 2020. • 60 000 ordinary shares were repurchased from a disgruntled shareholder on 1 December 2020. The company paid R3,50 per share. This was paid and recorded on 1 December 2020. C. A final dividend of 22 cents per share was declared on 30 June 2021. Only shares in the share register qualify for final dividends. D. The following adjustments have not been taken into account yet: • Provision for bad debts is set at 5% of the outstanding debtors. • Insurance included an annual premium of R31 800, paid for the period 1 October 2020 to 30 September 2021. E. The loan statement from Helping Bank reflected the following: Balance on 1 July 2020 R480 000 Repayments during financial year (including interest) R177 600 Interest capitalised R57 600 Balance on 30 June 2021 ? R40 000 of the loan will be paid back in the next financial year. F. Income tax for the year amounted to R408 800. This was calculated at 28% of the corrected net profit. 43 | P a g e

ACTIVITY 8 (2019 NSC NOV ADAPTED) BALANCE SHEET 8.1 Choose an explanation in COLUMN B that matches the term in COLUMN A. Write only the letters (A–E) next to the question numbers (8.1.1 to 8.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 8.1.1 Internal auditor A appointed by shareholders to manage a company 8.1.2 Memorandum of incorporation (MOI) B the body responsible for registration of all companies 8.1.3 Limited liability C employed by a company to ensure 8.1.4 Director good internal control procedures 8.1.5 Companies and D indicates that a company has a legal Intellectual Property personality of its own Commission (CIPC) E the document that establishes the rules and procedures of a company (5 x 1) (5) 8.2 VISIV LTD The financial year ended on 28 February 2019. REQUIRED: 8.2.1 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) 8.2.2 Calculate the correct net profit after tax for the year ended 28 February 2019. Indicate (+) for increase and (–) for decrease. (9) 8.2.3 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. 44 | P a g e

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 1 981 800 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. 45 | P a g e

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. 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. 46 | P a g e

5. ANSWER BOOK ACTIVITY 1 1.1 STONEY LTD NOTES TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 2021 ORDINARY SHARE CAPITAL AUTHORISED 400 000 ordinary shares ISSUED 300 000 Ordinary shares in issue on 1 March 2020 1 275 000 Ordinary shares in issue on 28 February 2021 8 RETAINED INCOME Balance at the beginning of the year 28 900 Dividends on ordinary shares Balance at the end of the year 10 ACTIVITY 2 PHESWA LTD 2.1.1 Ordinary Share Capital Ordinary shares on 1 March 2020 4 022 000 47 | P a g e

2.1.2 Retained income Opening balance Ordinary share dividends Closing balance 2.1.3 Trade and other payables 48 | P a g e

ACTIVITY 3 TANGIBLE ASSETS LAND AND VEHICLES EQUIPMENT BUILDINGS Carrying value (1 March 2019) Cost Accumulated depreciation Movements Additions at cost Disposals at carrying value Depreciation for the year Carrying value (30 June 2020) Cost Accumulated depreciation TRADE AND OTHER RECEIVABLES 49 | P a g e

ACTIVITY 4 4.1 Share Capital Authorised Share Capital: 3 000 000 ordinary shares Issued Share capital: Shares in issue at beginning of 1 800 000 year (120 000) Shares in issue at the end of the 9 year 50 | P a g e

4.2 STATEMENT OF FINANCIAL POSITION ON 31 AUGUST 2020 NON-CURRENT ASSET Fixed assets 8 121 000 Financial assets 830 200 CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDER EQUITY Ordinary share capital Retained income 14 960 NON-CURRENT LIABILITIES CURRENT LIABILITIES 1 097 840 Trade and other payables 463 840 21 TOTAL EQUITY AND LIABILITIES TOTAL MARKS ……./30 51 | P a g e

ACTIVITY 5 5.1 RETAINED INCOME NOTE Balance at the beginning of the year 345 000 10 Interim dividend 240 000 5.2 BALANCE SHEET/STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2021 ASSETS Non-current assets Fixed assets Financial assets Current assets Inventory Trade and other receivables Cash + cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Shareholder’s equity Ordinary share capital Retained income Non-current liabilities Loan: Vivian Bank Current liabilities Trade and other payables Shareholders for dividends Current portion of loan TOTAL EQUITY AND LIABILITIES 52 | P a g e

ACTIVITY 6 6.1 (a) Calculate the carrying value of Land and Buildings on 1 March 2020. 2 (b) Calculate the total depreciation on Vehicles on 28 February 2021. 6 (c) Calculate the carrying value of Vehicles on 28 February 2021. 4 (d) Calculate the carrying value of Equipment sold on 31 December 2020. 6 (e) Calculate the total carrying value of Fixed Assets on 28 February 2021. 4 53 | P a g e

6.2 BALANCE SHEET OF ODETTE LTD ON 1 JULY 2020 ASSETS NON-CURRENT ASSETS CURRENT ASSETS Inventory 408 880 Trade and other receivables Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Ordinary share capital Retained income 520 000 NON-CURRENT LIABILITIES CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES 37 54 | P a g e

QUESTION 7 7.1 7.1.1 7.1.2 7.1.3 7.1.4 7.1.5 5 7.2 ORBIT LTD 7.2.1 (a) ORDINARY SHARE CAPITAL Authorised 6 000 000 shares Issued 8 (b) RETAINED INCOME Balance on 1 July 2020 874 000 Ordinary share dividends Balance on 30 June 2021 11 55 | P a g e

7.2.2 ORBIT LTD BALANCE SHEET ON 30 JUNE 2021 ASSETS NON-CURRENT ASSETS Fixed/Tangible Assets Fixed deposit 380 000 CURRENT ASSETS Inventory 478 000 TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Ordinary share capital Retained income NON-CURRENT LIABILITIES Loan: Helping Bank CURRENT LIABILITIES Trade and other payables TOTAL EQUITY AND LIABILITIES 28 56 | P a g e

ACTIVITY 8 8.1 8.1.1 8.1.2 8.1.3 8.1.4 8.1.5 5 8.2 VISIV LTD 8.2.1 (i) Calculate: Depreciation for the current year Workings Answer (ii) Calculate: Carrying value of vehicle sold Workings Answer 5 Calculate: Profit/Loss on sale of asset Workings Answer 2 Calculate: Fixed assets carrying value on 28 February 2019 Workings Answer 4 57 | P a g e

8.2.2 Calculate the correct net profit after tax for the year ended 28 February 2019. Indicate (+) for increase and (–) for decrease. Workings Answer Incorrect net profit before tax 822 700 Correct net profit after tax 9 8.2.3 RETAINED INCOME NOTE: Balance at beginning 865 300 Ordinary share dividends Balance at end 9 58 | P a g e

VISIV LTD STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) ON 28 FEBRUARY 2019 ASSETS Non-current assets Fixed assets Fixed deposit Current assets Inventories 1 102 000 Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Ordinary shareholders' equity Ordinary share capital 8 152 000 Non-current liabilities Current liabilities 2 900 000 Current portion of loan TOTAL EQUITY AND LIABILITIES 27 59 | P a g e

6. SUGGESTED ANSWERS AND MARKING GUIDELINES 1.1 STONEY LTD NOTES TO THE FINANCIAL STATEMENTS ON 28 FEBRUARY 2021 ORDINARY SHARE CAPITAL AUTHORISED 400 000 ordinary shares ISSUED Ordinary shares in issue on 300 000 1 275 000 1 March 2020 shares repurchased during the year (85 000) (20 000) þ (x R4,25 üü) 40 000 shares issued during the year 220 000 üü ü Ordinary shares in issue on operation 320 000 þ ü 28 February 2021 1 410 000 8 RETAINED INCOME Balance at the beginning of the year 28 900 Net profit after tax (112 000 x 72/28) 288 000 þ Shares repurchased (120 000 ü - 85 000 þ see OSC) (35 000) þ Dividends on ordinary shares (86 000) þ one part correct Interim dividends paid (300 000 ü x 0,10) þ 30 000 one part correct Final dividends declared (280 000 ü x 0,20) þ 56 000 Balance at the end of the year 195 900 þ Operation, one part correct 10 • ASP R1 275 000/300 000 = *R4,25 • Alternative calculation for shares repurchased (above average price) R120 000 /20 0000 = R6.00 R6.00 – R4.25 = R1.75 20 000 X R1.75 = R35 000 60 | P a g e

ACTIVITY 2 2.1.1 Ordinary Share Capital 720 000 Ordinary shares on 1 March 2020 4 022 000 200 000 Shares issued at R6,80 each 1 360 000 (100 000) Shares repurchased (ASP: R5,85) (585 000) 820 000 Ordinary shares on 28 February 2021 4 797 000 2.1.2 Retained income Opening balance 413 220 Net profit after tax (535 000 - *160 500) 374 500 Funds used to repurchase shares (100 000 x (1,15) (115 000) (R7,00 - ASP (see 2.1.1) Ordinary share dividends (341 000) Interim dividend (920 000 x 13 cents) 119 600 Final dividend (820 000 x 27 cents) 221 400 Closing balance 331 720 2.1.3 Trade and other payables Creditors control 219 400 Accrued expenses 16 490 Income received in advance 8 880 SARS: income tax 12 730 Shareholders for dividends see 2.1.2 221 400 Short-term loan (20% of 946 500) 189 300 668 200 *Income tax : 147 770 + 12 730 =160 500 61 | P a g e

ACTIVITY 3 TANGIBLE ASSETS LAND AND VEHICLES EQUIPMENT WORKINGS BUILDINGS Carrying value (1 March 2019) 1500 000 185 000 290 000 A Cost 1 500 000 980 000 500 000 200 000 less 119 950 Accumulated depreciation - (795 000) (210 000) B Movements 400 000 375 001 87 450 290 000 X 25% Additions at cost 400 000 600 000 240 000 C Disposals at carrying value - 0 A (80 050) 500 000 Plus 240 000 Less Depreciation for the year - (224 999) B (72 500) 200 000 Carrying value (30 June 2020) 1 900 000 560 001 377 450 D Cost 1 900 000 1 580 000 C 540 000 210 000 + 72 500 - 119 950 Accumulated depreciation - (1 019 999) D (162 550) TRADE AND OTHER RECEIVABLES Debtors control Workings - rent income (138 500 - 2 100 + 750 + 1 700) check the T Account 138 850 Provision for bad debts (7 850 + 2 150) (10 000) 191 100 – ( 700 x 3) 189 000 + 3 500 Net Trade debtors 128 850 192 500 ÷ 11 Accrued income 18 200 17 500 + 700 Prepaid expense (22 950/9) x 3 7 650 = 18 200 154 700 NOTES AND STRATEGY DR Debtors’ Account CR R1 700 will be added to debtors Transfer to creditors 1 700 Balance 1 700 control • Provision for bad debts – R2 150 (R10 000 -7 850) will be recorded in the Income Statement under expenses because the provision has increased. • Depreciation on vehicles : New asset - 600 000 x 20% x 4/12 = 400 000 Old assets : R185 000 – R1 = R184 999 400 000 + 184 999 = 224 999 62 | P a g e

Asset Disposal Equipment 200 000 Accumulated Depreciation 119 950 200 000-15 000- Creditors Control 65 050 65 050 =119 950 Loss on sale of an asset 15 000 ACTIVITY 4 4.1 Share Capital Authorised Share Capital: 3 000 000 ordinary shares Issued Share capital: Shares in issue at beginning of 1 800 000 year x R6,00 ** (has to be ASP) 10 800 000 R Shares repurchased at ASP of (120 000) R6 üü per share 7,20 / 1,2 (720 000) þ* ü Additional shares issued during the 240 000 ü year at R6,60 per share 1 584 000 þ* Shares in issue at the end of the 9 year operation 11 664 000 þ 1 920 000 þ **do not accept if R7,20 or more *one part correct Number of Shares issued during the year 300 000 – 1 800 000 = 1 200 000 1 200 000 X 20% = 240 000 63 | P a g e

4.2 STATEMENT OF FINANCIAL POSITION ON 31 AUGUST 2020 NON-CURRENT ASSETS 8 951 200 ü Fixed assets 8 121 000 Financial assets 830 200 CURRENT ASSETS TA - NCA 5 312 800 R (60 x 1 750) two marks Inventories (2 340 000ü+ 105 000üü) 2 445 000 *R R Trade and other receivables Balancing figure 2 000 000 *R Cash and cash equivalents 864 800 + 3 000 867 800 ü TOTAL ASSETS See TE+L 14 264 000 R 10 EQUITY AND LIABILITIES SHAREHOLDER EQUITY Operation 11 678 960 R Ordinary share capital See 4.1 11 664 000 R Retained income 14 960 NON-CURRENT LIABILITIES 1 487 200 (1 840 000+130 800-307 200) two marks Loan: Tambo Bank 1 663 600üR – 176 400ü *R 1 487 200 6 CURRENT LIABILITIES 1 097 840 Trade and other payables 463 840 Current Portion of Loan See loan above 176 400 R SARS (Income tax) Balancing figure 35 200 R See 4.1 *R Shareholders for Dividends 1 920 000 x 22c 422 400 ü 21 TOTAL EQUITY AND LIABILITIES operation 14 264 000 R *One part correct Short term loan: 307 200 – 130 800 = 176 400 5 TOTAL MARKS 30 64 | P a g e

ACTIVITY 5 5.1 RETAINED INCOME NOTE Balance at the beginning of the year 345 000 Net profit after tax (1 250 000 x 72%) 900 000 PP Re-purchase of shares (75 000 Px R1,50)PP OR (112 500) þ (450 000 (1 mark) – 337 500 (2 marks) Ordinary share dividends (492 000) Interim dividend 240 000 Final dividend (900 000Px 28c)P 252 000 P 10 Balance at the end of the year 640 500 þ 5.2 BALANCE SHEET/STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2021 ASSETS Non-current assets balancing figure 4 860 030 þ Fixed assets (4 350 000P– 650 520P) 3 699 480 P Financial assets 1 160 550 þ 5 Current assets 479 970 þ Inventory (258 740P+ 2 180P) 260 920 P Trade and other receivables 364 000- 350 000 205 050 þ 195 000ü - 6 500 P - 5 500üü+8 050PP+14 000PP Cash + cash equivalents 14 000 þ (464 000 P– 450 000þ) see buy back of OSC TOTAL ASSETS same as TE+L 5 340 000 þ 17 EQUITY AND LIABILITIES Shareholder’s equity 4 353 000 þ Ordinary share capital 450 000 – 112 500 3 712 500 þ (4 050 000 P– 337 500 PP) Retained income see 5.1 640 500 þ 6 Non-current liabilities 490 000 Loan: Vivian Bank 490 000 þ 750 000 + 57 300 üP– 192 300 P– 125 000P) 5 Current liabilities 497 000 þ Trade and other payables 120 000 P (101 000P + 19 000P 40 Shareholders for dividends see 5.1 252 000 þ Current portion of loan 125 000 þ TOTAL EQUITY AND LIABILITIES 5 340 000 þ 7 *Trade and other payables can combine the elements under current liabilities. 65 | P a g e

ACTIVITY 6 6.1 (a) Calculate the carrying value of Land and Buildings on 1 March 2020. 2 550 000 – 325 000 = 2 225 000 PP 2 (b) Calculate the total depreciation on vehicles on 28 February 2021. (Allocate the marks to correct workings even if subtotals not shown) New: 422 550 x 20/100 x 6/12 = 42 255 PP Old: one mark 350 000 x 20/100 = 70 000 but can only write off R34 999 Püü (350 000 – 315 000) = 35 000–1 = 34 999 42 255 + 34 999 = 77 254 R one part correct 6 (c) Calculate the carrying value of Vehicles on 28 February 2021. see (b) above one part correct 35 000 P + 422 550 P – 77 254 R = 380 296 R OR one mark one mark one method mark 772 550 – (315 000 + 77 254 see (b) above = 380 296 392 254 two marks 4 (d) Calculate the carrying value of Equipment sold on 31 December 2020. 30 900 four marks 18 900 three marks 22 800 two marks 120 000 P – (12 000 P+ 10 800 P + 8 100 PP) = 89 100 R one part correct 108 000 two marks OR 1 mark 1 mark 1 mark 2 marks one method mark 120 000 – 12 000 – 10 800 – 8 100 = 89 100 6 (e) Calculate the total carrying value of fixed assets on 28 February 2021. see (c) above one part correct 2 550 000 P + 380 296 R + 50 994 P = 2 981 290 R 4 66 | P a g e

6.2 BALANCE SHEET OF ODETTE LTD ON 30 JUNE 2021 ASSETS NON CURRENT ASSETS (TA – CA) 4 010 940 R Fixed assets See (6.1 e) 2 981 290 R Financial assets (Fixed Deposit) R 3 1 029 650 (Non-current assets – Fixed assets) CURRENT ASSETS (CL X 2,1) 870 660 RR Inventory 408 880 Trade and other receivables R 84 080 67 200 P – 270 PP + 6 800PP +10 350 PP Cash and cash equivalents R 377 700 (870 660- 408 880 - 84 080) TOTAL ASSETS 12 4 881 600 R (Shareholders equity plus total liabilities) EQUITY AND LIABILITIES SHAREHOLDERS EQUITY 675 000 P x 620 c P R 900 000 x 75% 4 185 000 Ordinary share capital (Shareholder’s Equity – 520 000) 3 665 000 R 4 Retained income 520 000 NON-CURRENT LIABILITIES 282 000 Loan: Beque Bank 376 000–92 000 4 282 000 R* 284 000ü + 48 000ü – 50 000ü 332 000 two marks CURRENT LIABILITIES 414 600 R* NB: See alternative # Trade and other payables 184 000P + 5 600P 189 600 þ* version to allow for ## SARS: Income tax 222 000 PP – 209 000 P 13 000 R* 518 000 x 30/70 See no. of shares in SHE SARS as a T&OR 162 000 R* Shareholders for dividends (675 000 þ x 0,24P) Current portion of loan 50 000 P 14 TOTAL EQUITY AND LIABILITIES 4 881 600 R* 37 67 | P a g e

ACTIVITY 7 7.1 7.1.1 C P 7.1.2 E P 7.1.3 D P 7.1.4 A P 7.1.5 B P 5 7.2 ORBIT LTD 7.2.1 (a) ORDINARY SHARE CAPITAL Authorised 6 000 000 shares Issued Ordinary shares in issue at beginning of 4 200 000 P 3 150 000 ü year Shares repurchased during the year at (60 000) P *(45 000) R* R0,75Pü (ASP) one part correct Ordinary shares in issue at end of year 4 140 000 P 3 105 000 R 8 one part correct, must subtract repurchase *Do not accept: R210 000 or 60 000 x R3,50 (b) RETAINED INCOME Balance on 1 July 2020 874 000 Net profit after income tax (408 800 ü x 72/28 ü) 1 051 200 þ* OR: 1 460 000 – 408 800 Shares repurchased (60 000 x R2,75 þ) 3,50 – ASP above **(165 000) R* OR: 210 000 – figure for repurchase in (a) Ordinary share dividends (1 540 800) R* Interim (paid) 630 000 P Final (recommended) (4 140 000 ü x 22 cents ü or 0,22 / 910 800 R* 22% Balance on 30 June 2021 *one part correct 219 400 R* 11 & repurchase and OSD must be subtracted *One part correct ** do not accept 210 000 or 0; 68 | P a g e

7.2.2 ORBIT LTD BALANCE SHEET ON 30 JUNE 2021. ASSETS NON-CURRENT ASSETS TA – CA 3 822 600 R Fixed/Tangible Assets balancing figure 3 442 600 R Fixed deposit 2 380 000 CURRENT ASSETS operation 1 037 800 R Inventory 478 000 Trade and other receivables 309 100 R 317 000 P– 15 850PP + 7 950 PP one part correct Cash and cash equivalents 250 700 P TOTAL ASSETS see Total Equity and Liabilities 9 4 860 400 R EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY 3 324 400 R operation Ordinary share capital see 7.2.1 3 3 105 000 R Retained income see 7.2.1 219 400 R NON-CURRENT LIABILITIES 320 000 Loan: Helping Bank (360 000 PP– 40 000P) one part correct 4 320 000 R 302 400 one mark + 57 600 one mark – 40 000 one mark CURRENT LIABILITIES 1 216 000 R operation Award all marks if all items included in T&OP Trade and other payables one part correct 246 400 R (239 800 P + 6 600 P) Shareholders for dividends see 7.2.1 910 800 R SARS: Income tax (408 800 – 390 000) P 18 800 þ one part correct Current portion of loan see loan 40 000 ü ü TOTAL EQUITY AND LIABILITIES operation 10 4 860 400 R 28 Misplaced items mark figures but-1 each time (as per Nov 2021) Foreign entries -1 (max -2) Presentation / Incorrect or incomplete details -1 (max -2) SARS may not be shown as a current asset 69 | P a g e

7.2.3 As a shareholder, explain your concern regarding the proposed buy-back of shares. Provide calculations to support your concern. Explanation üü part-mark for unclear / incomplete answer Barry wants to increase his % shareholding (without investing in more shares) He will become the majority shareholder which will enable him to influence all decisions taken. % shareholding of Barry after the share buyback: 1 904 400 P/ 3 740 000 üü x 100 = 50,9%.R one part correct; accept 51% (4 140 000 – 400 000) 6 70 | P a g e

ACTIVITY 8 8.1 8.1.1 CP 8.1.2 EP 8.1.3 DP 8.1.4 AP 8.1.5 BP 5 8.2 VISIV LTD 8.2.1 Calculate: (i) Depreciation for the current year Workings Answer one part correct 225 000 P x 25% x 8/12 P 37 500 R (ii) Carrying value of vehicle sold Workings Answer P R Two marks 225 000 – 37 500 see (i) above 187 500 OR 400 000 – 212 500 100 000 + 75 000 + 37 500 5 Calculate: Profit/Loss on sale of asset Workings Answer Two marks P R 7 500 2 195 000 – 187 500 see (ii) above Calculate: Fixed assets carrying value on 28 February 2019 Workings Answer P R see (i) above R see (ii) above 10 190 000 – 37 500 – 187 500 225 000 two method marks OR: 10 190 000 – (400 000 – 212 500 + 37 500) one mark one mark one mark one part correct 9 965 000R Also accept ledger account format 10 190 000 37 500 187 500 9 965 000 4 71 | P a g e

8.2.2 Calculate the correct net profit after tax for the year ended 28 February 2019. Indicate (+) for increase and (–) for decrease. Workings Answer Incorrect net profit before tax 822 700 Provision for bad debts adjustment (65 000) P Advertising 9 800P Rent income [(334 000 – 9000) / 13] + 3 000 (28 000) PR* Additional depreciation see 8.2.1 (i) (37 500) R Profit on sale of asset see 8.2.1 (ii) 7 500R Income tax (155 000 + 43 000) (198 000) PR* 511 500 R* Correct net profit after tax 9 One part correct 8.2.3 RETAINED INCOME NOTE: Balance at beginning 865 300 Net profit after tax see 8.2.2 511 500 R Shares repurchased 360 000Px R0,30P 4,10 – 3,80 (108 000) P Ordinary share dividends (783 200) R* Interim 295 200 P Final 2 440 000 x R0,20 488 000 PR* Balance at end check operation; shares repurchased 485 600 R 9 and share dividends must be subtracted *one part correct 72 | P a g e

8.2.4 VISIV LTD STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) ON 28 FEBRUARY 2019 ASSETS Non-current assets (TA – CA) 10 624 000R Fixed assets see 8.2.1 9 965 000R Fixed deposit Balancing figure 659 000R 3 Current assets CL x 0,8 2 320 000PP Inventories 1 102 000 Trade and other receivables (1 090 000P – 65 000P + 9 800P + 7 600P) 1 042 400R* Advertising Cash and cash equivalents Balancing figure 175 600R TOTAL ASSETS 9 12 944 000R see total equity and liabilities EQUITY AND LIABILITIES Ordinary shareholders' equity 8 637 600R operation Ordinary share capital 8 152 000 Retained income See 8.2.3 485 600R 2 Non-current liabilities 1 406 400 Mortgage loan (1 758 000 P – 351 600 R) 3 1 406 400R* See CL below Current liabilities 2 900 000 Trade and other payables (1 981 800 P + 28 000R + 7 600 PP) 2 017 400R* Rent income see 8.2.2 SARS: Income tax (may be part of T&OP see 8.2.3) 43 000PP Shareholders for dividends (may be part of T&OP see 8.2.3) 488 000R Current portion of loan Balancing figure 351 600R 10 TOTAL EQUITY AND LIABILITIES 12 944 000R* 27 73 | P a g e

7. EXAMINATION GUIDANCE 1. The Statement of Financial Position is generally tested as an application-type question that involve many calculations for the different amounts for each section. 2. It is also combined with financial indicators, they are used to determine the amounts missing in the Balance sheet. 3. All Accounting questions follow the same layout. The “REQUIRED” is provided first, followed by the “INFORMATION” needed to answer the questions. Some of the information provided may not be required for any calculations. These, we call “distractors”. Do not be confused. 4. The sub-questions are repeated in the ANSWER BOOK, to assist with time management. Take note of specific information included in the ANSWER BOOK. If columns or spaces on statements are shaded, this indicates that you are not required to calculate those amounts and those amounts have no bearing on the answers required. 5. You should read the sub-questions carefully and highlight the relevant information such as verbs (what are you expected to do) and key dates to ensure that you use the correct number of months in your calculations. 6. Since all the information is presented separately from what is required, you must be able to identify the specific, relevant information that is needed to answer each sub-question; example, to calculate the amount owed to or receivable from SARS, you will need the income tax amount (on the Income Statement) and the provisional tax paid (from the additional information / Pre-adjustment Trial Balance). 7. Highlight all the amounts you have used, as these may not be used in other calculations. 8. Show all workings, to ensure that maximum part marks can be achieved. 9. Use your answers in following calculations where applicable; method marks will apply in these instances. 10. Do not rely on the answer book for the structure or format of the Balance sheet, the examiner may decide to leave out some of the balance sheet items. Inspect your answer book to identify amounts that are already entered. 74 | P a g e

8. GENERAL STUDY AND EXAMINATION TIPS 1. Note that the Accounting content is now split into TWO papers; • P1 Financial Reporting and Evaluation 150 marks 2 hours • P2 Managerial accounting and internal controls 150 marks 2 hours 2. It is important to be familiar with the specific content for each paper so that you can plan effectively for the examinations. Note that certain topics are relevant to both papers and some topics may be integrated in one question. 3. Obtain many past examination papers, the examination guidelines and exemplar papers to form the basis of your study programme. 4. Prepare a functional study time table and focus on specific topics at different intervals. Align this to time management; exploring short-cuts for calculations, frequently asked predictable questions and recommended responses for interpretive questions. 5. Pay close attention to the language used in past papers such as key vocabulary and action verbs. 6. For calculations, always show all workings – they carry many part marks. 7. Familiarize yourself with the structure and layout of Questions. They follow the same pattern which is: Appetizer, Required, Information. 8. Note that the ANSWER BOOK is a vital part of the Question Paper, as many amounts and details will be included for most Questions. This is a time-saving device. Ensure that you include these amounts in your final answers, where relevant. 9. Always arrive at least 30 minutes before the commencement of the paper. You will then be able to easily take care of all the administration requirements and to make effective use of your 10 minutes reading time. 10. Use the reading time to get a global picture of the paper, and identify where you wish to start (according to your strengths). You already have the ANSWER BOOK to assist in this regard. Simply go to the relevant pages for that Question. 11. You can also answer the sub-questions in any order; always insert what is given, working from the simple to the more challenging. 12. Write legibly and neatly; markers must be clear about your answers. 13. Keep your comments short and to-the-point. The mark allocation is your guide about the expected length of your response. 14. Have your own stationery and a good calculator (even a spare – just in case). 75 | P a g e

ACKNOWLEDGEMENTS The Department of Basic Education (DBE) gratefully acknowledges the following officials for giving up their valuable time and families, and for contributing their knowledge and expertise to develop this this study guide for the children of our country, under very stringent conditions of COVID-19. Writers: Poobie Govender, Mbangwa Shabalala, Beauty Mpanza, Tabile Nobhala, Nosipho Sicwetsha, Vuyisile Deluhlazo and Nomsa Bikitsha. DBE Subject Specialist: Percy Masango The development of the Study Guide was managed and coordinated by Ms Cheryl Weston and Dr Sandy Malapile. 91

Y eeoeaoeeneneeeed 0 ISBN : 978-1-4315-3488-3 High Enrolment Self Study Guide Series basic education _ This publication is not for sale. « Bose eueadon © Copyright Department of Basic Education REPUBLIC OF SOUTH AFRICA www.education.gov.za | Call Centre 0800 202 993