Accounting Grade 11 Eastern Cape November 2018 QP (Eng)

Downloaded from hlayiso.com NATIONAL SENIOR CERTIFICATE GRADE 11 NOVEMBER 2018 ACCOUNTING MARKS: 300 TIME: 3 hours This question paper consists of 14 pages and a 12-page answer book.

Downloaded from hlayiso.com 2 ACCOUNTING (EC/NOVEMBER 2018) INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL the questions. 2. A special ANSWER BOOK is provided in which to answer ALL the questions. 3. Where applicable, workings must be shown in order to achieve part-marks. 4. You may use a non-programmable calculator. 5. You may use a dark pencil or black/blue ink to answer the questions. 6. Where applicable, all calculations must be rounded off to ONE decimal place. 7. A breakdown of the questions is provided below. You must attempt to comply with the suggested time allocation for each question. To exercise good time management, try NOT to deviate from it. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2018) ACCOUNTING 3 QUESTION 1: 40 marks; 25 minutes Main topic: This question integrates: Financial accounting  Bank and Creditors Reconciliation Reconciliations Managing Resources  Internal control QUESTION 2: 50 marks; 30 minutes Main topic: This question integrates: Financial accounting Income Statement  Preparing the Income Statement (with adjustments) QUESTION 3: 60 marks; 35 minutes Main topic: This question integrates: Financial accounting Partnerships  Current account note  Ratio analysis and interpretation QUESTION 4: 50 marks; 30 minutes Main topic: This question integrates: Managerial accounting  Calculating costs and General Ledger Cost accounting  Break-even analysis Managing Resources  Internal control processes QUESTION 5: 45 marks; 25 minutes Main topic: This question integrates: Managerial Accounting and managing resources Budgeting  Completing and analysing Projected Income Statement  Internal control processes QUESTION 6: 55 marks; 35 minutes Main topic: This question integrates: Financial accounting  Membership fees account of a sports club Clubs and Fixed Assets Managing resources  Fixed asset management  Internal control Copyright reserved Please turn over

Downloaded from hlayiso.com 4 ACCOUNTING (EC/NOVEMBER 2018) QUESTION 1: RECONCILIATIONS (40 marks; 25 minutes) 1.1 Indicate whether the following statements are TRUE or FALSE. Write only ‘true’ or ‘false’ next to the numbers (1.1.1–1.1.4) in the ANSWER BOOK. 1.1.1 An internal auditor will want to inspect the Bank Reconciliation Statement at the end of each month. 1.1.2 A debit balance on the bank statement reflects and unfavourable balance. 1.1.3 Service fees, cash deposit fees and interest on overdraft are recorded as bank charges in the Cash Payments Journal. 1.1.4 A post-dated cheque issued will only be recorded in the Cash Payments Journal on the date reflected on the cheque. (4 x 1) (4) 1.2 BANK RECONCILIATION – WINKLE TRADERS Information from the records for October 2018 is presented. REQUIRED: 1.2.1 Show the entries that must be recorded in the cash journals by completing the table provided in the answer book. (10) 1.2.2 Prepare the Bank Reconciliation Statement on 31 October 2018. (10) 1.2.3 It is evident that the business does not exercise effective internal controls over the cash resources.  Identify TWO problems from the information provided.  In each case, provide a solution for the problem identified. (6) INFORMATION: A. Items from the Bank Reconciliation Statement on 30 September 2018. Balance on the Bank Statement R 10 400 Cr Outstanding deposits: Dated 10 September 2018 18 500 Dated 27 September 2018 15 300 Outstanding cheques: No. 883 (12 March 2018) 4 000 No. 1139 (22 September 11 400 2018) No. 1265 (15 October 2018) 9 700 Balance as per Bank Account 19 100  Cheque 883 was issued to Dimbaza Tennis Club for the owner’s membership fees. The club no longer exist.  Cheque 1139 appeared on the October 2018 bank statement. Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2018) ACCOUNTING 5 B. A comparison of the records revealed the following differences:  The outstanding deposit of R18 500 appeared on the bank statement.  The deposit of R15 300 did not appear on the bank statement. The cashier in charge of all cash transactions, Sue Drowzy, stated that she used some of the money to pay her child’s school fees. She promised to deposit the entire amount on 1 November 2018.  Bank charges of R1 120 appeared on the bank statement only.  The bank statement reflected a dishonoured cheque for R6 250 originally received from debtor, M. Mo, to settle her account of R6 500.  Interest of R450 was credited on the bank statement.  Cheque No. 1322 issued to creditor, Bee Dealers, appeared correctly on the bank statement as R6 780. It appeared in the journal as R7 860.  A debit order of R530 for the monthly insurance appeared twice on the bank statement. The bank promised to rectify this next month.  The October 2018 CRJ also showed two outstanding deposits: R13 220 on 17 October 2018, R10 400 on 29 October 2018.  The following cheques from the CPJ were still outstanding: No. 1460, for R4 280 (dated 27 October 2018), No. 1496, for R5 730 (dated 23 November 2018).  The bank statement closed off with an unfavourable balance of R12 190. 1.3 CREDITORS RECONCILIATION Umph Suppliers is a creditor of Power Traders. The August 2018 statement from Umph Suppliers reflected a closing balance of R21 500. The records of Power Traders reflected an outstanding balance of R20 000. REQUIRED: Complete the table provided to show the effect of each error/omission. Indicate whether each amount is a + or – and total each column. (10) ERRORS AND OMISSIONS NOTED: A. An invoice for R4 450 was incorrectly reflected as R5 450 on the statement. B. Power Traders recorded a 5% discount with the payment of R4 600. Umph Suppliers did not grant this discount, stating that the cheque was late. C. An allowance of R520 for damaged goods was recorded as an invoice in the creditor’s ledger account of Umph Suppliers in the books of Power Traders. D. Power Traders reflected a credit invoice of R4 190 in the creditor’s ledger account of Umph Suppliers. This was for goods purchased from Umteen Wholesalers. E. A payment of R5 500 made on 28 August 2018 did not appear on the statement. The statement was received on 26 August 2018. 40 Copyright reserved Please turn over

Downloaded from hlayiso.com 6 ACCOUNTING (EC/NOVEMBER 2018) QUESTION 2: INCOME STATEMENT (50 marks; 30 minutes) The information relates to Vuzi Traders for the financial year ended 28 February 2018. Goods are sold at a profit mark-up of 70% on cost. REQUIRED: Prepare the Income Statement for the year ended 28 February 2018. (50) INFORMATION: A. PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2018: Loan: Liesel Bank 179 500 Fixed deposit: PJ Bank 240 000 Trading stock 58 680 Debtors control 48 775 Provision for bad debts (1 March 2017) 3 070 Sales 2 362 575 Cost of Sales 1 389 750 Salaries and wages 285 200 Bad debts 8 770 Water and electricity 27 360 Bad debts recovered 2 180 Telephone 15 675 Packing material 38 550 Insurance 23 720 Advertising 19 660 Rent income 30 750 Sundry expenses 32 340 B. ADDITIONAL INFORMATION AND ADJUSTMENTS: (i) Credit sales of R17 425 on 28 February 2018 has not been recorded. (ii) Trading stock on hand as per physical stock-take amounted to R49 540. (iii) Packing material used during the financial year totalled R27 300. (iv) No entry was made for R1 470 received from the insolvent estate of a debtor. This represented 35% of the outstanding debt. (v) Received R820 from debtor J. Black. His account was previously written off. (vi) Adjust the provision for bad debts to 4% of the debtors’ balance. (vii) Provide for the outstanding interest on fixed deposit. Note that the fixed deposit was invested on 1 May 2017 at 8% p.a. interest. (viii) The telephone account for February 2018 was not yet paid, R1 245. (ix) Insurance of R280 per month was paid for three months in advance. (x) Advertising includes R3 480 for a six-month contract from 1 November 2017. (xi) Rent income includes the rent up to 31 May 2018. The storeroom was only rented out from 1 January 2018. (xii) The loan statement from Liesel Bank reflected that R210 500 was still due. Interest on the loan is capitalised. 50 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2018) ACCOUNTING 7 QUESTION 3: PARTNERSHIPS (60 marks; 35 minutes) The information relates to TX Traders (with partners Thandi and Xola) for the financial year ended 28 February 2018. REQUIRED: 3.1 Complete the Current Account note by filling in the missing amounts. (25) 3.2 Calculate the following financial indicators for the year ended 28 February 2018: 3.2.1 Current ratio (3) 3.2.2 Average debtors’ collection period (6) 3.2.3 Partner Xola’s return on equity (7) 3.2.4 Debt/equity ratio (4) 3.3 Comment on the liquidity of the business. Quote TWO financial indicators (with figures) to support your comment. (6) 3.4 Partner Xola suggested that the partnership increase the loan by R200 000 to finance the extensions to the buildings. Thandi disagrees stating that she is concerned about the unlimited liability principle. 3.4.1 Explain Thandi’s concern about the ‘unlimited liability’ principle. (3) 3.4.2 Provide TWO points to support Xola’s suggestion. Quote ONE financial indicator (with figures) in your motivation. (6) INFORMATION: A. Information extracted from the financial statements: 28 February 2018 1 March 2017 Capital: Thandi 800 000 800 000 Capital: Xola 1 000 000 900 000 Current Account: Thandi ? 22 320 Cr Current Account: Xola ? 17 670 Dr Drawings: Thandi 148 800 Drawings: Xola 127 100 Loan: Swazi Bank 800 000 800 000 Total Current Assets 407 340 Debtors Control 167 300 219 200 Total Current Liabilities 226 300 Sales 2 136 000 Net profit for the year 471 250 Copyright reserved Please turn over

Downloaded from hlayiso.com 8 ACCOUNTING (EC/NOVEMBER 2018) B. The partnership agreement makes provision for the following:  Salaries: Thandi is entitled to a monthly salary allowance of R12 400. Xola receives 2,5% more than Thandi’s allowance.  Interest on Capital is provided for at 8% p.a. on capital balances. Xola has increased her capital on 1 December 2017.  Thandi is entitled to a production bonus of 0,5% of turnover (sales).  Profits/Losses are shared in the ratio of capital balances. The change in capital was not considered for the current financial year. C. Credit sales accounts for 75% of total sales. D. The following financial indicators were calculated on 28 February: 2018 2017 Current ratio ? 2,2 : 1 Acid test ratio 0,8 : 1 1,2 : 1 Average debtors’ collection period ? 40 days Debt/equity ratio ? 0,5 : 1 60 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2018) ACCOUNTING 9 QUESTION 4: COST ACCOUNTING (50 marks; 30 minutes) 4.1 STRUMPHER MANUFACTURERS Strumpher Manufacturers produces rugby balls which are supplied to local schools and retailers in the Despatch area. The financial year ends on 28/29 February each year. REQUIRED: 4.1.1 Calculate the following for the financial year:  Direct material cost (7)  Direct labour cost (5) 4.1.2 Record the following transactions in the General Ledger:  Work-in-progress stock (10)  Finished goods stock (6) 4.1.3 The owner is concerned about the control of workers in production. Provide TWO points that justify his concern. Quote relevant figures. (6) INFORMATION: A. Stock balance: 28 FEBRUARY 2018 1 MARCH 2017 R R Raw material 38 700 23 400 Work-in-progress 60 000 45 300 Finished goods 22 000 27 000 B. Transactions for the year: (i) Raw material for R342 600 was purchased on credit. (ii) Damaged raw material worth R15 700 was sent back to creditors. (iii) Cash purchases of raw material amounted to R155 000. (iv) Delivery cost on cash purchases of raw material, R19 400. (v) Total factory overheads for the year amounted to R273 340. C. Details of workers in production: Number of workers 4 Normal hours worked 1 440 hours per worker (basic) Normal time as per contract 40 hours per week; 45 weeks per year Normal time rate R35 per hour Total overtime hours 640 hours worked Overtime paid R33 600 The business contributes 1% to the UIF and 9% to the pension fund on behalf of all employees. Copyright reserved Please turn over

Downloaded from hlayiso.com 10 ACCOUNTING (EC/NOVEMBER 2018) 4.2 JOLENE AND JUANE DOLLS The partnership manufactures dolls. The financial year ended on 30 April 2018. The mark-up percentage on cost is 50%. REQUIRED: 4.2.1 Calculate the break-even point and comment on your findings. (10) 4.2.2 Did the business achieve the targeted gross profit on sales? Provide a calculation to support your opinion. (6) INFORMATION: A. Details of the cost accounts: UNIT COST TOTAL AMOUNT Direct material Variable cost ? R71 400 Direct labour Variable cost R23 ? Administration Fixed cost R12 R30 600 Selling and distribution Variable cost R14 R35 700 Factory overheads Fixed cost R18 R45 900 B. 2 550 dolls were made and sold during the financial year. C. Total sales amounted to R242 250. 50 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2018) ACCOUNTING 11 QUESTION 5: BUDGETING (45 marks; 25 minutes) KULFI TRADERS Information from the records is for the budget period ended 31 December 2018. REQUIRED: 5.1 Calculate the percentage of goods sold on credit during December 2018. (4) 5.2 Complete the Debtors Collection Schedule for December 2018. (8) 5.3 Prepare the Cash Budget for December 2018. (23) 5.4 Refer to the actual figures for October 2018 (Information K).  Identify ONE item that was well controlled and ONE item that was not well controlled. In each case, provide a reason for your choice. (6)  Provide the owner with different internal control measures he can use to exercise better control over any TWO items on this list. (4) Copyright reserved Please turn over

Downloaded from hlayiso.com 12 ACCOUNTING (EC/NOVEMBER 2018) INFORMATION: A. Total sales figures for the budget period ended 31 December 2018: Goods are sold at a profit mark-up of 50% on cost. ACTUAL BUDGETED MONTH CASH CREDIT CASH CREDIT October 38 400 57 600 November 43 200 64 800 December 48 000 72 000 B. Credit sales are collected according to the following trend:  40% in the month of sale (these debtors receive a 5% discount).  40% in the month following the month of sale  18% two months after the sales month  2% is written off as bad debts. C. Purchases of stock:  Stock sold is replaced in the month of sale (a base stock is maintained).  All purchases of trading stock are made on credit.  Creditors are paid in the month following the month of purchase. D. The three shop assistants each earn R10 100 per month. During December 2018, two of the three shop assistants will also receive their annual bonuses of 80% of their monthly salary. E. Total rent income for the previous financial year was R139 680. The rent is expected to increase by 5% on the 1 December 2018. F. The owner agreed to monthly drawings of R2 600. This comprises R1 800 cash and the balance in trading stock. G. Interest on fixed deposit amounts to R9 600 per year. This is received in three equal instalments on 30 September 2018, 31 December 2018 and 31 March 2019. H. Operating expenses amount to R18 000 per month and is paid by cheque. I. Bank charges averages R1 620 per month. J. The bank balance on 30 November 2018 was R98 330 (favourable). K. Actual and budgeted figures for October 2018: BUDGETED ACTUAL Drawings R1 800 R1 500 Repairs and maintenance R5 000 R1 200 Advertising R3 600 R3 650 Rent Income R11 640 R5 000 45 Copyright reserved Please turn over

Downloaded from hlayiso.com (EC/NOVEMBER 2018) ACCOUNTING 13 QUESTION 6: CLUBS AND FIXED ASSETS (55 marks; 35 minutes) 6.1 SPORTS CLUBS The membership records of Mount Coke Hiking Club for the financial year ended 31 December 2017 is presented. REQUIRED: 6.1.1 Prepare the Membership Fees account in the General Ledger. Show the workings for part marks. (20) 6.1.2 New members are not satisfied with the fee structure for new members.  Explain why they feel this way. Provide ONE point. (2)  Provide a solution to solve this problem. (2) INFORMATION: A. Extract from the post-closing trial balance on 31 December 2016. DEBITS CREDITS Accrued income: membership fees 5 400 Income received in advance: membership fees 1 500 B. Extract from the cash journals for the year ended 31 December 2017. Membership fees collected: 61 500  2016 membership fees received 3 600  2017 membership fees received 55 200  Membership fees received for 2018 2 700 Membership fee refunds 450 C. Details of Membership fees:  Membership fees amount to R300 per member per year.  New members joining before June pay the full amount. Those joining after June pay half the membership fees.  On 31 December 2016, there were 210 members registered.  The outstanding 2016 fees must be written off. Defaulting members must be expelled, effective from 1 January 2017.  On 6 April 2017, 14 new members joined the club. They paid their entrance fees and membership fees in full.  On 30 September 2017, 8 new members joined the club. They also met their financial obligations.  The secretary requested that part of his honorarium of R500 be retained by the club to cover his membership fees. This was granted.  Three members who paid their fees in full resigned on July 2017. The Committee decided to give each member a refund of half the fees.  Some members did not pay their fees for 2017. Copyright reserved Please turn over

Downloaded from hlayiso.com 14 ACCOUNTING (EC/NOVEMBER 2018) 6.2 FIXED ASSET MANAGEMENT The information presented, appeared in the books of Shirley’s Delivery Services. The business is owned by Shirley May. She provides a delivery service for local furniture businesses. The financial year ended on 28 February 2018. REQUIRED: 6.2.1 Calculate the total depreciation on vehicles and on equipment. (9) 6.2.2 Complete the Fixed Asset note by filling in the missing amounts. Some amounts are included on the note. (9) 6.2.3 Shirley suspects that some of the drivers are using the vehicles for their private purposes.  Provide TWO points to justify her concern. Quote figures. (6)  Give Shirley TWO points of advice on how she can exercise better control over the use of the vehicles. (4) 6.2.4 The six drivers are dissatisfied with their salary increase and are planning a strike. Are they justified? Explain. (3) INFORMATION: A. On 1 March 2017, the business owned six delivery vehicles. On 1 June 2017, the business purchased an additional delivery vehicle. B On 28 February 2018, old equipment was donated to a local school. C. Vehicles are depreciated at 20% p.a. on cost and equipment is depreciated at 15% p.a. on carrying value. D. Additional information relating to fixed assets: 28 February 2018 1 March 2017 Delivery vehicles (cost) 1 090 000 924 000 Accumulated depreciation on ? 554 400 vehicles Equipment (cost) 335 000 380 000 Accumulated depreciation on 165 340 167 000 equipment Repairs and maintenance on 45 220 32 300 vehicles Petrol and oil 114 100 65 200 Salaries to drivers 408 240 388 800 Sales 932 400 740 000 55 TOTAL: 300 Copyright reserved Please turn over