Accounting Grade 12 NSC June 2014 Question Paper (English)

Downloaded from hlayiso.com SENIOR CERTIFICATE EXAMINATION ACCOUNTING HIGHER GRADE 2014 MARKS: 400 TIME: 3 hours This question paper consists of 15 pages and a 17-page answer book. 3 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 2 DBE/2014 SCE INSTRUCTIONS AND INFORMATION 1. Answer ALL the questions. 2. A special ANSWER BOOK is given in which to answer ALL the questions. 3. Show ALL calculations in order for part marks to be allocated. 4. Read the instructions carefully and follow them precisely. 5. Candidates will forfeit marks for:  Important dates which are omitted  Use of non-standardised abbreviations  Over-writing on figures  Superfluous entries/foreign items/errors of principle 6. Non-programmable calculators may be used. 7. NO pages may be removed from the ANSWER BOOK. The answer book caters for alternative formats of financial statements. 8. Use the information given in the table below as a guide when answering the question paper and try not to deviate from it. TIME GUIDE QUESTION TOPIC MARKS (MINUTES) 1. Bank reconciliation 66 29 2. Close Corporations 50 21 3. Budget 59 27 4. Company 90 42 5 Partnership 75 34 6. Club 60 27 TOTAL 400 180 minutes Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 3 DBE/2014 SCE QUESTION 1 BANK RECONCILIATION (66 marks; 29 minutes) You are provided with information taken from the records of Chuta Traders. The business is owned by Hertzog Chuta. REQUIRED: 1.1 Complete the Cash Receipts Journal and Cash Payments Journal for May 2014. (36) 1.2 Post to the bank account in the General Ledger. Balance the account on 31 May 2014. (9) 1.3 Prepare the Bank Reconciliation Statement on 31 May 2014. (15) NOTE: It is the policy of the business to correct errors in the Cash Journals, whenever possible. 1.4 Give TWO reasons why it is important for all businesses to draw up a Bank Reconciliation Statement every month. Give a detailed explanation for each reason. (6) INFORMATION: 1. Provisional totals in the Cash Journals (CRJ and CPJ) for May 2014: CRJ CPJ Bank 33 890 41 310 Sundry Accounts 33 890 41 310 2. The Bank Reconciliation Statement prepared on 30 April 2014 reflects the following information: R Favourable balance as per Bank Statement 18 600 Outstanding deposit 11 512 Outstanding cheques: 531 3 460 563 4 850 578 6 770 Favourable balance per bank account in the Ledger ? Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 4 DBE/2014 SCE 3. A comparison of the Bank Reconciliation Statement for April 2014 with the Bank Statement of Beta Bank for May 2014 reflects the following: 3.1 The outstanding deposit of R11 512 appears on the Bank Statement for May 2014. 3.2 Cheque No. 578 for R6 770 appears on the Bank Statement for May 2014. 3.3 Cheque No. 531 was issued to Lengana Stores to settle their account. This cheque has been lost and payment has been stopped. It was replaced with cheque No. 602 for R3 500 (inclusive of interest) on 31 May 2014. This cheque is still in the post. No entry has been made for the cancellation of the old cheque or the issuing of the new cheque. 3.4 Cheque No. 563 for R4 850, dated 25 June 2014 is still outstanding. 4. Items that appear in the Cash Journals for May 2014 but not on the Bank Statement: 4.1 A deposit by Chuta Traders on 31 May 2014, R18 580. 4.2 The following cheques: No. 611 for R2 150 No. 636 for R11 700 (dated 23 July 2014) 5. It was discovered that cheque No. 620 for R6 350 issued to Nowers Traders for purchase of stationery is correct on the Bank Statement but was entered in the CPJ as R3 560. Rectify the error. 6. Other items that appear on the May Bank Statement (received from Beta Bank), but not in the Cash Journals: 6.1 Bank charges R690 Interest on fixed deposit, R175 Interest on unfavourable balance, R320 6.2 Stop order for an annual donation to the SPCA, R890. 6.3 Dishonoured cheque originally received from a debtor B Bankrup, R750. 6.4 The tenant, B Bonke, made an electronic transfer to the account of Chuta Traders, R3 750. 6.5 A debit order in favour of Ali Insurers for the monthly business insurance premium, R3 200. 7. There was a favourable balance of R6 477 according to the Bank Statement on 31 May 2014. 66 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 5 DBE/2014 SCE QUESTION 2 CLOSE CORPORATION (50 marks; 21 minutes) The information given appeared in the books of Brownhead CC with B Brown and W Whitehead as members. The corporation's financial year ends on 28 February each year. REQUIRED: Draw up the following Ledger accounts, properly balanced or closed off, on 28 February 2014: 2.1 Members' contributions (10) 2.2 Loan to W Whitehead (8) 2.3 Distribution payable to members (7) 2.4 South African Revenue Service (Income tax) (12) 2.5 Distribution to members (4) 2.6 Appropriation Account (9) INFORMATION: Some of the balances that appeared in the books on 1 March 2013, the first day of a new accounting period, are as follows: Members' contribution R235 000 Retained income 51 500 Distribution payable to members 42 000 South African Revenue Service (Income tax) (Cr) 7 850 Loan from B Brown 50 000 Loan to W Whitehead 60 000 Transactions: 2013 Mar. 21 Paid the distribution owing to members. Member Brown requested that his amount be paid out to him while Whitehead asked the business to credit it to his loan account. The distribution payable was in the ratio 3 : 1 between Brown and Whitehead respectively. May 23 Received income tax assessment for the previous financial year and paid the amount due by cheque. June 18 B Brown purchased trading stock for the business valued at R31 250. He requested that this amount must be regarded as part of his member's contribution. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 6 DBE/2014 SCE Aug. 13 W Whitehead gave his personal laser printer, valued at R15 750, to the business to increase his member's contribution. 30 Paid first provisional income tax by cheque, R37 500. Nov. 15 Member W Whitehead borrowed R40 000 from the business. He received a business cheque on the same day. Dec. 29 Member Brown withdrew R23 600 of his members' contribution. A cheque was issued to him. 2014 Feb. 26 Issued a cheque to SARS for R35 300 in respect of second provisional income tax. 28 Final accounts were drawn up and a net profit of R240 000 was transferred to the Appropriation Account. The income tax calculated correctly amounted to 30% of the net profit. An amount of R90 000 of the net profit will be distributed between the members Brown and Whitehead in the ratio 3 : 1 respectively. 50 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 7 DBE/2014 SCE QUESTION 3 BUDGET (59 marks; 27 minutes) The following information relates to Travel Traders. REQUIRED: 3.1 Prepare the Debtors' Collection Schedule for the period 1 April 2014 to 31 May 2014. (14) 3.2 Prepare the Cash Budget for the two months April 2014 and May 2014. (45) INFORMATION: 1. Extract from list of balances on 31 March 2014 Fixed deposit: Parys Bank R90 000 Bank overdraft 19 951 Prepaid expenses (April wages paid in advance) 1 500 2. Total sales Actual sales Budgeted sales February 2014 March 2014 April 2014 May 2014 R96 000 R144 000 R180 000 R156 000 3. Credit sales Credit sales amount to 60% of the total sales. Credit sales are usually collected as follows:  40% in the month of sales less 5% discount for prompt payment  50% in the month following the sales (after 30 days)  8% in the second month following the sales (after 60 days)  2% is written off as bad debts in the third month after the sales (after 90 days) 4. Purchases and payments to creditors ALL goods are sold at cost price plus 50%.  All purchases are on credit. Goods sold are replaced in the month they are sold.  Creditors are paid in the month following that credit purchase (after 30 days). Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 8 DBE/2014 SCE 5. Rent income  The rent income for the period 1 May 2013 to 30 April 2014 is R3 800 per month.  The monthly rent will increase by 15% on 1 May 2014. 6. Wages  There are 4 workers who each receive R9 000 per month as wages.  The one worker who was paid R1 500 in advance in March 2014 will receive R7 500 in April 2014.  Each worker will receive a 12% bonus in May 2014. This bonus will be regarded as wages. 7. Drawings The owner will draw the following for his personal use during May 2014:  Cash – R4 500  Stationery – R2 990 8. Fixed deposit and interest on fixed deposit  The fixed deposit matures on 30 April 2014 and half of this amount is to be invested on the same date at Parys Bank. The rest will be retained in the current bank account.  Interest on fixed deposit is received monthly. The expected interest rate on fixed deposits for April is 8%. It is expected that the interest rate will drop by 2% on 1 May 2014. 9. Vehicles and depreciation  During April 2014 a delivery vehicle will be bought from Welkom Motors. A deposit of R20 000 will be paid in April 2014. The balance, including finance charges, amounts to R144 600, and will be paid in 12 equal monthly instalments starting in May 2014.  The old vehicle will be sold to K Koos for R25 000 cash during April 2014.  Depreciation on vehicles amount to R4 444 per month. 10. Other operating expenses  April R27 000 and May R28 500. 59 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 9 DBE/2014 SCE QUESTION 4 COMPANY (90 marks; 42 minutes) The information was taken from the accounting records of Melissant Traders Limited for the years ended February 2013 and February 2014. Melissant Traders Limited has a registered authorised share capital of 700 000 ordinary shares of R2 each. New shares were issued on 1 March 2013. REQUIRED: 4.1 Prepare the Asset Disposal Account. (6) 4.2 Prepare the Note to the Balance Sheet for Fixed Assets on 28 February 2014. (29) 4.3 Prepare the following notes to the Cash flow statement for February 2014: 4.3.1 Reconciliation between profit before taxation and cash generated by operations (12) 4.3.2 Dividends paid (7) 4.3.3 Income tax paid (7) 4.4 Calculate the number of ordinary shares that were issued on 1 March 2013. (4) 4.5 Calculate the following ratios for 2014: 4.5.1 Acid test ratio (5) 4.5.2 Debt-equity ratio (5) 4.5.3 The average period (in days) for which there is enough stock on hand (5) 4.5.4 Return on average shareholders' equity (5) 4.6 Do you think it will be wise for Melissant Traders to take out an additional loan of R200 000 to expand her business? In your answer refer to the debt-equity ratio and discuss how the R200 000 loan will impact on the risk. Show necessary calculations. (5) Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 10 DBE/2014 SCE 1. EXTRACTS FROM THE INCOME STATEMENT: 2014 2013 Sales (80% on credit) 966 000 600 600 Cost of sales 630 000 400 400 Net profit before tax 230 000 154 800 Interest on loan 19 750 12 000 Depreciation on equipment 29 000 23 500 Depreciation on vehicles ? 24 000 Income tax 83 500 57 900 Dividends ? 67 500 2. EXTRACTS FROM THE POST CLOSING TRIAL BALANCE ON 28 FEBRUARY: 2014 2013 Ordinary shareholders' equity 836 000 725 500 Ordinary share capital (nominal value per share R2) 720 000 640 000 Share premium ? 64 000 Retained income 44 000 ? Long-term liabilities (15% p.a.) 120 330 92 440 Land and buildings 475 000 295 000 Equipment at carrying value 218 320 222 320 Vehicles at carrying value 238 400 304 540 Current assets 182 370 142 000 Trading inventory 113 450 67 350 South African Revenue Service (Income tax) 3 410 - Debtors 54 150 74 650 Bank 11 360 - Current liabilities 157 760 145 920 Creditors 84 730 90 540 Expenses accrued/payable 19 830 12 740 South African Revenue Service (Income tax) - 4 140 Bank overdraft - 8 500 Shareholders for dividends 53 200 30 000 3. ADDITIONAL INFORMATION: The following transactions have been correctly recorded in the books and are reflected in the balances shown above:  A vehicle was sold at carrying value for R38 000 cash (the original cost was R64 000 and the accumulated depreciation at the date of disposal was R26 000).  Equipment was purchased for R25 000 during the year.  An extra storeroom was built during the year. 90 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 11 DBE/2014 SCE QUESTION 5 PARTNERSHIP (75 marks; 34 minutes) 5.1 The following information was taken from the books of Botnas Traders with partners B Botha and N Naas: REQUIRED: Use the information below to prepare the following notes to the financial statements on 28 February 2014: 5.1.1 Capital accounts (10) 5.1.2 Current accounts (26) EXTRACT FROM THE LIST OF BALANCES ON 28 FEBRUARY 2014: Debit Credit Capital: B Botha (28 February 2014) 350 000 Capital: N Naas (28 February 2014) 450 000 Current account: B Botha (1 March 2013) 24 650 Current account: N Naas (1 March 2013) 36 630 Drawings: B Botha 78 000 Drawings: N Naas 66 000 ADDITIONAL INFORMATION: 1. On 31 August 2013 partner N Naas increased his capital contribution by R50 000 whilst partner B Botha decreased his capital contribution on 1 December 2013 by R100 000. Both transactions have been recorded. 2. The primary distribution for the year amounted to R429 000. 3. The net profit for the year amounted to R430 000. 4. The partnership agreement stipulates the following: 4.1 Salaries B Botha receives R1 000 per month more than N Naas. 4.2 Interest on capital The partners are entitled to interest on capital at 18% per annum. Take into consideration that there were changes to capital during the year. 4.3 Remaining profits and losses Partners share the remaining profits (or losses) equally. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 12 DBE/2014 SCE 5.2 Partnership decision REQUIRED: Read the information given below and then answer the following question: Do you think it is advantageous for the partnership to engage the services of partner N Naas on a full-time basis and allow the bookkeeper Ms N Shabalala to retire on pension? Give TWO reasons for your answer. Fully explain your answer by quoting figures and calculations you have done on whether the partnership will benefit or not. (9) INFORMATION: Partner N Naas intends to work full-time for Botnas Traders as his other business interest has close down. This will mean:  The partnership agreement will be changed to give partner N Naas the same salary as partner B Botha. N Naas will do the books of the partnership as he has an accounting qualification.  The services of the existing bookkeeper, Ms N Shabalala, who presently earns R90 000 per year will no longer be required. She will be offered early retirement and receive a once-off payment of R100 000 from the partnership. The pension fund will pay her a monthly pension equal to 70% of her present salary. 5.3 Accounting equation of partnerships Analyse the transactions below as shown in the example. The partners are C. Cilliers and G Grimbeek. Example: Pay R100 for stationery per cheque. No. Account debit Account credit A OE L E.g. Stationery Bank - 100 - 100 0 Transactions 5.3.1 Partner Cilliers contributes R100 000 as additional capital. Issue receipt No. 221 to him. (5) 5.3.2 Cash sales for the day amounts to R15 000. The business uses a mark-up of 50% on cost. (10) 5.3.3 Paid the monthly salary of partner Grimbeek by cheque, R9 000. (5) 5.3.4 Partner Grimbeek withdrew R3 500 trading stock from the business for his personal use. (5) 5.3.5 Sent damaged stationery back to the creditor XX Suppliers, R500. (5) 75 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 13 DBE/2014 SCE QUESTION 6 CLUB (60 marks; 27 minutes) The financial year of the Faraway Running Club ends on 31 December of each year. REQUIRED: 6.1 Draw up the Membership Fees Account on 31 December 2013. (18) 6.2 Prepare the Income and Expenditure Statement for the year ended 31 December 2013. Show workings so that part marks can be awarded. (42) FARAWAY RUNNING CLUB POST CLOSING TRIAL BALANCE ON 31 DECEMBER 2012 Debit Credit Balance Sheet accounts section Accumulated funds/Capital funds 315 000 Land and buildings 320 700 Loan from Alpha Bank (15% p.a.) 50 000 Equipment 30 000 Accumulated depreciation on equipment 8 800 Fixed deposit: Beta Bank (12% p.a.) 11 000 Sundry creditors 7 408 Inventory: Track suits 3 415 Bank 13 055 Savings account 575 Income received in advance/Deferred (See note) 1 260 Income accrued/Receivable (Membership fees) 3 600 Expenses accrued/Payable (Telephone) 460 Expenses prepaid (Stationery) 583 382 928 382 928 NOTE: Income received in advance (deferred income) consists of:  Membership fees (2013), R1 080  Interest on fixed deposit, R180 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 14 DBE/2014 SCE FARAWAY RUNNING CLUB SUMMARY OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 31 DECEMBER 2013 RECEIPTS PAYMENTS Membership fees 19 440 Creditors 23 500 Entrance fees 3 900 Tournament expenses 10 250 Sales of tracksuits 14 890 Equipment purchased (2013/10/01) 10 000 Interest on fixed deposit 660 Purchase of track suits 9 700 Donations 23 960 Fixed deposit: Beta Bank (2013/09/30) 2 000 Tournament income 17 950 Water and electricity 6 550 Telephone 3 900 Membership fees 180 Alpha Bank (loan and interest) 13 750 Wages 17 688 Bank charges 1 455 Honorarium 1 200 Stationery 2 175 ADDITIONAL INFORMATION AND ADJUSTMENTS 1. Membership fees and entrance fees 1.1 Membership fees are R180 per member per year. The fees of members who join during the financial year are calculated on a pro rata basis for the unexpired months of the financial year. 1.2 All new members must pay an additional amount of R150 as entrance fees when they join the club. Entrance fees are regarded as current income. 1.3 On 1 January 2013, the club had 90 members. During March 2013, 20 new members joined the club while a further 6 new members joined during November 2013. All these members paid their membership fees in full by cheque during the year. 1.4 During the year 15 of the members' fees in arrears for 2012 were received. It was decided that the remainder must be written off as irrecoverable and the membership of these members be terminated with effect from 1 January 2013. 1.5 One member who had paid his 2013 fees emigrated in May 2013. It was decided to refund his fees in full and terminate his membership with effect from 1 January 2013. 1.6 On 31 December 2013 it was established that 7 members paid their membership fees for 2014, while the membership fees of some members were still owing for 2013. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting/HG 15 DBE/2014 SCE 2. An invoice for R45 000 was received from BB Builders for the building of a new tuck shop. 3. According to a physical stocktaking on 31 December 2013 the following stock was on hand:  Track suits R2 950  Stationery R344 4. After a comparison with the Bank Statement for December 2013 it was discovered that the bank charges of R25 did not appear in the books of the club. 5. The account of R521 for water and electricity for December 2013 will be paid on 3 January 2014. 6. Interest on the savings account was added directly to the saving account by the bank, R72. 7. An instalment of R10 000 on the loan must be paid on 30 June every year. The payment to Alpha Bank was in respect of interest on the loan calculated up to 30 June 2013 as well as the annual capital repayment. 8. Make provision for the interest outstanding on the fixed deposit. 9. Depreciation on the equipment must be calculated at 10% per annum according to the diminishing balance method. 60 TOTAL: 400 Copyright reserved