Accounting Learner Grade 11 Support Step Ahead 2021

Downloaded from hlayiso.com education ) Department: Education PROVINCE OF KWAZULU-NATAL CURRICULUM GRADE 10 -12 DIRECTORATE NCS (CAPS) LEARNER SUPPORT DOCUMENT GRADE 11 ACCOUNTING STEP AHEAD PROGRAMME 2021 Page 10f 100

Downloaded from hlayiso.com PREFACE This support document serves to assist Accounting learners on how to deal with curriculum gaps and learning losses as a result of the impact of COVID-19 in 2020. It also captures the challenging topics in the Grade 10 -11 work. Activities should serve as a guide on how various topics are assessed at different cognitive levels and also preparing learners for informal and formal tasks in Accounting. It will cover the following topics: A. Final Accounts 3-7 B. Financial Statements 8-24 C. Analysis and interpretation 25 - 37 D. Budgeting 38 - 55 E. Inventory Systems 56 - 67 F. Cost Accounting 68 - 91 G. Value Added Tax 92-100 Page 2 of 100

Downloaded from hlayiso.com A. PARTNERSHIPS THINGS TO REMEMBER Final accounts Calculation of interest on capital and final distribution of profits/losses. Income statement e Know the format and the use of signs (+/-) in the adjustment recorded in the income statement. e Beware of foreign/misplacements entries in the income statement. e Recording/Posting adjusted figures from income statement to relevant notes to balance sheet. e Adjustments to be noted: o Provision for bad debt adjustment (income or expense). o Identifying trading stock deficit/surplus. o Rentincome increased/decreased by % or amount during the financial year. co The correction of incorrect net profit. Balance sheet e Know the format of balance sheet. e Don't record foreign entries in both balance sheet and notes. e Fixed deposit maturing within the next 12 months to cash and cash equivalents. e Loan payable within the next 12 months to be disclosed in the current liabilities. e The use of financial indicators when preparing balance sheet. If Bank (debit) =note 6 cash and cash equivalents and If Bank (credit) = bank overdraft to current liability. ACTIVITY A1 (Final Accounts) An inexperienced bookkeeper of Thembi Stores prepared the Profit and Loss account for the financial year ended 28 February 2020. As the internal auditor, you discovered that certain year-end adjustments were not taken into account. REQUIRED 1.1 Prepare the Trading account on 28 February 2020 to reflect the correct Sales and Cost of Sales figures 1.2 Prepare the correct Profit and Loss account for the year on 28 February 2020. Page 3 of 100

Downloaded from hlayiso.com INFORMATION An inexperienced bookkeeper prepared the Profit and Loss account below. It includes some errors and omissions. GENERAL LEDGER OF THEMBI STORES FINAL ACCOUNTS SECTION Dr Profit and Loss account (F2) Cr 2020 2020 Feb 28 | Salaries & wages 107 390 | Feb | 28 | Trading account 246 750 Telephone 10 450 Rent income 74 800 Insurance 9 100 Discount Received 2 360 Sundry expenses 37 910 Equipment 122 000 Commission Income 12 890 Heke dees 4000 Discount allowed 1 240 Depreciation 18 300 Net profit 262 620 449 910 449 910 The following have not yet been considered: (a) The gross profit was correctly calculated using the profit mark-up of 60% on cost. However the bookkeeper did not take the following into account: A debtor had returned goods, valued at R6 400, on 28 February 2020. Transactions involving debtors, not recorded, included: ¢ Bad debts to be written off, R700 e A discount allowed of R180 on a late payment must be cancelled. The telephone account on February 2020 was received but not yet paid, R960 Rent income includes the rent for only 11 months. The rent amount was constant during the current financial year. Insurance includes the total amount paid up to 30 April 2020. The loan statement was received but no information from it was recorded. Details were: Balance on 1 March 2019 R396 000 Total of monthly repayments (including interest) 102 000 Interest capitalized 2 Balance on 28 February 2020 326 200 Interest on the Fixed deposit of R60 000 at 8% p.a. was outstanding for the year ended 28 February 2020. The new equipment was purchased on 1 March 2019. The depreciation shown above relates to this equipment only. Depreciation on the original equipment (cost R216 000) was not recorded. Depreciation on equipment is provided at a fixed percentage on cost. Page 4 of 100

Downloaded from hlayiso.com ACTIVITY A1 (FINAL ACCOUNTS) GENERAL LEDGER OF THEMBI STORES Final Accounts Section 14 TRADING ACCOUNT (F1) 1.2 Profit and Loss account (F2) 2020 2020 Feb | 28 | Salaries & wages 107 390 | Feb | 28 ACTIVITY A2 (Partnership ledger) Harry and William are in partnership trading as Prince Traders that sell sporting goods to the public. REQUIRED 2.1 Refer to Information B: Calculate the correct net profit for the year ended 28 February 2020. 2.2 Complete the following General Ledger accounts, properly closed off at the end of February 2020: e = Capital: William e — Current account: William e Appropriation account INFORMATION A. Balances/Totals on 28 February 2020: Capital: Harry R660 000 Capital: William 520 000 Current account: William (1 March 2019) (Dr) 8 800 Drawings: William 214 500 Gross Sales 4 820 000 Debtors allowances 20 000 Page 5 of 100

Downloaded from hlayiso.com GENERAL LEDGER OF PRINCE TRADERS Dr Current account: Harry (B3) Cr 2019 Mar 1 | Balance bid 14 000 on 28 | Interest on Capital 59 400 B. Adjustments The bookkeeper has calculated the net profit as R735 425 but did not consider the following adjustments: e William introduced an extra vehicle worth R220 000 as capital on 31 January 2020 e The provision for bad debts needs to be decreased by R2 600 e Anannual insurance premium of R8 100 was paid and recorded on 1 December 2019. No adjustment entry has been made. e Commission income received, R4 100 is for the next financial year. Make the necessary adjustment. e William earns a fixed monthly salary. He has withdrawn his salary for 13 months. There are no other drawings. C. Partnership agreement The partnership agreement provides for the following: Interest on capital is paid to both partners at a fixed % per year. Harry earns R2 500 per month more than William as a salary. William earns a bonus of 1% of the net sales. Remaining profit will be divided equally between Harry and William ACTIVITY A2 (Partnership ledger) 2.1 Correct net profit Net profit before adjustments 735 425 2.2 GENERAL LEDGER OF PRINCE TRADERS Dr Capital: William (B2) Cr Current account: William (B4) Page 6 of 100

Downloaded from hlayiso.com Appropriation account _(F3) 2020 2020 Feb | 28 Feb | 28 ACTIVITY B1 (Statement of Comprehensive Income) Rockstars Traders is a business owned by partners R. Rocky and S. Star. The financial year ends on 28 February each year. REQUIRED 14 Prepare the Statement of Comprehensive Income for the year ended 28 February 2020. Page 7 of 100

Downloaded from hlayiso.com INFORMATION A ROCKSTAR TRADERS PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2020 Balance sheet accounts section Dr Cr Capital: R. Rocky 500 000 Capital: S. Star 450 000 Current account: R. Rocky 24 600 Current account: S. Star 4 200 Drawings: R. Rocky 108 000 Drawings: S. Star 208 000 Land and buildings 1.620 000 Vehicles 140 000 Equipment 255 000 Accumulated depreciation on equipment 120 000 Loan: Roll Bank (12 % p.a.) 140 000 Fixed deposit: Roll Bank (8 % p.a.) 80 000 Trading Inventory 109 500 Debtors control 58 600 Provision for bad debts 2 580 Bank 36 510 Creditors control 115 200 Pension Fund 45 100 Nominal accounts section Sales 2 140 210 Cost of sales 961 000 Debtors allowances 10 210 Bank charges 8 200 Telephone 5 200 Rent income 86 800 Interest on fixed deposit 6 400 Bad debts 3.300 Pension fund contribution 4100 Interest on loan 15 400 Salaries and wages 121 000 Insurance 18 000 Packing material 35 890 Interest on bank overdraft 1.000 3 647 000 3 647 000 |B. | ADJUSTMENTS AND ADDITIONAL INFORMATION: l ] A debtor, J. Jovi, returned merchandise delivered to him on 27 February 2020 at a selling price of R1 000. The goods were sold at a mark-up of 100% on the cost price. No entries were made for this transaction, but the items were included in the physical stock count. fe Trading stock on hand, as determined by a physical stocktaking on 28 February 2020, amounted to R105 000 . Packing material used during the financial year amounted to R20 000. 4. The telephone account for February 2020 received but not paid, R700. Page 8 of 100

Downloaded from hlayiso.com 5. A debtor, B. Idol, was declared insolvent. His estate paid only 60c in the rand. An amount of R450 was received from his estate and recorded. The remainder of his debt must be written off as irrecoverable. No entries have been made for this transaction. 6. An amount of R460 was received from a debtor whose account was previously written off. This has not been recorded. 7. The provision for bad debts must be adjusted to R2 360. 8. The partnership is sub-letting a section of the building to A. Rose. The rent is increased annually by 10% p.a. on 1 January. The rent was received quarterly in advance until 31 May 2020. 9. The amount for insurance includes an annual premium of R8 400 for the period 1 July 2019 to 30 June 2020. 10. The pre-adjustment trial balance was prepared before the Salaries Journal for February 2020 was posted. The following details appeared in the SJ: Gross salaries R25 000 Less: Deductions R 7600 PAYE R4 500 Pension fund R3 100 Net salaries R 17 400 Employers contribution (pension fund) R3 100 NOTE: Payments (EFTs) for net salaries were made and recorded. ie Depreciation on equipment amounts to R15 000 for the year. 12. Provide for any outstanding interest on loan. Interest is not capitalised. 13. Partnership agreement stipulations: e Partners are entitled to a monthly salary of R15 000 each. e Partners are entitled to interest on capital at 7% p.a. e The remainder of the profit or loss is shared equally between the partners. Page 9 of 100

Downloaded from hlayiso.com ACTIVITY B1 (Statement of Comprehensive Income) ROCKSTAR TRADERS STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2020 Sales © 21Ue 216-Clo gic t leed 7 ee Cost of Sales ¢ 446i wee - See) ices: Gross Profit (iar Fe i Other Operating Income bY Yoo Rent Income CBen Pas reese: 6% 320 Bad hob ts Rec 4 bo Provision foe Bad debts C2S¢0 - %6o) ate Gross Operating Income 1237 Se Total Operating Expenses 426: tee “Treeline Shoe’ Ecco Pac \Luci ng materiol ( 38 eGo~-!$ Bu05 20 ces Telephone _C E20 } Toe) Site Rad debts ©3 See 4 Bec) 3 bee ‘In Suranco CN Goce 272 Cash [Be Zee, Sakyries cond wages C121 oog +25 coed (G6 cece Provision Condi bution © 4 low + Bloc) 12s Depreciation \¢€ cco Rank chetees, a Operating Profit Loo Gee Interest Income Ge. Ges Profit before interest expense lL o17 See Interest expense CN Gibas ®t Vesadtoce) Cit Reo) Net profit for the year (800 aco ACTIVITY B2 (Statement of Comprehensive Income, Notes) The following information was extracted from the records of JJ Stores on 28 February 2020, the end of the current financial year. The partners are Ms Jozi and Mr Jay. REQUIRED 2.1. Prepare the Statement of Comprehensive Income for the year ended on 28 February 2020. NOTE: Some amounts are provided in the answer sheet. Show all workings in brackets. 2.2 Complete the Notes to the Statement of Financial Position: e Capital e Current accounts 2.3. Jozi is not happy with the manner in which Jay is handling his investment in the business. e Provide TWO reasons to justify why she feels this way. In each case, provide relevant figures to support your comments. e Propose TWO practical suggestions that the partnership can use to address the concern expressed by Jozi Page 10 of 100

Downloaded from hlayiso.com INFORMATION A. Extracts from the financial records: Capital: Jozi (1 March 2019) R240 000 Capital: Jay (1 March 2019) 360 000 Drawings: Jozi 26 409 Drawings: Jay 57 403 Current account: Jozi (1 March 2019) (Cr) 22 360 Current account: Jay (1 March 2019) (Dr) 10 100 Sales 998 400 Cost of sales 665 600 Net profit (as per Profit and Loss account) 311 133 B. Extract of Pre-adjustment amounts from the General Ledger on 28 February 2020: Loan: Kudu Bank iu Fixed deposit: Bok Bank (9% p.a.) 120 000 Debtors control 68 720 Provision for bad debts (1 March 2019) 3 936 Trading stock 134 840 Rent income 117 250 Insurance 21 455 Packing material 23 100 Water and electricity 25 320 Interest income 8 100 Sundry expenses 2 Cc. The following adjustments were taken into account to calculate the net profit: 1. The annual stock take revealed the following stock on hand: e — Trading stock, R130 540 Packing material unused, R3 600 2, — Adjust the provision for bad debts to 5% of the net trade debtors 3. __ Interest on loan is capitalised. The loan statement received from Kudu Bank showed the following: Loan balance on 4 March 2019 R374 600 Repayments for the year (including interest) 86 400 Interest capitalised 2 Loan balance on 28 February 2020 327 000 4. The rent for March 2020 was received and deposited. Take into account that rent was increased by R875 from 1 December 2019. 5. _ Insurance includes the annual policy for R5 820 paid on 1 June 2019. 6. The water and electricity account for February 2020 was not yet paid, R2 150 7. Interest on fixed deposit is not capitalised. Interest for the last quarter of this financial year is not yet received. D. Transactions relevant to the partners: 1. Jozi took goods from stock for her personal use. The selling price was R9 590. Goods are marked- up by 75% on cost. Only the trading stock entry was processed. 2. Jay used a business cheque to settle his personal telephone account, R5 100 3. The partnership agreement clause for salaries provided for the following: e Jozi R113 400 annually e Jay R7 800 per month NOTE: The partners were entitled to an annual increase of 10% effective on 1 December each year. The above allowances were not adjusted with this increase. 4. _ Interest on capital is calculated at 8% of the capital balances. On 1 June 2019, Jozi increased her capital by R40 000 and Jay decreased his capital by R10 000. These changes were not taken into account. Jozi is entitled to a performance bonus equal to 3% of the total sales. Partners share remaining profits or losses in the ratio of their capital balances at the end of the year. Page 11 of 100

Downloaded from hlayiso.com ACTIVITY B2 (Statement of Comprehensive Income, Notes) 2.1 JJ STORES STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2020 Comprehensive Income Sales CAE Good QAk Geo Cost ofSales (age gcc) GS boo) Gross Profit 332 Soo Other Operating Income les gfe Commission Income 47 725 Qent Income CN 2 So. 86285) ho 7162S Provision Br Bad _debtc C3456 ~ 3436) So Gross Operating Income Total Operating Expenses Salaries and wages 45 500 Depreciation 18 300 Sundry expenses Af wo Trading Stock __defict _ C184 Sho- do SM) vase Paclting preter’ el CU tog = Sooo 19’ Ses wuter 4 elebnecty C U6 4+ 1S) 206 cee Insurance Ctl Ws -145S) see Operating Profit 329 123 Tntewst income Clo Bech (eo Sco Profit before interest expense b4Y 133 Interest Ex penSe C38 Foo) LZBe %a\ Net profit for the year Bu 123 2.2 CAPITAL JOZI JAY TOTAL Balance -beginning of year Additional capital Decrease of capital Balance - end of year CURRENT ACCOUNTS JOZI JAY TOTAL Profit per Statement of Retained income for the year Balance - beginning of year Balance - end of year Page 12 of 100

Downloaded from hlayiso.com 2.3 | Provide TWO reasons to justify why she feels this way. In each case provide relevant figures to support your comments. expressed by Jozi Propose TWO practical suggestions that the partnership can use to address the concern Activity B3: INCOME STATEMENT AND BALANCE SHEET NOTE TYALI TRADERS The following information relates to the financial year ended on 30 June 2019. REQUIRED 3.1 Complete the Income statement. 3.2 Prepare the Trade and other receivables note. INFORMATION: A. Extract from Pre-adjustment TRIAL balance on 30 June 2019 BALANCE ACCOUNT SECTION Vehicles 680 000 Accumulated depreciation on vehicles 150 000 Fixed deposit (at 9% p.a. at Nedbank) 160 000 Trading stock 302 500 Debtors control 68 880 Provision for bad debts 2010 Loan: Mtolo Bank 375 000 NOMINAL ACCOUNT SECTION Sales (including 75% mark-up) 1 737 750 Cost of sales 7 Rent income 81 792 Commission income 20 076 Discount received 6 850 Interest on fixed deposit 8 500 Salaries and wages 138 500 Consumable stores 11 900 Insurance 19 300 Sundry expense ? Bad debts 4120 Page 13 of 100

Downloaded from hlayiso.com Additional information and adjustments: (a) Goods returned by a debtor B. Jonson, R3 500 (cost price of R2 000),were placed back to the shelves. The transaction was not recorded. (b) Stocktaking revealed that stock, cost price R3 600, were missing and consumable stores on hand amounted to R2 900. (*) The bookkeeper omitted a discount of R150 from Jula Traders, a creditor. This was for early payment of the account. (d) Outstanding debts of R2 880 must be written off. (e) Provision for bad debts must be adjusted to 5% of debtors. (f) Insurance of R9 300 was fully recorded. The amount was paid for the period from 1 May 2019 up to 31 October 2019. (g) Rent income was increased by 6% on 1 December 2018. The rent forJune 2019 is still outstanding. (h) The bookkeeper recorded R60 000 as additional fixed deposit on1 February 2019. (i) Operating expenses amounted to 24% of the adjusted sales for theyear. (i) | Operating expenses amounted to 24% of the adjusted sales for theyear. (k) The loan statement is as follows: Balance on 01 July 2018 375 000 Repayment of loan (including interest) 161 250 Balance on 30 June 2019 257 250 (m) Depreciation for the year amounted to R71 680. Page 14 of 100

Downloaded from hlayiso.com ACTIVITY B3: ANSWER SHEET 3.1 TYALI TRADERS INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2019 Sales Cost of sales Gross profit Other operating income Renk Income Discount Received Comission Ancome Gross operating income Operating expense Depreciation 71 680 Nrading Steck Consumable gtores Sundry Ev pense Bad debts Tasafeance SalerieS ond wages ProShieg for Gad de&is ¢ Operating profit Interest Income Profit before interest expense Interest — Expense Net profit for the year Page 15 of 100

Downloaded from hlayiso.com 3.2 TRADE AND OTHER RECEIVABLES ACTIVITY B4 (Statement of Financial Position & Notes) The information relates to Golden Bakery, owned by partners Martin Gold and Mary Brown for the financial year ended 28 February 2019. REQUIRED 44 Prepare the following Notes to the Statement of Financial Position: 4.1.1 Current accounts (Total column is not required) 4.1.2 Trade and other payables 4.2 Complete the Statement of Financial Position as at 28 February 2019. INFORMATION A Extract from the Post-Adjustment Trial Balance on 28 February 2019: Capital: Gold 500 000 Capital: Brown 300 000 Current account: Gold (1/3/2018) 33 000 Current account: Brown (1/3/2018) (Dr) 15 400 Drawings: Gold 12 000 Drawings: Brown 10 000 Fixed (Tangible) assets at carrying value il Fixed deposit: Lama Bank (6% p.a) 225 000 Trading stock 146 900 Consumable stores on hand 3 870 Trade debtors 73 00 Trade creditors 65 000 Accrued Income / Income receivable* 10 490 Accrued expenses / Expenses payable” 3 100 Prepaid expenses 2 100 Income received in advance 8 250 Bank (Cr) 27 710 Cash float 3.500 Petty Cash 1500 Loan: Mama Bank (15% p.a.) 480 000 Creditors for salaries 45 000 SARS (PAYE) 22 500 Page 16 of 100

Downloaded from hlayiso.com B. Additional information 1. R75 000 of the fixed deposit will mature on 30 June 2019 2. R60 000 of the capital portion of the loan will be paid during the next financial year. 3. Brown took trading stock for personal use. The price on the goods reflected R6 900. The mark-up is 50% on cost. No entry was made in respect of this. 4. Brown increased his capital by R80 000 halfway during the financial year. This has been recorded properly. 5. The partnership agreement provides for: e — Gold receives a salary of R11 000 per month and an annual bonus of R12 000. e — Brown’s annual salary is R108 000. e Partners are entitled to 10% interest on their capital investment. e — Remaining profit and losses are shared between Gold and Brown in the ratio 3:2 6. The net profit for the year after all the adjustments had been processed was R400 000. ACTIVITY B4 (Statement of Financial Position & Notes) 4.1.1. CURRENT ACCOUNTS GOLD BROWN Profit per Statement of Comprehensive Income Salaries 108 000 Drawings : (12 000) Retained income for the year Balance- beginning of year 33 000 Balance - end of year 6.1.2 TRADE AND OTHER PAYABLES Trade Creditors Page 17 of 100

4.2 Downloaded from hlayiso.com GOLDEN BAKERY STATEMENT OF FINANCIAL POSITION AT 28 FEBRUARY 2019 ASSETS Non-current assets Fixed/Tangible assets Current assets Inventory (146 900 Total assets EQUITY AND LIABILITIES Capital & Reserves / Owner's equity Non-current liabilities Current liabilities Total equity and liabilities 1 842 560 Page 18 of 100

Downloaded from hlayiso.com ACTIVITY B5 (FINANCIAL STATEMENTS &NOTES The information relates to PJ Traders (partners Pollard and Jantjies). Their financial year ended 28 February 2020. REQUIRED 5.1 Prepare the following notes to the Statement of Financial Position on 28 February 2020: 5.1.1 Capital 5.1.2 Current accounts 5.1.3 Trade and other payables 5.2 Complete the EQUITY AND LIABILITIES section of Statement of Financial Position on 28 February 2020. INFORMATION A Balances from the ledger on 28 February 2020 Capital: Pollard 600 000 Capital: Jantjies 300 000 Current account: Pollard (1/3/2019) (Cr) 22500 Current account: Jantjies (1/3/2019) (Dr) 57 600 Drawings: Pollard 72.000 Drawings: Jantjies 96 000 Loan: SB Bank 402 500 Creditors control 62 750 SARS (PAYE) 13 500 Bank (Cr) 16 600 Accrued expenses 12 700 Income received in advance 4600 Accrued income 17 000 Prepaid expenses 16 300 B Changes to capital contributions dc The following transactions were correctly recorded: e Partner Pollard deposited R250 000 on 1 November 2019 e Partner Jantjies withdrew R150 000 on 1 December 2019 2. The following transaction was NOT recorded: e Partner Pollard withdrew R50 000 cash on 28 February 2020. c Provisions of the partnership agreement A Interest on capital: e Pollard is entitled to 12% p.a. on his capital e Jantjies is entitled to R49 500 in total id: Salary allowance: e Jantjies will receive R144 000 for the year e Pollard's monthly salary is R2 000 less than Jantjies 3. Annual bonus: e Pollard receives an annual bonus of R15 000 4. Share in remaining profits/losses The remaining profit of R16 000 must be shared between Pollard and Jantjies in the ratio 3 : 2 Page 19 of 100

Downloaded from hlayiso.com ACTIVITY B5 _— (Financial Statements & Notes) 5.1.1. CAPITAL POLLARD JANTJIES Balance -beginning of year Additional capital Withdrawal of capital Balance - end of year 5.1.2 CURRENT ACCOUNTS POLLARD JANTJIES Net profit for the year Salaries 144 000 Interest on capital 49 500 Bonus 15 000 Primary distribution 193 500 Share in remaining profit Drawings (72 000) (96 000) Retained income for the year Balance- beginning of year Balance - end of year 147 100 46 300 5.1.3 TRADE AND OTHER PAYABLES Trade Creditors 62 750 Page 20 of 100

Downloaded from hlayiso.com 5.2 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 EQUITY AND LIABILITIES Owner's equity Non-current liabilities Current liabilities TOTAL EQUITY AND LIABILITIES ACTIVITY B6: PARTNERSHIPS 6.1 6.1.1 6.1.2 6.1.3 6.14 6.2 6.2.1 6.2.2 CONCEPTS Choose the correct term from the list to complete each of the followingstatements. Write only the term next to the question number (8.1.1-8.1.4) in the ANSWER BOOK. Current liabilities; income received in advance; balance sheet; cash and cash equivalents; income statement; prepaid expense The statement reflecting the financial results of the company is called a/an.... The amount of rent paid by the tenant for the next financial year will be recorded as... The statement reflecting the financial position of the company is called a/an ... A fixed deposit that matures in the next financial year will be recorded under ... in the financial statements. SS BROTHERS S. Ntubeni and S. Kolisi are partners in this business. The financial year endedon 30 September 2019. REQUIRED: Complete the Current Account note for the financial year ended. Complete the Equity and Liabilities section of the Balance sheet on 30 September 2020. Page 21 of 100

| | | j on Downloaded from hlayiso.com A. _ Extract from accounting records on 30 September 2020: Capital: Ntubeni 350 000 Capital: Kolisi 450 000 Current account: Ntubeni (1 October 2019) (Dr) 30 000 Current account: Kolisi (1 October 2019) (Cr) 10 500 Trading stock 132 600 Loan: BANI Bank ? Fixed deposit: Easy Bank 180 000 Creditors control 60 500 Accrued expenses 8000 Accrued income 15 000 Prepaid expenses 22 000 Income received in advance 7500 Cash float 4500 Bank (Cr) 35 500 Petty cash 1000 Drawings: Ntubeni 345 000 Drawings: Kolisi 375 000 Profit and loss (Net profit) 750 000 On 34 March 2020 Kolisi increased his capital contribution with R50 000. This was recorded. The partnership agreement states the following: e Interest on capital of 12 % p.a. e Kolisi received an annual salary of R240 000. e Ntubeni received a salary of R5 000 per month more than Kolisi due toextra management responsibilities. e Kolisi received a bonus of 10% of his annual salary. e Remaining profits are shared equally between the partners. R50 000 will be paid on the capital amount of the loan in the next financial year. Total assets for the year amounted to R1 170 000. Activity B6: Partnerships 6.1 Concepts 6.1.4 6.1.2 6.1.3 6.1.4 Page 22 of 100

Downloaded from hlayiso.com 6.2.1 CURRENT ACCOUNTS NOTE OF PARTNERS NTUBENI KOLISI Partners’ salaries Interest on capital 42 000 Partners’ bonuses Drawings (345 000) (375 000) Balance at the beginning (30 000) 410 500 Balance at the end Page 23 of 100

Downloaded from hlayiso.com 6.2.2 BALANCE SHEET ON 30 SEPTEMBER 2020 EQUITY AND LIABILITIES Owners’ equity Non-current liabilities Current liabilities TOTAL EQUITY AND LIABILITIES

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ANALYSIS AND INTERPRETATION Cc: THINGS TO REMEMBER e Definition of concepts. e Users of financial Statement. (i) Explaining categories of the financial indicators. > > > > (ii) Guidelines that need to be followed when commenting on a ratio. > > Formulae: Gross profit on sales = gross profit X 100 Gross profit on cost of sales = gross profit X 100 Operating profit on sales = operating profit +X 100 Operating expenses on sales = operating expenses X 100 Net profit on sales = Net profit X 100 Solvency Ratio = Total Assets: Total liabilities Debt — Equity Ratio = NCL: Partners equity Net Assets = Total Assets - Total Liabilities Current Ratio = Current Assets: Current Liabilities Acid — test Ratio = Current Assets — Inventories: Current Liabilities Profitability ratios - can be divided into Margins: Gross profit on Sales, gross profit on cost of sales, Profit Returns: Net Profit on sales , Operating Profit on sales Efficiency of the business — how does the business has ability to control its expenses: operating profit on sales and operating expense on sales. Solvency of business — Looking at how firm acquisition has been funded - own or borrowed. Liquidity - Definition - Explaining difference between current ratio and acid - test ratio. State whether ratio increased or decreased compared to the previous year. State whether the ratio is better or worse than the norm — provide reason for increase or decrease. Make it short and to the point - reach a conclusion on the firm is performance. Operating profit on sales and net profit on sales are similar — checking on controlling expenses only difference is interest taken into account on net profit on sales. Operating expenses on sales if decreases show that business is more efficient in controlling its expenses. Sales 7 Cost of sales 1 Sales 1 Sales 1 Sales 1 Page 25 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRAVE 11 221 OIL ATLA ACTIVITY C1 (Financial indicators) (5 marks; 5 minutes) Name the financial indicator for each formula below. Write your answer in the Workbook. following: Gross profit on sales Gross profit on cost of sales Net profit on sales Operating profits on sales Operating expenses on sales Solvency ratio Current ratio Acid test ratio CO So) Ol Oe Information: Extract of Income Statement for year ended 28 February 2020: Turnover (sales) 495 000 Cost of sales 360 000 Operating expenses 110 500 Interest on loans 18 000 Net profit for year 37 500 11 Total assets : Total liabilities 1.2 Gross profit x 100 Cost of Sales 1 1.3 Net profit x 100 Average Owner's Equity 1 14 Operating expenses x 100 Net profit 1 15 (Trade and other receivables + Cash & cash equivalents) : Current liabilities 5 ACTIVITY C1 (Financial indicators) 14 1.2 1.3 1.4 1.5 ACTIVITY C 2 The following information was extracted from the accounting records of Khumalo Traders, distributors of school stationery. The undertaking is owned by two brothers, Sipho and Sizwe. Calculate and comment on each of the Page 26 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD Extract of Balance Sheet as at 28 February 2020 Note Tangible assets 197 000 Financial assets 30 000 Current assets 87 500 Inventories 1 60 000 Trade and other receivables 2 25 000 Cash and cash equivalents 2500 TOTAL ASSETS 314 500 Owners’ Equity 144 480 Capital 125 000 Current accounts 19 480 Non-current liabilities 110 000 Current liabilities 60 020 Trade and other payables 3 60 020 TOTAL EQUITY AND LIABILITIES 314 500 Notes to Balance Sheet: 2020 4. INVENTORIES Trading stock 58 000 Consumable stores on hand 2.000 2. TRADE AND OTHER RECEIVABLES Trade debtors 22 000 Provision for Bad Debts (1 100) Income accrued 1300 Prepaid expenses 2 800 3. TRADE AND OTHER PAYABLES Trade creditors 42 000 Expenses accrued 2620 Income received in advance 15 500 Calculations in respect of 2019: INDICATOR 2019 1. Gross profit on sales 33.3% 2. Gross profit on cost of sales 50% 3. Net profit on sales 8.9% 4. Operating profit on sales 13% 5. Operating expenses on sales 18% 6. Solvency ratio 2.1374 7. Current ratio 2.06:1 8. Acid test ratio 1.12:1 Page 27 of 100

Downloaded from hlayiso.com NZIV AULUUIV IVS unaue ih ever ures Any Answer sheet : ACTIVITY C2 1. Gross Profit on Sales: Gross Profit on Cost of Sales: Net Profit on Sales: Operating Profit on Sales: Operating Expenses on Sales: Solvency Ratio: Current Ratio: Acid Test Ratio: Page 28 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY C3 NT Traders is a partnership business that is owned by N Naser and T Turner. The financial year ends on the 28 February 2020. Required: Answer the following questions. Show workings so that part marks can be awarded. Where necessary, show your answers to one decimal place. 3.1 Liquidity 3.1.1Calculate the current ratio for 2020 3.1.2 Calculate the acid test ratio for 2020. 3.1.3 Comment briefly on these ratios for 2020.The current ratio for 2019 was 2:1 and the acid test ratio for 2019 was 0,3:1 3.2 Solvency: 3.2.1 Calculate the solvency ratio on 28 February 2020. 3.2.2 Comment on the solvency ratio. The solvency ratio for 2019 was 3.6 : 4 Information: Extract from the Income Statement for the year ending 28 February 2020 Sales [40% was on credit] 1.800 000 Cost of sales 1080 000 Net profit 280 000 Depreciation on equipment 37 200 Depreciation on vehicles 98 000 Information from the Balance Sheet as at: 28 February 2020 28 February 2019 Fixed assets [carrying value] 1929 500 1172 000 Current assets 440 000 420 000 Inventories [all trading stock] 171 800 351 200 Trade and other receivables 140 000 60 000 Cash and cash equivalents 128 200 8 800 Partners’ equity 2.037 500 1 150 000 Capital: Naseer 700 000 300 000 Capital: Turner 800 000 600 000 Current a/c: Naseer 200 000 80 000 Current a/c: Turner 337 500 170 000 Mortgage loan: JK Bank [15% p.a] 172 000 232 000 Current liabilities 160 000 210 000 Trade and other payables 160 000 210 000 Page 29 of 100

Downloaded from hlayiso.com AZIV ALLUUNING UMAUc 11 461 O1or ANIEAY ACTIVITY C4 Answer the questions based on the information taken from the financial statements of Candy- Bar Treats, a partnership owned by Candy Sweets and Barone Spicy, their coffee shop in the CBD is known for the fresh food and fast service. Information 2020 2019 Capital : C Sweets 350 000 350 000 Capital : B Spicy 500 000 500 000 Current Accounts C.Sweets 2 500(dr) 20 620 Current Account _B. Spicy 1800 3 100 Trading Inventory 35 670 27 700 Trade Creditors( 40% of all purchases are on credit) 34 240 20 480 Trade Debtors( 30% of all sales are on credit) 55 000 50 000 Net profit for the year 450 000 Final Distribution C Sweets 150 000 300 000 Sales 2.016 000 Cost of sales 1.440 000 Required Calculate the following for 2020, Comment on your findings. 4.1.1 Rate of Stock Turnover (2019: 44.9 times) 4.1.2 Stock holding period in days (2019: 40 days) 4.1.3 Average Debtors collection in days (2019: 40 days) 4.1.4 Average Creditors Payment period in days (2019: 33.7 days) 4.2. Calculate B Spicy’s earnings on his investment 4.3 Calculate S Sweets earnings as a % on her investment 4.4 Calculate the Return on Partner's Equity ANSWER SHEET B4 ACTIVITY C5 You are provided with information obtained from the financial statements of MS Traders. The business is owned by partners, Megan and Shenai. Required: Study the information and answer the questions that follow. Information: Extract from the Income Statement for the year ended: 28 February 2020 28 February 2019 Sales 2 400 000 1.900 000 Cost of sales 1280 000 1 160 000 Page 30 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD Extract from the Balance Sheet as at: 28 February 2020 28 February 2019 Fixed assets (carrying value) 1160 000 1.020 000 Investments {6% p.a.] 400 000 100 000 Current assets 380 000 320 000 Total Assets 1940 000 1 440 000 Owners’ Equity 1.400 000 990 000 Capital: Megan 840.000 620 000 Capital: Shenai 630 000 358 000 Current a/c: Megan 80 000{dr] 16 000 [cr] Current a/c: Shenai 50 000{cr] 4 000 [dr] Non-current liabilities [12% p.a.] 300 000 360 000 Current liabilities 200 000 90 000 Total Equity and Liabilities 1940 000 1.440 000 Financial indicators calculated on: 28 February 2020 28 February 2019 Gross profit on cost of sales 87.5% 64% Operating expenses on sales 20% 22% Operating profit on sales 21.8% 19.5% Net profit on sales ? 17.2% Current ratio ? 2.5:1 Acid-test ratio 1.21 0.8:1 Stock turnover rate 6 times 4.5 times Stock holding period 60 days 102 days Debtors collection period 30 days 45 days Creditors payment period 60 days 60 days Debt/Equity ratio i 0.35:1 Total assets to total liabilities 3.9:1 3:4 Return on Partner's Equity 32.8% 30.5% Questions: Percentage net profit on sales Current ratio Debt/Equity ratio Return on Partners’ Equity sa oeee feet, eee indicators. 5.1.1. Calculate the following financial indicators on 28 February 2020: 5.1.2 Use the acid test ratio to calculate the amount of trading stock on hand on 28 February 2020. 5.1.3. Comment on the liquidity position of the business on 28 February 2020. Refer to THREE financial Page 31 of 100

Downloaded from hlayiso.com ANSWER SHEET C5 ACTIVITY C 6 Required: Study the information extracted from the books of Happy Traders, a partnership business, with partners: H. Harry and P.Pather and answer the questions that follow. Information: The Net Profit from the Income Statement was R83 450 Extract of other balances/information 28 February 2020 28 February 2019 Capital: Harry 175 000 275 000 Capital: Pather 150 000 250 000 Current account: Harry 4000 (cr) 8 000 (dr) Current account: Pather 6 000 (cr) 4 000 (cr) Long-term loan (14% p.a.) 260 000 300 000 Current assets (including inventory) 65 000 70 000 Current liabilities 47 000 42 000 Trading stock 28 000 24 000 Current ratio 1,38:1 1,67:1 Acid test ratio : 1.18:1 Debt to equity ratio ? 0.37:1 Return on Partners’ Equity ? 25% Questions: 6.1 Calculate the following for 2020 6.1.1 Acid-test ratio (4) 6.1.2 Debt/equity ratio 6.1.3 Return on Partners’ Equity (6) 6.2 Does the business have a liquidity problem? Quote two financial indicators (with figures) to substantiate your answer. 6.3 Should the Partners’ be satisfied with their Returns? Explain 6.4 The business is considering expanding and opening another branch. To finance this, the partners are considering taking out a further loan. Do you consider this to be a wise decision? Support your answer by referring to a relevant financial indicator. ANSWER SHEET C6 Page 32 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY C7 You are provided with information extracted from the accounting records of Little Pea Stores for the year ended 31 August 2020. The business is owned by two partners: Roo and Chico. Required: 7.1 Calculate the following for 2020. 7.1.1 Acid test ratio (4) 7.1.2 Gross profit on cost of sales (4) 7.1.3 Debt/equity ratio (3) 7.2 Should the partners be satisfied with the control of the operating expenses? Briefly explain, quoting relevant calculations to support your answer. (5) 7.3 Roo and Chico are uncertain about the liquidity position of the business. They ask you for your opinion. Quote three relevant financial indicators and explain to them the liquidity position of the business. (8) 7.4 The business wants to expand in the next financial year and needs additional capital. The partners have decided to take out additional loan of R400 000 instead of contributing more capital. Explain, quoting two financial indicators to justify their decision. (6) INFORMATION: 1. Extract from the Income statement for the year ended 31 August 2020. Sales R3 296 000 Cost of sales R2 060 000 2. Extract from the Appropriation account prepared on 31 August 2020. Roo Chico Interest on capital 60 000 86 250 Salaries 150 000 132 000 Share of profits 34 600 69 200 244 600 287 450 3. Extract of the balance sheets as at 31 August. 2020 2019 Fixed assets 760 000 810.000 Investments: Fixed deposit at 6% p.a. 250 000 200.000 Current assets 378 000 286 000 Total assets 1 388 200 1 296 000 Partners equity 988 200 896 000 Capital account: Roo 500 000 300 000 Capital account: Chico 500 000 600 000 Current account: Roo Dr 42000 Cr 4000 Current account: Chico Cr 30000 Dr 8000 Non-current liabilities at 10% p.a. 220 000 250 000 Current liabilities 180 000 150 000 Total equity and liabilities 1388 200 1 296 000 Trading stock ( included in current assets) 176 000 156 000 Page 33 of 100

Downloaded from hlayiso.com 4. Financial indicators 2020 2019 Mark- up percentage achieved 60% 63% Operating expenses on sales 21% 18% Net profit on sales 16,1% 19,2% Current ratio 21:4 191 Acid test ratio 2 0,9: 1 Debt equity ratio a 0,3: 1 Return on total capital employed 47,1% 458% ANSWER SHEET C7 ACTIVITY C8 (Analysis & interpretation) (25, marks; 20 minutes) Jody and Tim are partners in a partnership, JT Sports Outfitters. They sell sports gear to local schools. The business aims at achieving a mark-up of 50% on cost. The financial indicators below were calculated from the financial statements for the past two years ended 30 September. REQUIRED Study the extract from the financial statements and financial indicators and then answer the questions in your Workbook. INFORMATION A. Extract from the Statement of Financial Position with comparative figures: 2020 2019 Non-current liabilities (13%p.a) 220 000 180 000 Trading stock 1270 000 650 000 Trade and other receivables (all debtors) 240 000 50.000 Cash and Cash equivalents 30 000 25 000 Trade and other payables (all creditors) 380 000 150 000 B. Financial indicators 2020 2019 % Return on average equity (PartnerJody) 14% 13% % Return on average equity (PartnerTim) 8% 6% Current ratio 4:4 5:4 Acid-test ratio ? 0,5:1 Creditors average payment period 30 days 30 days Debtors average collection period 90 days 100 days Return on total capital employed 28% 32% Debt/Equity ratio 05:1 03:1 Interest rate on loans 13% 12% Gross profit on cost of sales 40% 42% Gross profit on sales 29% 39% Net profit on sales 4% 7% Operating expenses on sales 32% 18% Operating profit on sales 9% 13% Page 34 of 100

Downloaded from hlayiso.com KZN ACCOUNTING QUESTIONS: In your answers, quote the actual ratios / Percentages from the above list to support your answer. GRADE 11 2021 STEP AHEAD 8.1 Calculate the acid test ratio for 2020. (3) 8.2 Comment on the liquidity of the partnership. Recommend THREE ways in which the liquidity of (9) the partnership can be improved. 8.3 If you were partner Tim, would you be satisfied with your return earned over the past two years? (4) Motivate your answer. 84 On which areas of the Statement of Comprehensive Income should the owners concentrate in order to improve the profitability of the business? List TWO points and motivate your answer. (4) 8.5 The partners are considering the expansion of the operations of the business. In order to do this, they are considering taking out a large loan at an interest rate of 13% or admitting a new partner into the business. Which of these two methods of financing do you advise for this business? Explain in detail. (5) ACTIVITY C8 ANSWER SHEET ACTIVITY C9 (Analysis &Interpretation) (40 marks, 30 minutes) The information relates to Tamthan Electronics, owned by partners Tammy and Thando. Their financial year ends annualy on 28 February. REQUIRED Study the information and answer the questions which follow. In support of your answers you have to quote figures and/or the actual financial indicator(s) (ratios/percentages) where appropriate. (40) INFORMATION Extracts from the ledger on 28 February 2018. CAPITAL: THANDO 2017 | Balance bid 900 000 Mar. 1 Aug.31 | Bank 800 000 1700 000 CURRENT ACCOUNT: THANDO 2018 2017 Feb. | Drawings: Thando 77000 | Mar1 | Balance bid 40 000 28 Balance 90 000 | 2078 | | salary: Thando 70 000 old Feb.28 | 9&2: Interest on Capital 48 000 Appropriation acc 9 000 167 000 167 000 2018 Mar. 1 Balance bid 90 000 Page 35 of 100

Downloaded from hlayiso.com Extract from the Statement of Financial Position on 28 Februa 2018 2017 Fixed assets 3 052 000 2270 000 Investments 150 000 180 000 Current assets 850 000 720 000 TOTAL ASSETS 4052 000 3 170 000 Owners’ equity 2 732.000 2 330 000 Non-current liabilities (14% p.a.) 1.000 000 600 000 Current liabilities 320 000 240 000 TOTAL EQUITY & LIABILITIES 4 052 000 3170 000 Amounts obtained from the financial statements 2018 2017 Sales (40% on credit) R3 100 000 R4 200 000 Cost of sales 1 820 000 2 640 000 Operating profit 365 800 600 600 Net profit 269 000 520 000 Capital - Tammy 1.000 000 1 400 000 Capital - Thando 1.700 000 900 000 Current Account - Tammy (58 000) (10 000) Current Account - Thando 90 000 40 000 Trading stock 180 000 440 000 Trade debtors 410 000 230 000 Trade creditors 245 000 184 000 Financial indicators calculated from the financial statements 2018 2017 Operating profit as a % of sales 11,8% 14,3% Net profit as a % of sales 86% 12,2% Current ratio 2,6:1 3,0:1 Acid-test ratio 2,1:4 1231 Stock turnover rate 5,9 7,0 Debtors' average collection period : 54 days Creditors average payment period 23 days 25 days Solvency ratio ? 3,88:1 Debt/Equity ratio : 0,26:1 Return on total capital employed 10,1% 11,2% % return on average equity 12,9% 17,1% % return earned by Tammy 14,7% 16,6% % return earned by Thando ? 17,3% QUESTIONS: 9.4 Solvency: 9.1.1 Calculate the solvency ratio for 2018. (3) 9.1.2 Comment on this ratio. Is this business likely to experience a solvency problem? Briefly explain. 9.2 Gearing and profitability: 9.2.1 Calculate the debt/equity ratio for 2018. (3) (3) 9.2.2 Thando is not happy with the debt/equity ratio and feels that it is negatively affecting the performance of the business. State TWO points (financial indicators) to support his opinion. (4) Page 36 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 9.3 Returns and equity: 9.3.1 Calculate Thando’s % return on average equity. (4) 9.3.2 Thando is of the opinion that his return is unsatisfactory and that Tammy is taking advantage of her senior position in the partnership. State TWO points to support Thando’s opinion. (6) 9.4 Liquidity: 9.4.1 Calculate the average debtors’ collection period for 2018. (5) 9.4.2 Customers are complaining that the business seldom stocks the products they would like to buy. Explain, stating TWO points. Quote figures and financial indicators to proof the customers’ complaints. (4) 9.4.3 The partners disagree about the liquidity situation. + Tammy is not worried about the liquidity situation for the immediate future, Thando feels that there is danger signs for the long-term sustainability of the business as far as liquidity and cash flow are concerned. State TWO points to support Tammy's opinion and TWO points to support Thando’s opinion. (8) ANSWER SHEET C9 (Analysis & Interpretation) Page 37 of 100

Downloaded from hlayiso.com D: BUDGETING THINGS TO REMEMBER What is the Cash Budget e Itisa financial plan indicating projected receipts and payments to ensure that there is sufficient cash to meet future payments. A cash budget deals only with cash transactions, namely the receipt and payment of cash. Transactions that are not cash related will not be considered in the preparation of cash budget. ° These transactions include: Depreciation, Stock taken by the owner for personal use, Discount allowed and received, Bad debts, Profit/ loss on sale of fixed assets. The structure of the Cash Budget Differences between the Receipts and Payments ¢ Calculation of sales using ratios as well as percentage. Cash Sales are recorded under Receipts in the cash budget and Credit sales are used to calculate the Debtors collection schedule and Cost of Sales. Know how to calculate cash Surplus and Cash Deficit The closing cash balance of the current month will be the opening balance of the following month. Know how to do the Arithmetic calculations. e Preparation of the Debtors Collection Schedule ¢ Credit sales (Actual and Budgeted) will be analysed in the collection procedure and all information in this respect is processed into a Debtors Collection Schedule. Debtors collection schedule consist of credit sales and budget period. The calculation of cash sales and credit sales from total sales using the given % or ratio. Know how to apply the Debtors Collection Policy on credit sales and to take note of Discounts. The totals of the Debtors collection Schedule must be transferred to the Cash Budget under Receipts as Collection from Debtors. Preparation of the Creditors Payments Schedule e Inorder to improve cash flow, the business may purchase stock on credit. On fulfilling all business credit application requirements, the business can negotiate relevant payment terms with its creditors. Such terms will be followed in making payments to creditors during budget period. This information may be presented in the form of Creditors Payment Schedule. The calculation of credit and cash purchases from total purchases using % or ratio e Cash purchases is recorded in the cash budget and credit purchases in the creditors payment schedule. If total purchases is not given use the cost of sales. If the cost of sales is not given, calculate it using the mark-up %. e Projected Income Statement e The main aim of the business is to make a Profit. Regular and thorough planning is essential. Budgeting is an integral part of this process. Budgeting is forecasting for the future. The current budget is used to plan for the future. Likewise, the enterprise has to prepare a Projected Income Statement for the future from the | current income statement e The key here is to remember that we are trying to determine the future profits, and thus the Projected income Statement will include o Allincome that is expected to be earned during the budget period, whether received or not o All expenses that are expected to be incurred during the budget period, whether paid or not. Page 38 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD What is the main aim of the Projected Income Statement? Projected income Statement is an essential tool used to monitor and plan the profitability of the business enterprise. By analysing it; management can ascertain whether: e The business will be profitable over the budget period e The projected figures are satisfactory e Expenses need to be cut. e The business can afford to hire additional staff, run an advertising campaign and so on. If it predicts a loss in a specific month, the management can make suitable arrangements to try to prevent this from materialising. Format of the Projected Income Statement The Projected income Statement has the same format as the “normal Income Statement, except, that here the figures are based on future projections and not past results, also often several columns are required since the budget period may span over several months or even years. How to Prepare the monthly Projected Income Statement 1. Take as a starting point the actual Income Statement of the past year. 2. Divide the figures by 12 to calculate the monthly figures 3. The following factors, amongst others, should be taken into account: Increase in expenses due to inflation, e.g. wages, fuel increases Increase demand in particular months (season) due to events such as religious holidays, sports events, and international events etc. Expected decline in sales due to increased competition. e Expected gross profit, i.e. mark-up on cost NB. Some of the CALCULATIONS TO KNOW Mark up %= gross profit / cost of sales x100 Surplus / deficit= Receipts - Payments. Closing balance= Opening balance +/- Surplus/ deficit % change= difference / original amount x100 Increased amount by % = Original amount x 100+ % increase 100 e Decreased amount by %= = Original amount x 100- % decrease 100 «Amount before increase= Increased amount x100 100 + % increase e Loan or Fixed deposit = Interest on loan / fixed deposit x 100 x 12 eoeooee % e Interest rate on loan / fixed deposit= interest amount x 12 x 100 Loan / Fixed deposit Compare actual figures to budgeted figures to ensure that the budget figures are realistic and also comment on the control of income and expenses. Ways to improve debtors collections Remind them by sending statements/ phone calls/sms/email Offer discounts on early payments Charge interest on late payments Refuse to sell on credit to debtors who are not compliant Page 39 of 100

Downloaded from hlayiso.com Advantages of buying the business premises rather than renting e Will not have to pay rent in future e Business will acquire a fixed asset, which increases the value of a business e Extra space will be rented out to receive additional income Disadvantages of buying than renting Rates on building must be paid Additional maintenance cost will be incurred Not easy to relocate Costs and time involved in selling the property Ways to Improve cash balances in future Encourage debtors to pay faster Negotiate with creditors for longer payment terms Raise more capital / issue more shares Move to cheaper premises Charge clients for deliveries Take out a loan ( to reduce overdraft and interest) Decrease mark up to improve sales Look for alternative income e.g. commission oeoeoeeeee BUDGETING ACTIVITY D1 Bz CS Remember: Cash budgets deal with expected inflow (Receipts) and outflow (Payments) of cash. Receipts and payments are of Revenue and Capital nature The following will not be included in the cash budget : = Bad debts = Loss on sale of an asset = Discount received = Profit on sale of an asset = Discount allowed = Drawings of trading stock = Depreciation Let’s do the activity together The following information was extracted from the records of Phindile Traders. Use the information provided below to draw up the: = Debtors Collection schedule for the three months ending 30 September 2019 = Cash budget for the three month period ending 30 September 2019 (a) Actual information Budgeted information May June July August September Cash sales 20 000 26 000 34 000 37 000 40 000 Credit sales 24 000 29 000 28 000 30.000 24 000 Wages 10 000 10 000 10 000 11.000 11.000 Rent income 5.000 5000 5.000 5 500 5 500 Cash purchases 17 000 16 000 11 000 10 000 14 000 Credit purchases 20.000 26 000 25 000 28 000 26 000 Other expenses 17 000 17 000 17 000 19 000 19 000 (b) New computer will be bought on 01 August by cheque, R6 000. Page 40 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD (c) Additional information. = Phindile Traders had a favourable balance of R28 000 on 01 July 2019 = Debtors normally pay their accounts as follows : © 60% one month after the date of sale o 40% two months after the date of sale = Creditors are paid in full one month after purchase = Other expenses are paid in the month they occur. ACTIVITY D2 ANSWER SHEET DEBTORS’ COLLECTION SCHEDULE - MALEBO TRADERS Debtors collection Month Credit sales Term July August September Expected receipts CASH BUDGET OF MALEBO TRADERS -— 01JULY 2013 - 30 SEPTEMBER 2019 RECEIPTS July August September Cash sales Receipts from debtors PAYMENTS Cash purchases Page 41 of 100

Downloaded from hlayiso.com ACTIVITY D2 - DEBTORS COLLECTION SCHEDULE AND CASH BUDGET REQUIRED You are provided with the information from Maduna Traders. You are required to complete the following for January and February 2019: "Debtors Collection schedule "Cash budget for January and February INFORMATION A. EXTRACT FROM THE LIST OF BALANCES ON 31 DECEMBER 2018 Fixed Deposit (8 % p.a.) 24 000 Loan: Future Bank (14 % p.a.) 36 000 B. ACTUAL AND BUDGETED FIGURES Actual : Budgeted November December January February Credit sales 45 000 48 000 60 000 54 000 Cash sales 50 000 55 000 40 000 36 000 Credit purchases 22 000 23 000 30 000 25 000 C. Transactions 1.It is expected that the amounts owed by debtors will be collected as follows: = 30% in the same month in which the transaction took place = 50% in the month after the sales take place = 15% in the second month after the sales took place = 5% is to be written off in the third month after the sales take place 2. The Fixed deposit matures on the 31st of January 2019. Interest on Fixed Deposit is received at the end of each month. 3. The business will sell the old equipment on 31 January 2019 for R3 000 cash. New equipment will be purchased on credit for R34 000 in February .The supplier will require a deposit of R4 000 and the balance will be paid over six months commencing in March 2019. 4. Depreciation will increase from R6 700 to R7 000 from January 2019. 5. Credit purchases are paid in full in the month following the purchases transaction Month. A discount of 5% is received for this payment 6. The loan from Mayibuye Bank was made on 01 November .Half of the loan will be repaid on 31 January 2019 .Interest on loan must be paid monthly. 7. The business employs three shop assistants at a salary of R4 000 each per month. On 31 January one of the assistants will leave the business. The other two assistants will receive the increase R1 000 each per month with effect from 1 February. 8. Part of building is let at R2 500 per month .The rent received will increase by 15% on 1 February. 9. Maduna Traders has an unfavourable bank balance of R6 200 Note! The interest on Fixed deposit and Loan Account is not capitalised. Page 42 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY D2 ANSWER SHEET CASH BUDGET OF MADUNA TRADERS - 01 January - 28 February 2019 RECEIPTS January February Cash sales Receipts from debtors PAYMENTS Cash purchases ACTIVITY D3- CASH BUDGET AND PROJECTED INCOME STATEMENT The following transactions were taken from the records of XMan Stores for the period ended 30 June 2019 Complete the table in the answer book by filling in the amounts only in the relevant column(s). Example: The telephone account for June 2019, R2 130 was paid by cheque 3.1.1 3.1.2 3.1.3 3.1.4 Amount in the Cash Budget Amount in the Projected Income No. for June 2019 Statement for June 2019 RECEIPT PAYMENT INCOME EXPENSE Example R2 130 R2 130 The expected cash sales for June 2019 were estimated to be R35 200. The profit mark-up is 60% on cost. Total depreciation on fixed assets for the financial year ended 30 June 2019 amounted to R17 040. Cash receipts from debtors for June 2019 are expected to be R62 200. Discounts of R2 150 will be allowed for early payments received An instalment of R8 460 on the loan is expected to be paid on 25 June 2019. R460 of this amount is the interest on loan. Page 43 of 100

Downloaded from hlayiso.com 3.2. CASH BUDGET RCN Transport owned by Khetha Mthethwa is a small business that offers a delivery service. Their financial year ends on 30 September each year. REQUIRED: 3.2.1 Complete the Debtors Collection schedule for October 2019 and November 2019. 3.2.2 On31 October 2019, the following figures were extracted from the records of the business. Explain what you would mention to Sonny about each of the items listed. Give ONE point of advice in each case. OCTOBER 2019 BUDGETED ACTUAL (R) (R) Maintenance of vehicles 24 500 21 380 Collection from debtors 147171 115 620 Telephone 2 300 4 860 3.2.3 Complete the Cash Budget for October and November 2019. INFORMATION: A partially completed Cash Budget for October and November 2019. November October 2019 2019 CASH RECEIPTS Collection from debtors Fee income for services rendered 62.000 Rent income 8 200 Commission income 4 650 Fixed deposit 10 000 Interest on fixed deposit 375 TOTAL RECEIPTS CASH PAYMENTS Fuel and oil 32 600 Maintenance of vehicles 24 500 Salaries Drawings Telephone 2300 Sundry expenses 3120 Interest on loan Purchase of additional vehicle TOTAL PAYMENTS SUPLUS/SHORTFALL 134 126 Opening Balance 22 104 Balance at the end of the month Services rendered to customers on credit is as follows: Debtors normally pay according to the following pattern: 2,5% discount. 40% | pay their accounts during the transaction month to take advantage of the 55% pay in the month following the transaction month. The balance is usually written off as bad debts after the second month. Page 44 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD D ee ee The rent income will be increased by 9%, and fuel and oil is expected to go up by 15 cents to the Rand, with effect from 1 November 2019. A fixed deposit is expected to mature on 1 November 2019. Interest on investment is earned at 9% p.a. Interest on the loan at 11% p.a. is payable monthly. The loan balance on 1 October 2019 was R300 000. Salaries are paid to the five drivers employed by the firm. All drivers are expected to get a 6% inflationary increase during November 2019. The business plans to buy an additional vehicle during November 2019. The total cost of the vehicle is R256 000 inclusive of finance charges. A deposit of 10% is payable. The balance will be settled over 60 months. The deposit and the first monthly instalment will be paid during November 2019. Commission income is a fixed percentage of the cash fee income for services rendered The owner draws R500 cash and takes R150 worth of consumable stores per month for his personal use Sundry expenses is expected to increase by 2,5% each month All other items on the budget are expected to remain the same over the budget period. ACTIVITY D3 - ANSWER SHEET QUESTION 1: CASH BUDGET AND PROJECTED INCOME STATEMENT 3.1 3.2.1 Amount in the Cash Amount in the Projected No. Budget for June 2019 Income Statement for June = 2019 RECEIPT. PAYMENT. INCOME EXPENSE Examole! R2 130 R2130 | 3.1.4 3.1.2 3.1.3 3.1.4 DEBTORS COLLECTION SCHEDULE MONTHS CREDIT OCTOBER NOVEMBER SALES September 142 500 October 176 400 November 174 800 Page 45 of 100

3.2.2 3.2.3 Downloaded from hlayiso.com COMMENT. ADVICE Maintenance of vehicles Collection from debtors Telephone October 2019 | November 2019 CASH RECEIPTS Collection from debtors Fee income for services rendered 62 000 65 400 Rent income 8 200 Commission income 4650 Fixed deposit - 10 000 Interest on fixed deposit 375 TOTAL RECEIPTS CASH PAYMENTS Fuel and oil 32 600 Maintenance of vehicles 24 500 Salaries 25 500 Drawings Telephone 2300 Sundry expenses 3120 Interest on loan Purchase of additional vehicle : TOTAL PAYMENTS SUPLUS/SHORTFALL 134 126 Opening Balance 22 104 Balance at the end of the month Page 46 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY D4 CASH BUDGETS 4.1. VARIA TRADERS You are provided with information from the books of VARIA Traders. Their financial year ends on 31 December each year REQUIRED: 4.1.1 Whyis it necessary to prepare a Cash Budget? 4.1.2 Why does depreciation and profit on sale of asset not appear in the Cash Budget? 4.1.3 Name TWO items other than depreciation and profit on sale of asset which will appear in the Projected Income Statement but will not be included in the Cash Budget. 4.1.4 Complete the Debtors’ Collection Schedule for February 2019. 4.1.5 Complete the Cash Budget for January and February 2019. INFORMATION: e CASH BUDGET FOR JANUARY AND FEBRUARY 2019 CASH RECEIPTS JANUARY FEBRUARY Cash sales 168 000 Cash received from debtors 52 400 Rent income TOTAL RECEIPTS CASH PAYMENTS Payments to creditors 81 000 Sundry expenses New assets purchased 25 315 Salaries and wages 61 600 TOTAL PAYMENTS CASH SURPLUS (SHORTFALL)i Bank (opening balance) (19 000) Bank (closing balance) B _ Balances on 31 December 2018: Fixed Deposit: Stanger Bank 120 000 Creditors control 70 000 Income received in advance (Rent Income) 12 000 Accrued expenses (Sundry expenses) 17 700 Page 47 of 100

Downloaded from hlayiso.com C Sales and Purchases Actual and Projected Credit Sales Credit (Credit sales are 25% of total sales) Sachaee Month Credit Sales November 2018 57 000 December 2018 57 500 70 000 January 2019 56 000 81 000 February 2019 54 600 74 000 D Debtors are expected to pay as follows: e 50% in the transaction month, subject to 5% discount e 30% in the month following the transaction month e 15% in the second month after the transaction month e 5% will be written off as bad debts after the third month. E All goods are bought on credit. Creditors are paid one month after the month of purchase. F The monthly Rent Income of R25 000 will increase by 10% on 1 January 2019. G Sundry expenses are expected to increase by R700 per month on 1 January 2019. Sundry expenses are paid after one month H_ Two full time employees each earn R30 800 per month. On 1 February 2019 an extra person will be employed at half the cost of the other employees. | The fixed deposit matures on 1 February 2019. The amount of R123 600 is receivable at maturity J Interest on the bank account is paid or received every month and is calculated on the balance as at the 1st day of each month as follows: e 18% per annum on unfavourable balance (overdraft) e 6% per annum on favourable balance. ACTIVITY D4 ANSWER SHEET 4.1.1 | Why is it necessary to prepare a cash budget? 1 3.1.2 | Why does depreciation and profit on sale of asset not appear in the Cash Budget? 1 4.1.3 | Name TWO items other than depreciation and profit or loss on sale of asset which will appear in the Projected Income Statement but will not be included in the Cash Budget. 2 Page 48 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 4.1.4 | Debtors’ Collection Schedule for February 2049. CREDIT SALES PER MONTH JANUARY FEBRUARY November 57 000 8 550 December 57 500 17 250 January 56 000 26 600 February 54 600 - TOTAL RECEIVED 52 400 8 41.5 | CASH BUDGET OF VARIA TRADERS FOR JANUARY AND FEBRUARY 2019 ee JANUARY FEBRUARY Cash sales 168 000 Cash received from Debtors’ 52 400 Rent income TOTAL RECEIPTS CASH PAYMENTS Payments to creditors 81 000 Sundry expenses New assets purchased 25 315 Salaries and wages 61 600 TOTAL PAYMENTS Bank (opening balance) (19 000) 20 Page 49 of 100

Downloaded from hlayiso.com ACTIVITY D5 BUDGETS You are provided an Incomplete Projected Income Statement and Cash Budget for three months ending November 2018 of Made in P Z M Designers which sells smart casual clothing to teenagers REQUIRED: Use the given information to complete A - 5.1. Complete the Debtors Collection Schedule (A and B) for the month of November 2018, in your answer book. The credit sales amounts are provided on the answer sheet. 5.2 Complete the Projected Income Statement (C - G) in the answer sheet provided. Show all calculations to earn part marks. 5.3 Complete the Budget (H - Q) in the answer sheet provided. Show all calculations to earn part marks. 5.4 Over the past few months the economic recession has had a serious impact on the clothing industry in South Africa. Discuss 2 ways, (other than increasing the loan), which indicates that the owner has taken the recession into account in the drawing up of this Cash Budget. Support your answers by quoting relevant figures. ADDITIONAL INFORMATION 1. SALES: All goods sold are marked up by 60% on cost. The credit sales figures have been inserted on the Debtors Collection Schedule provided in the answer book. 2. PURCHASES: PZM Designers work on a fixed stock base i.e. stock sold each month is replenished in the same month. 40% of all purchases are for cash. No discounts are expected to be granted by creditors over the next 3 months. 3. DEBTORS COLLECTION PERIOD: Asurvey reveals that debtors are expected to pay their accounts as follows: 15% Within the same month as the sale subject to the 2% discount 26% In the month following the sale. 50% In the second month following the sale. 9% Are written off as bad debts at the end of the second month following the sale. 4. RENT INCOME: Rent is expected to increase by 12% in November 2018. 5. _ LOAN FROM FUNBANK: The loan from Funbank is expected to increase on the 1 October 2018. Interest is charged at 18% p.a. and the interest on the new loan will be paid monthly starting from the 1 November 2018. 6 SALARIES AND WAGES The salaries and wages will increase by 20% in October 2018 and then decrease by 3374% in November 2018. 7 SUNDRY EXPENSES Sundry expenses remain the same throughout the year. 5.1 | DEBTORS COLLECTION SCHEDULE CREDIT SALES NOV August R280 000 0 September R324 000 162 000 October R360 000 A November R456 000 B Total 322 632 Page 50 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 5.2 | MADE IN PZM DESIGNERS PROJECTED INCOME STATEMENT FOR NOV 2018 NOV Sales Cost of Sales GROSS PROFIT E OTHER OPERATING INCOME 8 960 Rent Income 8 960 GROSS OPERATING INCOME 293 960 OPERATING EXPENSES (164 000) Salaries and wages 96 000 Advertising 25 000 Sundry expenses 10 000 Bad debts F Discount allowed G Depreciation 2100 Trading stock deficit 372 OPERATING PROFIT 129 960 Interest expense (7 200) NET PROFIT 122 760 Page 51 of 100

Downloaded from hlayiso.com MADE IN PZM DESIGNERS CASH BUDGET FOR THE 3 MONTHS ENDING 31 NOVEMBER 2018 CASH RECEIPTS SEPT OCT NOV Cash sales 216 000 240 000 H Cash from debtors 111 628 139 320 I Rent Income 8 000 8 000 J Loan from Nedbank 0 180 000 0 Total receipts 335 628 567 320 K CASH PAYMENTS Cash purchases 108 000 120 000 114 000 Cash paid to creditors 210 000 252 000 280 000 Interest on the loan 4500 4500 L Salaries and wages 120 000 96000] M Advertising 15 000 45 000 25 000 Sundry expenses 10 000 10 000 N Total payments 467 500 575 500 532 200 Surplus / Deficit (134 872) (8 180) Opening bank balance 24 000 (107 872) Closing bank balance (107 872) (116 052) Q 19 MARKS Discuss 2 ways, (other than increasing the loan), which indicates that the owners have taken the recession into account in the drawing up of the Cash Budget. Support your answers by quoting relevant figures. Page 52 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY D6 BUDGETING REQUIRED: 6.1 Explain the difference between a Projected Income Statement and a Cash Budget. 6.2 Complete the following for September to November 2020. (Some amounts have been entered for you.): 6.2.1 Debtors Collection Schedule. 6.2.2 Projected Income Statement INFORMATION Green Tree Stores Income Statement for the year ended 31 August 2020 Sales 1 600 000 Cost of Sales (1.000 000) Gross Profit 600 000 Other Operating Income 73 600 Rent Income 56 800 Commission Income 16 800 Gross Operating Income 673 600 Operating Expenses (456 500) Salaries 240 000 Advertising 30 000 Bad Debts 20 000 Depreciation 48 600 Sundry Expenses 117 900 Operating Profit 217 100 Interest Expense (on Loan) (19 200) Net Profit for the year 197 900 ADDITIONAL INFORMATION 1. Sales (including forecasted sales) for the period 1 July 2019 to 30 November 2020 are shown below: Total Sales Cash Sales Credit Sales July 2020 119 000 35 700 83 300 August 2020 127 000 38 100 88 900 September 2020 132 000 39 600 92 400 October 2020 136 000 40 800 95 200 November 2020 140 000 42 000 98 000 2. — Credit Sales are expected to be collected as follows: e 20% in transaction month to receive a 5% discount. e 70% in the month after the transaction. e 5% two months after the transaction. e 5% irrecoverable and is written off two months after the transaction. Page 53 of 100

Downloaded from hlayiso.com 3. The current percentage mark up on cost will be maintained throughout the budget period. 4, e Anincrease in salaries becomes effective on 1 September each year. An increase of 8% has been budget for on 1 September 2020. e The business currently has 3 employees earning the same monthly salary. From 1 November 2020, a fourth employee, who will earn the same salary, will be employed. 5. The monthly rental was increased by R800 on 1 October 2020. The business intends to increase the tenants rent by R1 000 from 1 October 2020. 6. Green Tree Stores currently pays interest in their loan at a rate of 8% per annum. The capital portion of the loan remained unchanged during the previous financial year. The business plans to increase this loan by R60 000 on 1 November 2020. 7. The business plans for dispose of unused equipment at a book value by the end of September 2020. This will decrease the depreciation on equipment by R200 per month from 1 October 2020. (Note that no assets were bought or sold during the financial year ended 31 August 2020. Assets are depreciated on cost) 8. Sundry expenses are estimated at R10 000 in September and thereafter to increase by 2% per month. ANSWER SHEET ACTIVITY D6 BUDGETING 6.1 Explain the difference between a Projected Income Statement and a Cash Budget. 6.2.1 Debtors Collection Schedule July 2020 R 83 300 4165 August 2020 R 88 900 62 230 4445 September 2020 R 92 400 October 2020 R 95 200 November 2020 R 98 000 Page 54 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 6.2.2 Projected Income Statement Sept October November Sales 132 000 136 000 140 000 Cost of Sales Gross Profit Other Operating Income Commission Income 1 400 1400 1 400 Advertising 2 500 2500 2500 Net Profit for the month Page 55 of 100

Downloaded from hlayiso.com E: INVENTORY SYSTEMS START HERE ANALYSIS OF TRANSACTIONS /ACCOUNTING EQUATION Study the following transactions and ensure that learners know how to close off all Nominal accounts to the Trading account being the first final account at the end of the financial year. TRANSACTIONS PERIODIC INVENTORY PERPETUAL INVENTORY OPERATING TRANSACTIONS DEBIT CREDIT DEBIT CREDIT 1 Cash purchases of trading stock, | Purchases Bank Trading Stock Bank 2 Credit purchases of trading stock _| Purchases Creditors Control __| Trading Stock Creditors Control | 3 Donation of trading stock Donations Purchases Donations Trading Stock | 4 Owner took stock for own use Drawings Purchases Drawings Trading Stock 5 Theft of stock Theft of Stock Purchases Theft of Stock Trading Stock | 6 Trading stock returned to Creditors | Creditors Control Purchases _| Creditors Control | Trading Stock 7 Payment of transport of stock Carriage on Purchases _| Bank | Trading Stock Bank : 8 Transport on credit Carriage on Purchases | Creditors Control__| Trading Stock Creditors Control 9 Payment of import/ custom duties | Import/custom duties | Bank Trading Stock Bank 10 Cash sales Bank Sales _ Bank Sales a Cost of Sales Trading Stock 11 Credit sales Debtors Control Sales Debtors Control Sales Ea | Cost of Sales Trading Stock 12 Returns by debtors Debtors Allowances Debtors Control Debtors Debtors Control Allowances : Trading stock Cost of sales 13 Payment of deliveries to Carriage on Sales Bank Carriage on Sales | Bank clients CLOSING TRANSFERS: 1. Debtors Allowances to Sales | Sales Debtors Allowances _| Sales Debtors Allowances _ 2. Opening balance of Opening Stock Trading Stock - - Trading Stock to Opening Stock account i i 3. Closing Stock account to Trading Stock Closing Stock : - Trading Stock account 4. Net Sales to Trading Account | Sales (net) Trading Account [F1] | Sales (net) Trading Account [F4] Trading Cost of Sales 5. Net Purchases to Trading Trading Account[F1] | Purchases (net) Account 6. Carriage on Purchases to Trading Account[F1] | Carriage on Trading Account Purchases 7. Custom / Import Duties to Trading Account[F1] | Custom Duties Trading account : 8. The gross profit to Profitand | Trading Account{F1] | Profit and Loss (F2] | Trading Profit and Loss [F2] Loss Account[F 1} Page 56 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD THINGS TO REMEMBER Periodic Stock System "| What is periodic Inventory System e Itis a stock management system that does not require continuous updating of trading stock values. The trading stock account is not updated with the movement of stock, making it difficult to determine the value of stock at any given time. e The cost price of stock sold (cost of sales) is not determined at point of sale but only when physical stock take (stock count is completed) Advantages Disadvantages e tis cost effective as there is no outlay for expensive equipment e.g. expensive bar code and scanning systems e Quick and easy to use with minimum administration required e Ideal for smaller businesses where the cost price per item cannot be easily determined e Stock theft/lleakages are difficult to identify e Gross profit can only be determined at the end of the month/week when a stock take is done as there is no cost of sales entries and regular updates of the Trading stock account e Value of stock is determined periodically with a physical stock take Comparison of the two stock systems Perpetual Inventory System Periodic Inventory systems e Stock purchases recorded in trading stock account (asset) Stock purchases recorded in purchases account e Expenses incurred in purchasing of goods (eg carriage on purchases) are charged to the trading Expenses incurred in purchasing of goods (eg carriage on purchases) are recorded in carriage on purchases stock account account(expense) e Returns and allowances on stock purchased recorded Retums and allowances on stock purchased recorded in in Trading stock account purchases account e Donations and stock taken by the owner are credited to the Trading stock account Donations and stock taken by the owner are credited to the Purchases account e Balance of trading stock shows value of stock on hand Physical stock take (periodically) determines stock on hand e Cost of sales is calculated on a continuous basis, therefor cost of sales account will show the total cost price of goods sold There is no cost of sales account a calculation required to determine cost of sales. Explanation of advantages and disadvantages of perceptual and periodic system Advantages determine when goods are sold. stock is sold counts. Perpetual system control measure. ¢ Cost price of the goods sold and gross profit can be e Trading can be easily controlled through regular stock e Trading stock deficit can be calculated immediately. e Stock losses can be quickly identified and improve internal Disadvantages ¢ — Itis expensive to administer and requires the use of computer. e Trading stock recorded are always updated when trading e — Itis very time consuming because when stock is sold, the cost of sale needs to be calculated. e tis difficult to monitor costs related to the acquisition of stock e.g. carriage on purchases, custom duty, because this cost are added to the trading stock account Page 57 of 100

Downloaded fr om hlayiso.com Advantages Disadvantages e tis suitable for business that sell low cost items with e Available stock cannot be determine high volume of turnover’s nurseries. immediately without physical stock count. e e tis easy to implement, no cost of sale entries are made e = Itis difficult to control stock.. 2 when goods are sold. e Physical stock count must to be conducted a e Itis cheaper to administer and it does not require regularly. 3 complicated bookkeeping e Stock losses due to theft are not easily S detected. e Cost price of good cannot be calculated when goods are sold. This only done at the end of the accounting period CALCULATIONS COST OF SALES Opening stock + Purchases + Carriage on Purchases + Custom NUMBER OF UNITS MISSING Opening no of units + units purchased — units returned — units si NET PURCHASES Purchases — creditors allowances — donations of stock — drawin NET SALES Sales — debtors allowances GROSS PROFIT Sales — Cost of sales Explanation of ledger accounts approach Duties - Returns (creditors allowances) — Closing stock old — closing units gs of stock Comparison of how gross profit is calculated Perpetual inventory system Periodic inventory system Sales —Cost of sales=gross profit Step 1: cost of sales calculation Opening stock +purchases +carriage on purchases +import duty -Closing stock = Cost of sale Step 2: Sales-Cost of sales= Gross profit Comparison of tra ding account Perpetual inventory system Periodic inventory system Cost of sale Sales- Debtors allowances Profit and loss Mark up on cost calculation (sales-Cost of sales)/Cost of salesx100 Or gross profit/Cost of sales x100 Opening stock Sales-Debtors allowances Purchases Closing stock Carriage on purchases Import duty Profit and loss Mark up on cost calculation (sales- Coast of sale)/ cost of salex100 Or gross profit / Cost of salesx100 Page 58 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD Example of purchases account under the periodic system is shown below. GENERAL LEDGER OF DHLAMINI CC NOMINAL ACCOUNT PURCHASES ACCOUNT 2020 | 31 | TOTAL (1) | b/f | XXXX 2020 | 31 | CREDITORS CAJ | Xxx Dec Dec CONTROL (5) BANK CPJ | XXXX DONATION (6) | GL XXXX (2) CREDITORS CJ | XXXX DRAWINGS (7) | GJ XXXX CONTROL (3) PETTY CASH(4) PCJ | XXXX . Total of the purchases account at the end of the previous month and brought forward for December( as purchases is an expense account it has a total and not a balance 2 Stock purchased and paid for by cheque or electronic transfer. 3 Stock purchased on credit. 4 Stock purchased and paid for from petty cash. 5 Stock returned to suppliers (creditors). 6 Stock donated. 7 Stock taken by the owners for their personal use. BASELINE ACTIVITY REQUIRED: Prepare the trading account of Jit Traders for 30 June 2021 Sales 350 000 Cost of Sales 175 000 Gross Profit 175 000 Information A debtor ZN Vilakazi returned stock at a selling price R1 000 (mark-up on cost 100%) TRADING ACCOUNT Page 59 of 100

Downloaded from hlayiso.com ACTIVITY E41 1.1 CONCEPTS COLUMN A COLUMN B 1.1.1 | Carriage on purchases A __|Inventory system that normal suitable for small businesses due to the expenses of acquiring the technology 1.1.2 | Perpetual system B___| Customs duty 1.1.3 | Inventory system Cc Transport cost incurred when stock is bought 1.1.4 | Tax levied on import goods |D | Inventory that records the sale or purchase of inventory immediately through the use of computerized point-of -sale system. 1.1.5 | Periodic system E Process by which you track your good throughout your entire supply chain. 1.2 REQUIRED: State whether each of the following statements are TRUE or FALSE. If FALSE, correct the Underlined WORD/S to make the statement TRUE. d2) In the perpetual inventory system, cost of sales is calculated after each sales transaction. 1.2.2 When using the periodic inventory system, all stock purchased is recorded in the —_ trading stock account. 1.2.3. There is no need to purchase expensive equipment when using the periodic inventory method. 1.2.4 Businesses that use the perpetual stock system can detect theft relatively easily. ACTIVITY E2 Use the table provided to record the following transactions. NOTE: The bank balance is favourable at all times. Example: purchase merchandise on credit form a supplier. Perpetual system Periodic system No | Journal Account Account Account Account credited debited credited debited e.g. | Creditors journal Trading Creditors control Purchases Creditors control stock Transactions: 2.1. Purchase good and paid by cheque. 2.2. Return damaged goods to a supplier 2.3. The owner took merchandise at a cost for personal use. 2.4. Donated stationery to a children’s home on behalf of the business. 2.5. Sold goods to a customer and receive credit card payment. 2.6 .paid for carriage on purchases by Electronic transfer (EFT) 2.7. Sold good on account to a customer. 2.8. Customer returned damaged goods sold on credit. Page 60 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ANSWERSHEET ACCOUNTING EQUATION Perpetual inventory system Periodic inventory system No. Journal Account debited Account credited | Account debited | Account credited 7 2.2 2.3 24 2.5. 2.6 2a 2.8 ACTIVITY E3 INVENTORY SYSTEMS Vilakazi Stores is a small business that is located near a popular beach. It sells sunglasses, umbrella’s, towels and other items that beach - goers would like to purchase. The periodic inventory system is in operation. REQUIRED 3.1 Calculate the value of items purchased for the year ended 30 June 2020 3.2 Complete the Trading Account, correctly closed off, in the General ledger of Sunshine Traders for the year ended 30 June 2020. Show calculations in brackets, where needed. INFORMATION: A. Stock of R28 575 was on hand on 1 July 2019. B. Stock costing R773 225 was purchased during the course of the year. C. Returns to suppliers for the year amounted to R3 000. D. The owner donated stock costing R800 to the local municipality to use as prizes during the June beach festival. E. R12 400 was spent on the transport needed to get the stock to the business. F. A further R1 400 worth of stock was taken by the owner for his son’s birthday party. G. The physical stock take at the end of June 2018, revealed that stock on hand amounted to R31 650. H. Sunshine Stores sales for the year amounted to R1 237 160 and returns from customers during the course of the year was R4 200. Page 61 of 100

Downloaded from hlayiso.com 3.1. Calculate the value of items purchased for the year ended 30 June 2018. 3.2 Trading Account ACTIVITY E4 The information relates to SANITIZER TRADERS ON 30 JUNE 2020. The business sell face shields to customers. REQUIRED 414 Calculate the number of face shield missing NO. OF UNITS | AMOUNT(R) Opening stock 890 142 400 Purchases 1500 240 00 Returns 13 2080 Carriage on purchases 10 500 Closing Stock 190 30 400 Sales 2157 539 250 ACTIVITY E4 4.1 Calculate the number of face shield missing 4.2 Choose the correct word(s) from those given in brackets. Write only the word(s) next to the question number (3.1.1 - 3.1.4) on the ANSWER SHEET 4.2.1 Cost of sales is determined at the point of sale in the (Perpetual/periodic inventory system). 4.2.2 In the periodic inventory system, Carriage on purchases is recorded as an (asset/expense) 4.2.3 3.1.3 The (perpetual/periodic) system is more suited for low-value goods, purchased in bulk. 4.2.4 3.1.4 Merchandise purchased is recorded as an (asset/expense) in the perpetual inventory system. 4.3 Explain 3 differences between perpetual and periodic stock system 44 Periodic Inventory system Page 62 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD The information provide relates to Musk Stores for the year ended 30 June 2020. The business is owned by Zweli Mkhize and managed by Julius Malema. REQUIRED: 441 Calculate cost of sales on 30 June 2020. 44.2 Calculate the average stock turnover rate 4.4.3 Zweli suspects that stock is being stolen despite security cameras being installed e Provide a calculation to verify her suspicion e What can Zweli do to improve the internal control of stock? State two points. INFORMATION UNITS AMOUNT Sales 3.200 768 000 Opening Stock 160 19 200 Purchases 6 300 756 000 Carriage on purchases 75 600 Closing stock 2 800 336 000 ACTIVITY E5 PROBLEM SOLVING: MANAGEMENT OF STOCK Baker is the owner of two school tuck shops. Betty is the manager of Shop A and Benny is the manager of school B Each manager is paid R1 000 per week Each tuck shop sells only chips and juices. The chips cost R5-00 per packet and are sold at profit mark-up of 50% on cost. The juice is marked by 25% and is sold for R10-00 each REQUIERED: Identify ONE problem in each tuck shop, and provide ONE solution or advice in each case. In each case relevant figures must be quoted. INFORMATION SHOP A SHOP B CHIPS | JUICE CHIPS JUICE Opening Stock (units) 300 200 150 90 Stock supplied by Baker 400 400 400 400 Closing stock (units) 200 150 330 120 Units sold 420 450 220 370 Cash deposited (Rands) R3150 R4500 R1 650 R3200 Page 63 of 100

Downloaded from hlayiso.com ACTIVITY E6 INVENTORY SYSTEMS, ETHICS, INTERNAL CONTROL AND INTEPRETATIONS 6.1 Trading Account 2019 | 4 | Balance bid 20.000 | 2°"9 | 31 | costofsales CRI | 30000 JAN Jan 31 | Bank CPJ 50 000 Cost of sale DJ 45 000 Petty cash PCJ 200 Creditors control CAJ 1400 Creditors control CJ 80 000 Donation GJ 10 000 Cost of sale DAJ 1 000 Balance cd 64 300 151 200 Balance 64 300 TREQUIRED : 6.1 Total cash sale for the month amounted to R60 000. Thandeka operation uses a fixed mark-up percentage on all their products. Calculate the mark-up percentage. 6.2 Calculate the total credit sales for the month. 6.3. The owner become aware of the donation of R500 for the first time. Further investigations revealed that stock donations of between R500 and R1 000 were being made regularly in the past. Since the owner has not authorized these donations what plan of action would you recommend to him? 6.4 Aphysical stock-take was conducted on 31 January 2019. The stock count revealed an amount of R58 300. (a) Provide the double entry to record the shortfall (b) Assume that 31 January 2019. Is the end of the financial period? e What amount will be shown in the income statement in respect of the shortfall? e What amount will be shown in the balance sheet for trading stock? (c) What suggestions do you have regarding the shortfall in January? In the past stock shortages have occurred but were not as large as this one. (d) Is it possible for there being a trading stock surplus? Give two examples to explain how this can happen 6.5 The owner has withdrew a large amount of stock for his person use. He withdraws about the same amount every month. What is your opinion on the stock withdrawals by the owner? 6.6 Compare the opening stock with the closing stock. Give two possible reasons for the large differences Page 64 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY E7 The information below was extracted from the accounting records of NQUBUKA limited, a clothing dealer, on 28 February 2020.this company sells for cash and on credit: all purchases are on credit. Cost of sales is equal to purchases. Information : . Extract from income statement for the year ended 28 February 2020 Sales : credit R 630 000 Cash 580 000 Cost of sale 700 800 2 Notes to the financial statement: 2020 2019 A Inventory Trading stock 106 200 69 000 B Trade and other receivable Trade debtors 89 300 48 700 Cc Trade and other payable Trade creditors 76 000 38 000 7 Calculate the following for 2020.(the previous year's indicators are provided in brackets). a) Stock turnover rate. 2019: 10 times b) Number of days for which enough stock ison hand 2019:60days ii; Explain the meaning of the calculation above. Comment on you observations and make your recommendations. ACTIVITY E 8 EXTENSION ACTIVITIES 8.1 STOCK SYSTEMS Bezzie’s Centre sells fabric and dress making products. The business uses the periodic inventory method to record stock. The financial year ended on 31 October 2020. REQUIRED: 8.1.1 Explain ONE difference between the perpetual stock system and the periodic stock system. 8.1.2 Provide ONE advantage and ONE disadvantage of each stock system. 8.1.3 Analyse transactions (ii) and (iii) in terms of the accounting equation. Complete the table provided. Show increase (+) and decrease (-) for assets, equity and liabilities. 8.1.4 Calculate the cost of sales for the financial year ended 31 October 2016. INFORMATION: A Stock balance on 1 November 2019, R134 600 B Transactions during the current financial year R (i) Cash and credit purchases of trading goods. 622 400 (ii) Transport cost on trading goods paid by cheque. 92 200 (iii) Damaged goods returned to creditors. 45 300 (iv) Goods donated to a local school (fund raising) 5 500 (v) Goods taken by the owner for personal use. 3 750 (vi) Cost of goods returned by debtors taken into stock. 7.250 Stock take on 31 October 2020 revealed that R98 350 was on hand. Page 65 of 100

Downloaded from hlayiso.com 8.2 | MANAGEMENT OF STOCK - PROBLEM SOLVING Fundani Electronics is a retail business that sells car accessories. The business has branches operating in Queens, Cofimvaba and Tsolo. Fundani, the owner, was concerned about the sale of a single brand of car radio and requested the figures for this product from each branch. The information presented are for the three months ended 31 July 2020. REQUIRED: Identify a different problem in each branch, quoting the relevant figures for each. Also provide a possible solution to the problems identified. INFORMATION: Information relating to the single brand of car radios QUEENS COFIMVABA TSOLO Stock balance on 1 May 2020 230 160 85 Number of units sold during the period 180 40 85 Stock balance on 31 July 2020 35 120 NIL Selling price per radio R1 120 R1 120 R1 120 Deposit of sales revenue R201 600 R44 800 R81 760 Advertising of radios R1 400 R6 720 R6 120 Monthly salary of sales person R7 000 R7 500 R7 500 8.3 ALPHA STATIONERY SHOP You are provided with information relating to Alpha Stationery Shop for the year ended 28 February 2021. The business uses the periodic inventory method. REQUIRED: 8.3.1 __| Prepare the Trading Account. Show workings in brackets 8.3.2 _| Calculate cost of sales. Show ALL workings. 8.3.3 | Calculate the mark-up % achieved. 8.3.4 The business aims at a mark-up % of 65%. Give TWO possible reasons for the actual mark-up % being different from the intended mark-up%. INFORMATION: A__| Trading stock was valued as follows: R245 000 on 1 March 2020 R302 000 on 28 February 2021 B__| Goods purchased during the year on credit, R960 000 C | Goods returned to suppliers, R26 000 D Carriage paid to KZN Deliveries during the year: e On goods delivered to Alpha Stationery Shop, R35 000 e Ongoods delivered to customers, R22 000 E | One supplier, Penguin Paper, admitted that an error had been made on an invoice for goods delivered during the year. The invoice stated that a10% trade discount had been granted. The amount of the invoice, R37 800, is included in the figure mentioned in INFORMATION 2 above. Penguin Paper has agreed that a 25% trade discount should have been granted. They issued a credit note for the appropriate amount. EF Goods comprising gold-plated pens were imported from Top Notch Pens in the USA. Page 66 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD Payment of 6 000 US dollars was made to Top Notch Pens immediately. The exchange rate is R9,00 to a US dollar. Alpha Stationery Shop also paid R4 800 to Fedex to transport the pens. Customs duty on these goods was levied at 40% and this was paid to SARS when the goods arrived in the country. G__| The owner, Alan Alpha, took goods costing R3 200 for personal use. H__| Goods were sold during the year for R1 532 900. ACTIVITY E8 8.1 8.1.1 EXPLAIN ONE DIFFERENCE BETWEEN THE PERPETUAL STOCK SYSTEM AND THE PERIODIC STOCK SYSTEM PERPETUAL STOCK SYSTEM PERIODIC STOCK SYSTEM 8.1.2 Provide ONE advantage and ONE disadvantage of each stock system. ADVANTAGE DISADVANTAGE PERPETUAL INVENTORY SYSTEM PERIODIC INVENTORY SYSTEM 8.1.3 | Analysis of transactions: NO | ACCOUNT DEBITED ACCOUNT CREDITED | ASSET EQUITY LIABILITY (ii (iii) 8.1.4 COST OF SALES 8.2 PROBLEM SOLVING PROBLEM (WITH FIGURES) SUGGESTIONS QUEENS BRANCH COFIMVABA BRANCH TSOLO BRANCH Page 67 of 100

F. COST ACCOUNTING / MANUFACTURING Downloaded from hlayiso.com COST CONCEPTS Manufacturing business A trading enterprise is an enterprise that buys and sells manufactured products at a profit. In a trading enterprise we talk about purchased and sold trading stock. A service enterprise is an enterprise where persons use their skills to provide a service to the community. A manufacturing enterprise is an enterprise that manufactures products (completed products) from raw materials. (It transforms raw materials into finished or completed products. It important to remember that after the product is manufactured it then has to be sold.) Costing It is the calculation of the costs involved in producing a product Unit The word used to describe a single product made in the factory Direct material costs The raw material actually needed to make the product — also called Direct raw material cost Indirect material costs These are materials that are not directly involved with the manufacturing of the product (e.g. cleaning material costs, packing materials) Direct labour costs This is the amount paid to workers who actually manufacture the product Indirect labour costs This is the amount paid to workers in the factory who are not directly involved with the making of the product e.g. the cleaning staff) Factory overheads These are the expenses to run the factory, but none of them are directly involved \with the making of the product. (e.g. factory rent) Indirect labour and indirect materials are treated as part of factory overheads Prime production cost Direct material cost plus direct labour cost Total production cost or It is the total cost to produce the products. manufacturing costs Prime cost plus factory overhead cost (Direct material cost + Direct labour cost + Factory overhead cost) THINGS TO REMEMBER 1. Raw (direct) materials cost > These are the materials that go into a final product. > They are directly identified with the final product. > The finished product of one business can become the raw material of another business e.g. sugar from the mill becomes a raw material in the manufacture of chocolates. > They also include costs like carriage on purchases, import duties, custom duties, etc. > Materials purchased from another country have to be recorded in the South African currency i.e. rand values (exchange rate) >» Raw materials cost forms part of prime cost/direct cost > 2. Direct labour cost This refers to the labour costs of those workers directly involved in the manufacture of the goods e.g, wages of factory workers. Without them no production will take place It takes into account factors like hours, rate per hour, normal rate, overtime rate, days worked, weeks worked, months worked, bonuses, etc. Direct labour cost forms part of prime cost/direct cost Page 68 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 3. Factory overheads > This is a very important section that attracts huge marks in exams and tests. > These are all costs incurred in order to run the factory other than the direct materials and direct labour costs. > nother words these costs are in the factory but they are not directly identified or associated with the final product. >» Examples of factory overheads cost are inter alia rent, insurance, depreciation, electricity, indirect material cost, indirect labour cost, remuneration of a cleaner, salary of the supervisor/foreman/production manager, etc. Take note that some of these costs could have been incurred by the whole business. In such cases those costs would have to be apportioned or prorated according to floor space, etc. 4. Prime costs (direct costs) >» These are costs that are directly involved in the production of finished goods viz Direct (raw) material costs and direct labour costs. 5. Indirect material cost » These materials are not directly identified with the manufacture of a finished product but they are still necessary in the production process, e.g. lubricating oil, petrol, cleaning materials, etc. 6. Indirect labour cost > This labour cost is important but the workers are not directly involved in the production process, e.g. the cleaning staff, maintenance staff, foreman, factory manager, etc. 7. Fixed costs > These are costs that remain constant within a period of time irrespective of the amount of goods produced. » Such costs do not vary or change with the level of production. > Example is factory rent, depreciation, insurance, etc. > Unless stated otherwise, factory overhead costs and administration costs are treated as fixed| costs 8. Variable costs > These are costs that vary or change with the level of production, e.g. raw materials. Total cost of production > This takes in account raw materials cost, direct labour cost and factory overhead cost. 10. Work in process/progress > This refers to the partially finished product which is still waiting for completion. > This is an asset account and it is a balance sheet account > Itincreases on the debit side and decreases on the credit side of the ledger 11. Raw material stock account > This refers to the raw materials that have been purchased in order to be used in the production process. > This is an asset account and it is a balance sheet account > Itincreases on the debit side and decreases on the credit side of the ledger > Materials issued for production are credited on this account as raw material issued account. 12. Cost of production of finished goods This is equal total manufacturing cost + work in progress at the beginning — work in progress at the end od Page 69 of 100

Downloaded from hlayiso.com 13. Unit costs > This refers to the cost of producing one item. > If there is no work in progress the formula is : > unit cost = total manufacturing cost Number of units produced > If there is work-in- progress the formula is: unit cost = cost of production of finished goods Number of units produced IBREAK-EVEN POINT > This is a point where a business neither make a profit nor a loss > Ifthe business has actually produced units that are above the break-even point it means it has made profit. > Ifthe business has actually produced units that are equal to break-even units it means it has neither make a profit nor a loss > Ifthe business has actually produced units below break-even units it means that the business has made a loss > Break-even point (units) = Fixed cost SP per unit - VC per unit > The above BEP MUST expressed in units > To calculate break-even point value (Rands) you must first calculate the BEP(UNITS) and thereafter multiply your answer by the unit cost 1.1 ACTIVITY F1 - CONCEPTS Identify ONE cost account for each of the descriptions from the list below. Write only the answer next to the question numbers (1.1.1 to 1.1.5) in the ANSWER BOOK. variable cost; factory overhead cost; direct labour cost; indirect labour cost; direct material cost; indirect material cost; selling and distribution cost; fixed cost; administration cost 1 This cost stays the same, even when the number of items manufactured changes. 2 The cost of raw materials that are not directly involved in manufacturing products. 3 Bad debts for the accounting period. 4 — Selling and distribution cost as well as direct material cost and direct labour cost are also referred to as ... 1.1.5 Rent expenses of the office for the accounting period. (5) ACTIVITY F2 - CONCEPTS 2.1 Indicate whether the following statements are TRUE or FALSE. Write only ‘true’ or ‘false’ next to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK. 2.1.1. Wages of factory cleaners is a direct labour cost. 2.1.2 Delivery costs of finished goods to retailers are a selling and distribution cost. 2.1.3. Depreciation on office equipment is an administration cost. (3x 1) (3) Page 70 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY F3 - CONCEPTS 3.1. Choose a description in COLUMN B to match the concept in COLUMN A. Write only the letter (A-D) next to the number (3.1.1 - 3.1.3) in the ANSWER BOOK. COLUMN A COLUMN B (3) oA Direct material A __| The varnish purchased to use on the school desks 3.1.2 Indirect material |B | The carpenter in the factory's salary 3.1.3 Indirect labour C__| The wood purchased to produce school desks D | The salary of the factory foreman ACTIVITY F4 - CONCEPTS 44 Match the terms in Column A with an appropriate example/explanation from Column B. Write only the letter (A — E) next to the numbers (4.1.1 - 4.1.5) in the ANSWER BOOK. COLUMN A COLUMN B 41.1 Fixed cost A. Cost of raw materials used in the production process. : B Completely manufactured goods ready for distribution 7 7 7 oe labour to retailers. 41.3 Selling and C. Debit order payment for the monthly factory rent and nw» flistribution cost | _ __insurance. — 414 Variable cost D. id paid to factory maintenance and cleaning 7 E. Cheque paid to the Daily Dispatch for a three month oS advertising contract. (5) ACTIVITY F5 - LEDGER ACCOUNTS You are provided with information relating to Kitty Delights Manufacturers for the financial year ended 28 February 2021. The business manufactures 1 kg packets of cat food. The perpetual inventory system is used for all stocks, except in the case of indirect materials where the periodic system is used. REQUIRED: 5.1 Prepare the following Ledger Accounts: 5.1.1. Raw Materials Stock (8) 5.1.2 Work-in-progress Stock (11) 5.1.3 Factory Overhead Cost (16) INFORMATION: 28 FEBRUARY 2021 | 1 MARCH 2020 Raw materials stock R55 000 R80 000 Work-in-progress stock 40 000 25 000 Finished goods stock 10 600 62 500 Indirect materials (consumable stores on hand) 5 300 7.500 Page 71 of 100

Downloaded from hlayiso.com AZIN AUUUUIN IV Una 11 ever urer nine TRANSACTIONS DURING THE YEAR: (a) Raw materials: Bought for cash, R120 000. An additional R10 500 was paid for transporting raw materials to the factory. (b) The following costs are to be split between the three departments according to floor area: Factory (200 square metres); Sales Department (50 square metres) and the Administration Department (50 square metres): e Water and electricity paid during the year amounted to R25 200. The February 2021 account of R1 800 has not been paid yet. e Rent: Total for the year, R69 600. (c) Indirect materials: Bought on credit during the year, R22 300. An additional R700 was paid out of petty cash to have these materials delivered to the factory. 75% of all indirect materials are used in the factory. (d) Wages and salaries for the year: Salary of factory foreman R120 000 Production wages 550 000 Administration salaries 151 200 Commission paid to salesman 72.000 Wages of the cleaner (% of the cleaner’s time is spent in the factory) 37 800 (e) Other sundry expenses (including depreciation): Factory R110 000 Administration department 322 000 Sales department 175 000 (f) 50 000 packets of cat food (dry pellets) were produced during the current financial year. ANSWER SHEET 5.1.1 RAW MATERIALS STOCK ACCOUNT Page 72 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 5.1.2 WORK-IN-PROGRESS STOCK ACCOUNT 5.1.3 FACTORY OVERHEAD COST ACCOUNT ACTIVITY F6 - LEDGER ACCOUNTS 6.1 GALANE MANUFACTURES Galane Manufacturers manufacture towels. The information below is from their financial records for the financial year ended 28 February 2019. REQUIRED: Use the information provided to complete the following accounts in the General Ledger: 6.1.1 Work-in-Progress Stock Account (10) 6.1.2 Finished Goods Stock Account (7) 6.1.3 Factory Overhead Cost Account (15) Page 73 of 100

Downloaded from hlayiso.com RLV ALUUUIN IVS wine INFORMATION: A. Balances taken form the records of Union Manufacturers: 28 February 2021 1 March 2020 R R Factory indirect material 2 630 3 840 Work-in-progress stock 38 300 33 150 Finished goods stock 34 100 15 250 B. Summary of transactions for the year ended 28 February 2021: R Raw materials purchased (all issued to factory) 516 000 Factory indirect materials purchased 21 560 Direct labour ? Indirect labour 24 350 Factory manager's salary 65 060 Rent expense 39 200 Insurance 8 700 Water and electricity 16 500 Bad debts 2.980 Sundry factory expenses 25 750 Sales net of trade discount 1 800 000 C. Additional information: (a) The mark-up % used in pricing goods is 60%. Trade discounts of R100 000 were granted. (b) | Raw materials: e R16 000 was paid for transporting raw materials. e Raw materials were returned to the suppliers, R20 000. NOTE: No entry has been recorded for these items. (c) Two-thirds of the insurance expense relates to the factory. (d) Water and electricity must be allocated to the factory, sales department and the Office in the ratio 4 : 1: 1 respectively. (e) 65% of the rent expense must be allocated to the factory. ANSWER SHEET 6.14 WORK-IN-PRGRESS STOCK ACCOUNT Page 74 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 6.1.2 FINISHED GOODS STOCK ACCOUNT 2020 | 1 | Balance b/d 15 250 Mar 6.1.3 FACTORY OVERHEAD COST ACCOUNT ACTIVITY F7 - LEDGER ACCOUNTS 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 February each year. i REQUIRED: 7.1.1 Calculate the following for the financial year: e Direct material cost (7) e Direct labour cost (5) 7.1.2 Record the following transactions in the General Ledger: ¢ Work-in-progress stock (10) ¢ Finished goods stock (6) 7.1.3. The owner is concerned about the control of workers in production. Provide (6) TWO points that justify his concern. Quote relevant figures. Page 75 of 100

Downloaded from hlayiso.com INFORMATION: A. Stock balance: 28 FEBRUARY 2021 | 1 MARCH 2020 Raw material stock R38 700 R23 400 Work-in-process stock 60 000 45 300 Finished goods stock 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 (basic) 1 440 hours per worker Normal time as per contract 40 hours per week, 45 weeks per year Normal time rate R35 per hour Total overtime hours worked 640 hours Overtime paid R33 600 The business contributes 1% to the UIF and 9% to the pension fund on behalf of all employees. ANSWER SHEET 7.1.1 _Calculate the following for the financial year: Direct material cost Direct labour cost 7.1.2 WORK-IN-PROGRESS STOCK ACCOUNT Page 76 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 7.1.3 FINISHED GOODS STOCK ACCOUNT 74.3. The owner is concerned about the control of workers in production. Provide TWO points that justify his concern. Quote relevant figures. Point 1: Figures Point 2: Figures ACTIVITY F8 - LEDGER ACCOUNTS Snuggle Bag Manufacturers is a business that provides thick winter blankets in a variety of colours and designs. The financial year ends on 30 June each year. REQUIRED: 8.1 Calculate the following for the year ended 30 June 2021: 8.1.1 Direct Material Cost ( 8.1.2 Direct Labour Cost (6) 8.1.3 Factory Overhead Cost ( 8.2 Prepare the Work-Progress Stock Account in the General Ledger for the year ended 30 (12) June 2021. 8.3 The manager is thinking of reducing the quality of material used in manufacturing (3) blankets. This change will not be revealed to customers (labels will not be changed). Comment. Page 77 of 100

Downloaded from hlayiso.com ANSWER SHEET 8.1 8.1.1 8.1.2 8.1.3 8.2 Calculate the following for the financial year: Direct material cost Direct labour cost Factory Overhead cost WORK-IN-PROGRESS STOCK ACCOUNT 8.3 The manager is thinking of reducing the quality of material used in manufacturing blankets. This change will not be revealed to customers (labels will not be changed). Comment. Page 78 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY F9 - LEDGER ACCOUNTS AND UNIT COSTS ON POINT Manufacturers is a medium size factory, owned by Mrs HB. Led, that manufactures pencils. The business sells all pencils for R2.50 each. The perpetual inventory system is in use. REQUIRED: 9.1 Complete the missing details/figures labelled by letters A to F. (9) 9.2 Identify TWO items that could be included under “Factory Overhead Cost’, (2) 9.3 Calculate the following if 4 000 000 pencils were made during the year: 9.3.1 The cost price per unit (3) 9.3.2 The breakeven point for the year ended 30 June 2021. (5) 9.3.3 Should the owner, Mrs HB Led be satisfied with the number of pencils made (3) and sold during the year? Support your answer by quoting figures. 9.4 Mrs HB Led has been considering buying some of her raw materials from a local supplier in KwaZulu Natal rather than from the current supplier in the Western Cape. 9.4.1 Explain the effect this will have in the Direct Materials Costs. Give ONE reason (3) for your answer. 9.4.2 Mrs HB Led is concerned that the quality of the pencils may deteriorate ifshe (2) uses local raw materials. What can she do to ensure that this does not happen? INFORMATION General Ledger of ON POINT Manufacturers Balance Sheet Section RAW MATERIALS STOCK ACCOUNT B2 2020 | 1 | Balance 440 000}] 2021 | 30 (B) 1 560 000 July June 2021 | 30 | Bank (A) Balance (C) June Creditors control 400 000 Carriage on Purchases 180 000 Import and Customs 90 000 Duty 1910 000 1 910 000 2021 | 1 | Balance (C) July Page 79 of 100

Downloaded from hlayiso.com NAW MULUUI IVS WORK-IN-PROCESS STOCK ACCOUNT B3 2020 Balance 300000 442021 | 30 (F) 5 200 000 July June 2021 | 30 | Direct Materials Cost (D) Balance ? June Direct Labour Cost (E) Factory Overhead Cost | 1200 000 ? ? 2021 | 1 | Balance . July ADDITIONAL INFORMATION e Prime costs for the year amounted to R4 560 000. e There were no finished goods on hand at either the beginning or the end of the year. e Direct Labour Cost and Factory Overhead Costs are considered to be fixed, whereas Direct Material Cost is variable. ANSWER SHEET 9.1 TM) OlO} a> 9.2 9.3.1 9.3.2 Identify TWO items that could be included under “Factory Overhead Costs”. The cost price per unit. The break-even point for the year ended 30 June 2021. Page 80 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 9.3.3 | Should the owner, Mrs HB Led be satisfied with the number of pencils made and sold during the year? Support your answer by quoting figures. 9.4.1 Explain the effect this will have in the Direct Materials Costs. Give ONE reason for your answer. 9.4.2 Mrs HB Led is concerned that the quality of the pencils may deteriorate if she uses local raw materials. What can she do to ensure that this does not happen? ACTIVITY F10 - LEDGER ACCOUNTS AND UNIT COSTS 10.1 GENERAL LEDGER AND INTERPRETATION REQUIRED: Study the Work-in-Progress Stock account in the General Ledger of Themba’s Wooden Tables and answer the questions that follow: 10.1.1 In which section of the General Ledger will this account be found? (1) 10.1.2 Identify TWO items that can be included in each of the following amounts in the Work-in-Progress Stock account: a) R112 300 (2) b) R210 600 (2) 10.1.3 Themba currently employs one supervisor and 3 carpenters to make the (4) tables. Identify which of his employees are considered to be direct and indirect labour. Explain your reasoning by giving an example of the type of work each employee will be completing. 10.1.4 If this business made 160 wooden tables and sold each table for R4 350, calculate the following: a) The cost price per table. S b) The mark-up percentage applied by Themba’s Tables. S Page 81 of 100

Downloaded from hlayiso.com INFORMATION: WORK-IN-PROGRESS STOCK ACCOUNT B3 2020 | 1 | Balance 96 800 2021 | 28 | Finished Goods Stock 464 000 March Feb 2021 | 28 | Direct Materials Cost 210 600 Balance 93 500 Feb Direct Labour Cost 137 800 Factory Overhead Cost 112 300 557 500 557 500 2021 |1 | Balance 93 500 March 10.2. BREAK-EVEN POINT Billy Bob's Beds produced and sold 3 950 single beds for the year ended 31 August 2020. The following information was extracted from their books: INFORMATION: Sales R4 740 000 Variable Costs R2 646 500 Fixed Costs R713 500 10.2.1 Calculate the break-even point for the year ended 31 August 2020. (5) 10.2.2 Should Billy Bob's Beds be satisfied with the number of single beds that were (3) made during the year ended 31 August 2020? Explain. ANSWER SHEET 10.1.1 | In which section of the General Ledger will this account be found? Page 82 of 100

KZN ACCOUNTING 10.1.2 10.1.3 10.2.1 10.2.2 Downloaded from hlayiso.com GRADE 11 2021 STEP AHEAD Identify TWO items that can be included in each of the following amounts in the Work-in-Progress Stock account: c) R112 300 d) R210 600 Themba currently employs one supervisor and 3 carpenters to make the tables. Identify which of his employees are considered to be direct and indirect labour. Explain your reasoning by giving an example of the type of work each employee will be completing. Direct Labour Indirect Labour Calculate the break-even point for the year ended 31 August 2020. Should Billy Bob’s Beds be satisfied with the number of single beds that were made during the year ended 31 August 2020? Explain. ACTIVITY F114 - BREAK EVEN POINT ANALYSIS AND PROBLEM SOLVING KUNAL’S SECURITY GATES 11.1 Kunal’s Security Gates makes security gates according to orders received. The information below is for the financial year ended 31 August 2020. REQUIRED: ae ea Calculate the break-even point for the period ended 31 August 2020. (6) 11.1.2 Compare and comment on the break-even point and the level of production achieved 11.1.3 over the last two years. Quote figures. (6) Provide TWO reasons for the increase in direct material cost and suggest ONE way in which Kunal can control this cost. (5) Page 83 of 100

Downloaded from hlayiso.com AZIV ALLUUNTING nae 11 461 TCP ALLA INFORMATION: A. Cost information for the year ended 31 August: 2020 2019 TOTAL UNIT UNIT AMOUNT | COST | COST Direct material cost Variable cost 86 400 R180 R156 Direct labour cost Variable cost 122 400 R255 R242 Factory overhead cost Fixed cost 76 800 R160 R156 Selling and distribution cost Variable cost 74 400 R155 R152 Administration cost Fixed cost 60 000 R125 R129 B. Additional information for the financial year ended 31 August: 2020 2021 Total sales R412 800 R459 000 Selling price per unit R860 R850 Number of units produced and sold 480 units 540 units Break-even point 2? 508 units ANSWER SHEET 11.1.1 | Calculate the break-even point for the period ended 31 August 2020. 41.1.2 | Compare and comment on the break-even point and the level of production achieved over the last two years. Quote figures. 11.1.3 | Provide TWO reasons for the increase in direct material cost and suggest ONE way in which Kunal can control this cost. REASONS: SUGGESTION: Page 84 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 ACTIVITY F12 - BREAK EVEN POINT ANALYSIS AND PROBLEM SOLVING 12.1. GRACIAS LTD. REQUIRED: 2021 STEP AHEAD 12.1.1 Calculate the missing figures marked a-d. Write only the answers in the ANSWER BOOK. 12.1.2 Calculate the break-even point for 2021. Assume that factory overheads and administration cost is regarded as fixed cost. (5) 12.1.3 Comment on the break-even point (3) 12.1.4 Identify TWO unrealistic escalations of expenses. Give a possible cause for each as well as a possible solution to the problem. (8) INFORMATION: 2021 2020 Finished stock 105 800 22 700 Number of units made and sold 50 000 36 000 Break-even point ? 25 560 Selling price R120 R100 Costs in Rand Total cost Unit cost 2021 | Unit cost 2020 2021 R R R Direct/Raw materials 900 000 a 24 Direct labour cost c b 22 Prime cost d 48 46 Factory overheads 1 100 000 22 20 Administration costs 400 000 8 6 Selling and distribution 350 000 7 4 2021 2020 R R Total cost of production Z 2 446 000 Page 85 of 100

Downloaded from hlayiso.com ALIN AULUUN TING GALE II 2UéZ1 O1EP ANCA ANSWER SHEET 12.1.1 | Calculate the missing figures marked a—d. Write only the answers in the ANSWER BOOK. A B Cc D 12.1.2 | Calculate the break-even point for 2021. Assume that factory overheads and administration cost is regarded as fixed cost. 12.1.3 | Comment on the break-even point 12.1.4 | Identify TWO unrealistic escalations of expenses. Give a possible cause for each as well as a possible solution to the problem. Identification of expense with Possible cause for escalation | Possible solution to the problem. explanatory figures ACTIVITY F413 13.1 RIETFONTEIN MANUFACTURERS You are provided with information for the year ended 30 June 2015. The business produces and sells T-shirts to advertise the town. REQUIRED: 13.3.1 Calculate the missing figures indicated by A and B. 13.3.2 Calculate the break-even point and comment on the level of production for the year. INFORMATION: The number of T-shirts produced and sold increased from 7 000 T-shirts in 2014 to 9 000 T- Shirts in 2015. The break-even point for 2014 was 3 250 units. The following figures apply to the 2015 financial year: TOTAL COST UNIT COST Sales R495 000 R55,00 Variable costs R207 000 A Fixed costs B R12,00 Page 86 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ANSWER SHEET 13.3.1 | Calculate the missing figures indicated by A and B. A B 13.3.2 Calculate the break-even point and comment on the level of production for the year. CALCULATION: COMMENT: ACTIVITY F14 Waste Traders manufactures bags from organic, recycled materials. Waste Traders uses the Perpetual Stock system and a mark-up of 100% on cost. REQUIRED: 14.1 14.2 Calculate the following: 14.1.1 Selling price per unit 14.1.2 Cost of Sales 14.1.3 Variable cost per unit 14.1.4 Break-even point Waste Traders anticipates that demand will increase in the next financial year to 600 000 units. They aim to increase the number of units produced to meet this demand. They expect fixed costs to remain unchanged. 14.2.1 Explain what you understand by the term ‘break-even point’. 14.2.2 Explain the effect that the above decision will have on the fixed cost per unit and the break- even point. INFORMATION: A. Balances / totals on 30 June 2015 2014 Raw Material Stock 92 400 78 900 Work-in-Process Stock 2 175 000 Finished goods stock 759 000 542 000 Factory overhead cost 362 790 Production Wages 990 000 B. Raw Materials Stock purchases of R553 500 includes carriage on purchases of R40 000. Page 87 of 100

Downloaded from hlayiso.com AZIV AULUUIV HIV vine ot ever viens C. Production wages totalling R90 000 was not recorded. D. Factory Overhead Cost was incorrectly calculated. The following adjustments must be taken into account: = Depreciation on Factory Plant and Equipment amounting to R84 030 was omitted. = Indirect Materials included R3 500 worth of materials bought for the next financial year. = Advertising cost of R17 320 was included as R12 790. = The utilities amount of R10 290 in the Factory Overhead Cost account was apportioned in the ratio of 2:1:1 between the factory and other departments respectively. It should have been in the ratio 4:2:1 E. UNITS PRODUCED AND SOLD Value Units Cost of Finished goods produced R1 872 000 374 400 Sales (mark-up = 100% on cost) — R3 564 000 | 396 000 E COSTS AND BREAK EVEN Fixed Costs R682 500 Variable Costs R2 059 200 Administration Costs R250 500 Selling and Distribution Costs u Break-Even Point a ANSWER SHEET 141 Calculate the following: 14.1.1 | SELLING PRICE PER UNIT: 14.2.2 | COST OF SALES: 14.1.3] VARIABLE COSTS PER UNIT 14.1.4 BREAK-EVEN POINT 14.2 | Waste Traders anticipates that demand will increase in the next financial year to 600 000 units. They aim to increase the number of units produced to meet this demand. They expect fixed costs to remain unchanged. 14.2.1 | Explain what you understand by the term ‘break-even point’. Page 88 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 14.2.2 | Explain the effect the above decision will have on the fixed costs per unit and the break-even point. FIXED COST: BREAK-EVEN POINT: ACTIVITY F15 15.1. THE CLOTHING FACTORY SHOP Nkosi Mlambo is the owner of this business which produces and sells tracksuits. The information below relates to what her factory is producing. REQUIRED: 15.1.1 Complete the ledger accounts. Close off properly at the end of the year on 28 February 2020: e Raw materials stock (11) e —Work-in-progress (14) e — Finished goods stock (8) e — Factory overheads (19) INFORMATION: A. Balances: 28 February 2020 1 March 2019 Raw materials stock R251 000 R164 800 Work-in-progress 445 450 223 700 Finished goods Z 569 500 Indirect material 7 300 9 800 B. Transactions for the financial year ended 28 February 2020: Purchases on credit:Raw materials 950 800 Purchases: Indirect materials 39 800 Carriage on purchases of raw materials paid 47 500 Advertising 29 500 Rent expense 130 000 Depreciation: Factory equipment 56 250 Delivery vehicles 49 500 Sales (profit margin of 60%) 4071 208 Page 89 of 100

Downloaded from hlayiso.com AZIVAUUUUNNT ING nAUE ri Cc. Additional information: 1. The bookkeeper forgot to record an invoice for raw material purchased, R300 000. 25% trade discount was received on this transaction. 2. Two thirds (2/3)of the indirect materials were used in the factory. 3. Salaries and wages e Salary of the factory foreman, R216 000. e Summary of factory workers’ earnings: Deductions Employer's Net PAYE UIF Pension contributions wages R140 000 RQ 600 R78 800 Total deductions = R228 400 R97 856 R844 600 NOTE: Contributions are regarded as part of factory Wages costs. e Indirect wages: Six casual workers clean the factory at R50 an hour. They each worked 192 hours normal time. Three of them worked 40 hours of overtime at the normal rate plus 50%. 4. Rent expense includes rent for March 2020. There was no increase in the rent during the financial year. Rent is proportionally allocated to the various departments according to floor space occupied: e Factory 600 m2 e Administration offices: 250 m? e Sales department: 150 m2 15.2 FAST MOVERS FACTORY SHOP This business is owned by Patrick Pillay. He requires your assistance. In each case, quote figures to support your opinion. INFORMATION 2020 2019 Total units produced & sold 12 000 units 9 000 units Break-even point in units 2 7.000 units Selling price per unit R270,00 R220,00 Total Variable Costs R2 040 000 R1 560 000 Total Fixed Cost 612 000 REQUIRED: 15.2.1 Calculate the break-even point for 2020. 15.2.2 Patrick is satisfied with the break-even point. Explain. Quote figures to prove his opinion. (4) (4) ANSWER SHEET GENERAL LEDGER OF THE CLOTHING FACTORY SHOP Balance Sheet Section Dr Raw materials stock (B5) Cr 2019 Mar | 1 | Balance bid 164 800 Page 90 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD Work-in-progress (B6) Finished goods stock (B7) Factory overheads (C3) 15.2.1 | Break-even point 15.2.2 | Patrick is satisfied with the break-even point. Explain. Quote figures. Page 91 of 100

Downloaded from hlayiso.com G: VALUE ADDED TAX CONCEPT EXPLANATION VAT Vendor A person or business that supplies goods or services who register as a vendor (trader). Compulsory Registration | All businesses with a turnover of more than R1-milion MUST register as a vendor (trader). Voluntary Registration Businesses with a turnover of less than R1-million CAN register if they want to. Zero-rated items Items charged at 0% VAT, but this can be changed by the government at any time. E.g. Fresh fruit and vegetables, brown bread, milk, maize, rice, lentils and cooking oil. VAT-exempt items Items on which no VAT is charged. E.g. interest, rates, export services, educational services and childcare services. VAT inclusive VAT is included in the amount. VAT = 15/115 X Amount. VAT exclusive VAT is excluded from the amount. VAT = 15/100 X Amount. VAT Input VAT paid by a business on the purchases of goods and services (which can be claimed back from SARS). VAT Output VAT collected by the business on the sale of all goods and services (which needs to be paid over to SARS). APPROACH TO THE TOPIC . 6 There are two methods that can be used to arrive at the amount payable to or receivable from SARS. You can either draw up the VAT Control account or you can do a calculation. You are advised to use the VAT Control account because the format of the account is easier to remember. VAT Input amounts (money to be claimed back from SARS) are entered on debit side and VAT Output amounts (money collected and to be paid over to SARS) are entered on the credit side. VAT Input will include VAT on purchases (trading stock, equipment etc.), VAT on expenses, VAT on returns from debtors, VAT on bad debts VAT Output will include VAT collected from sales, VAT on returns of merchandise, VAT on drawings of stock, VAT on Bad debts recovered. When VAT Input is more than VAT output (i.e. VAT Control account has a debit balance) the difference is receivable from SARS. When VAT Output is more than VAT Input (the VAT Control account has a credit balance) the difference is payable to SARS VAT Calculations VAT output - VAT input = amount payable to SARS. VAT inclusive calculations: When VAT is included in an amount (VAT Inclusive) The calculation for VAT will be the amount x 15/115. VAT exclusive: When VAT is excluded (VAT exclusive) the calculation for VAT will be the amount x 15/100. ACTIVITY G1 41.1. VAT STATEMENTS INDICATE WHETHER THE FOLLOWING STATEMENTS ARE TRUE OR FALSE. ANSWER 1.1.1. | Any business with sales of more than R200 000 must register as a VAT vendor. 1.1.2 | Certain basic foods and essential items are zero-rated to assist the poor. 1.1.3 | Maize meal is one of the example for VAT Exempted item. 1.1.4 | Most businesses mark their stock with the selling price including VAT. 1.1.5 | The standard rate for VAT in RSA is at 19% 1.1.6 | VAT is payable to SARS. Page 92 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD 1.2 VAT ANALYSIS ANALYSE THE FOLLOWING ITEMS BY MAKING A CROSS (X) IN THE APPROPRIATE COLUMN. GOODS / SERVICES 15% VAT 0% VAT VAT EXEMPTS 1.2.1 Residential rent expense 1.2.2 | Vehicle purchases 12.3 | Fuel 1.24 Purchase of a personal computer 1.2.5 Hotel accommodation fee 1.2.6 Public transport fee 1.2.7 | Beans ACTIVITY G2 244 What does VAT stand for? (2) 2.1.2 What is the current VAT rate in South Africa? (2) 2.1.3, What is the VAT charged on the price of brown bread? (2) 2.1.4 Complete the following table in respect of VAT: Taxes paid Type of Direct or indirect Taxes paid on by taxation taxation Employees A Direct B c VAT D Goods/expenses/services (8) 2.1.5 A Shady, owner of Shady Stores, is not registered for VAT. However, he charges VAT to all his customers and he does not pay the VAT over to SARS. Comment on his practice and state the consequences he could be faced with if he is reported to SARS. (8) Page 93 of 100

Downloaded from hlayiso.com ACTIVITY G3: VAT Calculations The table below indicates amounts for various sale transactions, which are subject to Vat at 15%. Complete the table. No. Cost price % Mark-Up VAT Exclusive VAT Amount | VAT Inclusive Price Price e.g. R200 50% R300 R45 R345 1 A= 25% B= R150 C= 2 R400 D= R640 E= Fe 3 R900 G= R1200 H= l= 4 J= 20% K= L= R2760 5 M= 25% N= R105 O= 6 R1000 P= Q= R= R1610 ACTIVITY G4 VAT 4.1 Differentiate between zero rated supplies and exempts supplies. 4.2. Distinguish between the tax evasion and tax avoidance 4.3 Give TWO types of Zero rated supplies. 4.4 Provide the missing figures indicated by A to E. Amount exclusive VAT amount Amount inclusive 700 105 A B Cc 2875 D 780 E 4.5 Calculate the VAT payable at the end of the month if: Total purchases for the month was R120 000 (exclusive of VAT) Total sales for the month were R161 000 (inclusive of VAT) Page 94 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY G4 Answer sheet 4.1 Differentiate between zero rated supplies and exempts supplies. (4) 4.2. Distinguish between the tax evasion and tax avoidance (4) 4.3 Give TWO types of Zero rated supplies. (4) 4.4 Provide the missing figures indicated by A to E. Amount exclusive VAT amount Amount inclusive 700 105 = C= 2875 D= 780 (10) 4.5 Calculate the VAT payable at the end of the month if: Total purchases for the month was R120 000 (exclusive of VAT) Total sales for the month were R161 000 (inclusive of VAT) (6) Page 95 of 100

Downloaded from hlayiso.com ACTIVITY G5 Mr Jumbo is the sole owner of Guduza Supermarkets. The following information was extracted from the accounting records for the month of July 2020. Summary of transactions: Total Sales for a months Sales VAT amount from CRJ 6 390 Sales @ 0% VAT 15 000 Total Purchases for a months Purchases VAT amount from CPJ 3750 Payments that were VAT exempted 2 100 Drawings VAT amount 63 Debtors allowances VAT amount 720 Creditors allowances VAT amount 150 Discount allowed to customers excluding VAT 500 Bad debts written off excluding VAT 400 Required: Prepare the Input VAT, Output VAT and VAT Control account. ANSWERSHEET ACTIVITY G5 GENERAL LEDGER OUTPUT VAT ACCOUNT Page 96 of 100

Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD INPUTVAT ACCOUNT VAT CONTROL ACCOUNT ACTIVITY G6 6.1 VAT CONCEPTS Fill in the missing space in your answer sheet. Write the answer next to the question number (6.1.1- 6.1.3) in the ANSWER BOOK. 6.1.1 is VAT charged to customers. (1) 6.1.2 VAT is payable to the . (1) 6.1.3 VAT is charged at on brown bread. (1) 6.2 VAT CALCULATIONS Mvuzo Traders is a VAT registered business. The standard rate of VAT is 15%, REQUIRED: Calculate the correct amount of VAT the business has to pay. Show ALL workings. (12) Page 97 of 100

Downloaded from hlayiso.com INFORMATION: The bookkeeper, Felix, prepared the VAT Control Account for the tax period ended 31 May 2020 and arrived at a VAT payable amount of R43 820. However, the internal auditor has identified the following errors and omissions which must still be brought into account to calculate the correct VAT payable amount: |. | Sales invoices omitted from the Debtors’ Journal, exclusive VAT 8900 ll. | Damaged goods returned to suppliers, inclusive VAT 21 620 Ill. | VAT on bad debts recovered 112 IV. | VAT on bad debts was recorded on the wrong side of the VAT Control . Account Vv. | VAT on discounts received from suppliers exclusive VAT 5 040 VI. | VAT on sundry business expenses omitted 6 818 ACTIVITY G6 - ANSWER SHEET 6.1 VAT CONCEPT 6.1.1 6.1.2 6.1.3 6.2 VAT CALCULATIONS Calculate the amount receivable from or payable to SARS for VAT on 31 March 2019. Receivable/Payable: Page 98 of 100

71 Downloaded from hlayiso.com KZN ACCOUNTING GRADE 11 2021 STEP AHEAD ACTIVITY G7 7.1. VALUE-ADDED TAX (VAT) The information below relates to Sun Traders for their two-month VAT period ended on 31 March 2020. All items are subject to 15% VAT. REQUIRED Calculate the amount receivable from or payable to SARS for VAT on 31 March 2019. Indicate whether the amount is receivable or payable. (You may complete a VAT Control Account.) (10) INFORMATION: A. Amount owed to SARS for February 2020, R21 375 B. Details in respect of VAT for March 2020 DETAILS EXCLUDING VAT VAT INCLUDING VAT Merchandise purchased/Expenses paid R341 550 Goods taken by owner for personal use R31 500 Debtors’ accounts written off Total sales R480 000 R552 000 Returns by debtors te SS Calculate the amount receivable from or payable to SARS for VAT on 31 March 2020. Receivable/Payable: Page 99 of 100

Downloaded from hlayiso.com Workings Page 100 of 100