Accounting Grade 12 NSC June 2019 Memo (English)

Downloaded from hlayiso.com SENIOR CERTIFICATE EXAMINATIONS/ NATIONAL SENIOR CERTIFICATE EXAMINATIONS ACCOUNTING 2019 MARKING GUIDELINES MARKS: 300 MARKING PRINCIPLES: 1. Unless otherwise stated in the marking guideline, penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied. 2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item. 3. Full marks for correct answer. If answer incorrect, mark the workings provided. 4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer). Note: if figures are stipulated in memo for components of workings, these do not carry the method mark for final answer as well. 5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or – sign or bracket is provided, assume that the figure is positive. 6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. 7. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions. 8. Where penalties are applied, the marks for that section of the question cannot be a final negative. 9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer and at least one part must be correct before awarding the mark. 10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note: check operation must be +, -, x, ÷, or per memo. 11. In calculations, do not award marks for workings if numerator & denominator are swapped – this also applies to ratios. 12. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. Indicate with a . 13. Be aware of candidates who provide valid alternatives beyond the marking guideline. 14. Codes: f = foreign item; p = placement/presentation. These marking guidelines consist of 15 pages. Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 2 DBE/2019 SC/NSC – Marking Guidelines QUESTION 1 1.1 1.1.1 True  1.1.2 True  1.1.3 False  1.1.4 True  4 1.2 Calculate the amount receivable from or payable to SARS for VAT on 30 April 2019. Mark one line only. Cannot mix signs. Inspect candidates' responses. Award highest mark.        One part correct 15 890 – 1 470 + 3 075 – 1 305 – 33 600 + 51 750 = 34 340 224 000 x 15% OR – 15 890 + 1 470 – 3 075 + 1 305 + 33 600 – 51 750 = – 34 340 Mark one “account”/workings only. Inspect candidates' responses. Award highest mark. Items marked * may be shown on the opposite side in brackets. VAT CONTROL VAT CONTROL 33 600 15 890 15 890 33 600 *1 305 51 750 51 750 *1 305 *1 470 *3 075 *3 075 *1 470 34 340 34 340 70 715 70 715 70 715 70 715 Receivable/Payable: PayableDo not accept Receivable (irrespective of workings) 11 Copyright reserved Please turn over

Downloaded from hlayiso.com Accounting 3 DBE/2019 SC/NSC – Marking Guidelines 1.3 BANK RECONCILIATION 1.3.1 Calculate the correct Bank Account balance on 31 May 2019. CRJ: Provisional Bank R19 400 2 350 + 313 + 900 = 3 563 balance Accept alternative CPJ: Cheque 654 + 2 350  presentations 31 560 + 1 060 = 32 620 such as Bank Theft of cash – 31 560 account or Bank Balance Receipts and 19 400 + 3 563 – 32 620 Bank charges – 1 060 Payment = (9 657) columns Interest income +313 + 900  -1 Foreign Correction EFT items, max -2 if two marks or 0 6 578-5 678 mark is earned in BRS Correct Bank balance – 9 657  One part correct Favourable/Unfavourable: Unfavourable See calculation above 9 1.3.2 Bank Reconciliation Statement on 31 May 2019 If candidates use 1-column method and start with Bank ledger account, +ve and -ve signs will be reversed. Alternative DEBIT CREDIT Balance as per Bank Statement (2 700) 2 700 Balancing figure Outstanding deposit 21 343 21 343 Outstanding cheques: 705 (9 450) 9 450 797 (14 350) 14 350 Debit deposit erroneously credit (4 500) 4 500 Balance as per bank account (9 657) 9 657 See 1.3.1 -1 Foreign items, max -2 if mark is earned in bank calculation above 31 000 31 000 7 1.3.3 State TWO internal control measures that the business can use to ensure that this will not happen in the future. Possible responses for two marks:  Part marks for partially correct answer • Encourage debtors to use EFTs and internet banking. • Get other people to handle matters concerning cash (Division / Rotation of duties) also for two marks • SMS notifications from the bank for all transactions. • Use security companies to collect/transit the money • Check deposits daily / Check deposits to receipts 4 TOTAL MARKS 35 Copyright reserved

Downloaded from hlayiso.com Accounting 4 DBE/2019 SC/NSC – Marking Guidelines QUESTION 2 2.1 2.1.1 FIFO  2.1.2 Perpetual  2.1.3 Expense  3 2.2 PHOTO-FIX TRADERS 2.2.1 Calculate: Value of closing stock of cameras OR: Using COS to calculate stock 435 500 145 000 one mark one mark one mark (6 x 5 500) (70 x 5 750) (10 x R4 000) (25 x 4 200) 110 000 + 1 104 000 + 1 380 000 – 2 013 500 33 000 + 402 500 + 40 000 + 105 000 (77 000 + 977 500 + 560 000 + 399 000) two marks one mark one mark one mark     = 580 500 method mark = 580 500  one part correct 9 2.2.2 Value of closing stock of photo frames 115 200 two marks 110 700 three marks 7 200  + 108 000 – 4 500  x 80 = 11 808  one part correct if multiplied by 80 60  + 720  – 30 750 three marks R147,60 six marks 8 2.2.3 The owner suspects that photo frames are being stolen. Provide a calculation to confirm his suspicions. 93 three marks     one part correct 750 – 657 – 80 = 13 (60 + 720 – 30) one mark if incorrect but 60, 720 or -30 is shown 5 Copyright reserved

Downloaded from hlayiso.com Accounting 5 DBE/2019 SC/NSC – Marking Guidelines 2.2.4 Tom is thinking of employing an assistant at a wage of R3 500 per month to control the stock of photo frames. Explain why this is NOT a good idea. Provide TWO points with figures/calculations. Note: Explanation could differ depending on figures calculated above in 2.2.2 and 2.2.3 Explanation   Figures   Wages one mark It is not worthwhile to R42 000 p a / R 3 500 pm employ the assistant Point 1 OR Cost of units missing: one mark Wages greatly exceed the 13 x R147,60 = R1 918,80 cost of the missing units see 2.2.2 / 2.2.3 above (could use unit cost price) Units missing = 13 one mark see 2.2.3 above Missing items are relatively Units available = 750 one mark insignificant see 2.2.2 above Point 2 OR % missing = Less than 2% two marks Units missing are a very OR: small % of units available Units sold p.a. = 657 one mark Units sold per day = 1,8 or 2 one mark 6 2.3 MANAGEMENT OF INVENTORIES Product Problem Solution Problem       Figures    High returns, 500 Possible change to new supplier Ensure high quality ordered or Order as per customer specifications Cupboards 500 / 1 800 (27,7%) Check quality before accepting stock Or delivered 1 000 cupboards missing Improve security Missing money, R40 000 (510 000 – 470 000) Division of duties/ banking of Or 20 tables missing money Improve physical security Tables Credit sales much higher than cash sales (liquidity issues) Promote cash sales by 2 400 / 600 or 1 800 units more providing incentives such as 2 400 / 3 000 (80%); cash discount 600 / 3 000 (20%) Change to a different type of Slow selling item / too much chair. Advertise more to stock on hand increase sales Chairs (1 300 and 2 950) Purchases much higher than Buy stock according to sales. sales (6 000/4 350) Reduce mark-up% 9 TOTAL MARKS 40 Copyright reserved

Downloaded from hlayiso.com Accounting 6 DBE/2019 SC/NSC – Marking Guidelines QUESTION 3 3.1 3.1.1 Indirect  3.1.2 Selling and distribution  3.1.3 Fixed  3.1.4 Direct material  4 3.2.1 Calculate: The value of the closing stock using the first-in-first-out stock valuation method 930 x 90 = 83 700  265  x 80  = 21 200 * 104 900 * one part correct 1 195 – 930 three marks 5 Calculate: Direct material cost (390 000 + 198 400 + 83 700) one mark 59 800 + 672 100 – 104 900 = 627 000   see above one part correct 4 3.2.2 Factory overhead cost TOTAL b/f 84 330 Insurance (31 200 x 60%) 18 720 * 5 Rent expense (114 000 x / 8 ) 71 250 * Water and electricity (7 110  x 50/ 15 ) 23 700  One mark for 474 / 3 555 as final answer *one part correct 198 000 * 8 3.2.3 Provide evidence (figures) to justify his concern. In each case, also give a possible reason for the increase in EACH unit cost, apart from normal inflation. EVIDENCE REASON figure     Total fixed cost per unit Changes in economies of scale Increased by R8 per unit (22%) Fewer units produced (from R36 to R44) (Do NOT accept inflation.) Direct labour cost per unit More overtime worked due to strikes Increased by R12 per unit (32%) Inefficiency / Poor supervision of (from R38 to R50) workers / Surplus workers not gainfully employed / Hours lost due to load shedding (Do NOT accept inflation.) 6 Copyright reserved

Downloaded from hlayiso.com Accounting 7 DBE/2019 SC/NSC – Marking Guidelines 3.2.4 Calculate the break-even point on 31 December 2018. R 264 000  300 – 165 135 two marks = 1 956 or 1 955 or 1 955,6 units  one part correct 4 Explain whether or not there was any improvement in the trends of the level of production and the break-even point from one year to the next. Quote figures. Comment on each   figures   Production decreased from 7 560 – 6 000 (1 560 units / 20,6%)two marks The BEP decreased from 3 888 units to 1 956 units (1 932 / 49,7%) two marks see above calculation OR: for four marks 6 000 – 1 956 In 2018 production exceeds BEP by 4 044 units while in 2017 production exceeds BEP by 3 672 units 7 560 – 3 888 4 The owner cannot understand why he is making a better profit this year. Explain how this happened. Provide TWO points. Quote figures. Comparing BEP to production  figures  Comparing selling price  figure  For three marks: • The business is making a profit on more units this year (4 044 this year; 3 672 last year), 372 units more see BEP calc above For two marks: • The selling price per jacket increased from R220 to R300 (R80 more per jacket) OR: For two marks only if first bullet not provided: • A decrease in BEP by 1 932 units see above 5 TOTAL MARKS 40 Copyright reserved

Downloaded from hlayiso.com Accounting 8 DBE/2019 SC/NSC – Marking Guidelines QUESTION 4 4.1 4.1.1 C Balance Sheet 4.1.2 D Income Statement 4.1.3 B Cash Flow Statement 4.1.4 A Audit Report 4 4.2 AUDIT REPORT 4.2.1 Choose the correct word from those given in brackets. Unqualified  Give ONE reason. Any ONE valid reason  Mark independent of answer above It is a good/clean audit report The words 'fairly present' indicates that there were no problems encountered by the auditors. 3 4.2.2 Give ONE reason why the Companies Act requires public companies to be audited by an independent auditor. Any ONE valid reason  part-mark for unclear or incomplete answer • Unbiased view will be presented • Separation between management and ownership • Interest of the shareholders are safeguarded • Business is working with money of shareholders • To reduce / deter the possibility of fraud occurring For one mark: Prevent / reduce fraud 2 4.2.3 Newspaper reports have indicated that Kego and Murray Associates have been found guilty of misconduct in terms of audit work done at several large firms. Explain how this may influence shareholders of Everest Ltd. State TWO points. Any TWO relevant points   Future shareholders not relevant to this answer Question asks for influence on shareholders, not consequences for share prices etc. The shareholders will not be able to rely on the audit report The shareholders will not reappoint the auditors at the next AGM (will be fired) The shareholders may demand a re-audit by another reputable firm The shareholders may insist on legal action if audit was fraudulently done Existing shareholders might want to offload / sell their shares Existing shareholders will concerned over the value of their investment in the company. 4 Copyright reserved

Downloaded from hlayiso.com Accounting 9 DBE/2019 SC/NSC – Marking Guidelines 4.3 MVVS LTD Foreign entries –1 max -1 Placement -1 (if marks scored elsewhere) max –1 4.3.1 Statement of Comprehensive Income (Income Statement) for the year ended 31 March 2019 # Give method mark if R6 236 000 Sales (10 563 280 + 36 720) 10 600 000 * Cost of sales (6 236 000 + 24 000 ) (6 260 000) *# Gross profit Sales - COS 7 4 340 000  Operating income operation 112 000 * Rent income 99 500 Bad debts recovered 7 800  Provision for bad debts adjustment 1 600  Profit on sale of asset 3 100  Gross operating income GP + OI 8 4 452 000  Operating expenses operation (3 710 000) * Directors' fees 1 262 100 Water and electricity 218 000 Telephone 75 600 Audit fees 104 000 Sundry expenses 61 001 13 000 three marks Salaries and wages (1 280 000 + 9 100 + 3 900) 1 293 000 * Employer's contributions 318 200  Bad debts (22 300  + 8 000 ) 30 300 * Consumable stores 49 800  Insurance (79 500 – 38 250 ) 41 250 * 156 799 three marks 94 250 two marks Depreciation (34 999 + 80 000 + 41 800) + (92 500 + 1 750) 251 049 *      Trading stock deficit (364 200 – 24 000 - 334 500) 5 700 * See COS above 28 29 700 three marks Operating Profit GOI – OE 742 000  Interest income 26 000  balancing figure; cannot be 0; accept -ve based on workings Profit before interest expense NPBT + IE 768 000  Interest expense (1 430 200  + 304 800  – 1 658 000) (77 000) * Net profit before tax 691 000 Income tax Ignore brackets (193 480)  Net profit after tax must subtract income tax 497 520  10 53 *one part correct Copyright reserved

Downloaded from hlayiso.com Accounting 10 DBE/2019 SC/NSC – Marking Guidelines 4.3.2 NOTES TO THE BALANCE SHEET Fixed/Tangible Assets (Brackets must be included, where applicable, to score marks) Land and Vehicles Equipment buildings Carrying value at beginning 12 500 000 275 000 280 500 of financial year Cost 12 500 000 750 000 398 000 Accumulated depreciation - (475 000) (117 500) Movements Additions at cost - 627 000 - Disposals at carrying value - - (6 500) See Inc Stmt Depreciation - (156 799) (94 250) Carrying value at end of 12 500 000 financial year Cost 12 500 000 1 377 000 370 000 (190 250) Accumulated depreciation - (631 799)  475 000 + depr  8 Ordinary share capital Authorised: 8 000 000 shares Issued: 1 200 000 shares in issue at beginning 4 800 000  (150 000) shares re-purchased (ASP: R4.00 ) (600 000)  850 000 shares issued during year 5 100 000  balancing figure if one item correct 1 900 000  shares in issue at end 9 300 000  6 OR: Issued: Note: Candidates might not round off the ASP to nearest cent; this could lead to differences of approximately R710 to R790 1 200 000 shares in issue at beginning 4 800 000  shares issued during year 5 233 500 850 000  balancing figure if one item correct OR 5 235 000 shares re-purchased ASP: R4,89  (733 500) (150 000)  ASP: R4,90 OR (735 000) 1 900 000  shares in issue at end (R4,89 or R4,90) 9 300 000  TOTAL MARKS 80 Copyright reserved

Downloaded from hlayiso.com Accounting 11 DBE/2019 SC/NSC – Marking Guidelines QUESTION 5 5.1 5.1.1 Solvency  5.1.2 Liquidity  5.1.3 Return on equity  5.1.4 Gearing  4 5.2 KULFI LTD 5.2.1 RETAINED INCOME: Balance on 1 March 2018 141 500 Net profit after tax 293 100 x 70/30 683 900 / 977 000 – 293 100 One part correct Funds used for repurchase of shares (57 600)  60 000  x 0,96  Ignore brackets Do not accept 0 One part correct Ordinary share dividends Ignore brackets (456 800)  One part correct; if Int Div + Final Div Interim 1 000 000 x 25c 250 000 Final 206 800 Balance on 28 February 2019 one part correct 311 000 Check that figures used for repurchased shares, OSD are deducted 12 5.2.2 Calculate: Income tax paid 293 100  – 11 300  – 21 800  = 260 000  one part correct Accept alternative arrangements for calculations such as signs reversed, brackets and/or ledger account. 4 Calculate: Dividends paid (456 800 – 206 800) 360 000  + 250 000  = 610 000  one part correct See 5.2.1 Accept alternative arrangements for calculations such as signs reversed, brackets and/or ledger account. 4 5.2.3 Cash effects of investing activities (518 600) No details -1P (Max) operation Fixed assets purchased 345 000 two marks (580 400)  8 775 720  + 123 600 + 111 800 – 8 430 720  One part correct Accept alternative arrangements for calculations such as signs reversed, brackets Must be in brackets and/or ledger account. Proceeds from sale of fixed assets 111 800  Increase in fixed deposit (50 000) Must be in brackets 9 Copyright reserved

Downloaded from hlayiso.com Accounting 12 DBE/2019 SC/NSC – Marking Guidelines Net change in cash and cash equivalents  377 700 Cash and cash equivalents (beginning of year)  (117 520) Must be in brackets Cash and cash equivalents (end of year)  260 180 4 5.2.4 Calculate: Acid test ratio 996 480 one mark – 448 000 one mark 548 480 two marks One part correct; must be y:1 (288 300  + 260 180 ) : 553 600  = 0,99: 1 or 1 : 1  4 Calculate: Debt-equity ratio see 5.2.1 1 400 000  : (311 000  + 7 557 600) 7 868 600 = 0,2 : 1 One part correct; must be y:1 (0,17 : 1) 4 Calculate: % return on average shareholders' equity (ROSHE) see 5.2.1 683 900  x 100 ½  (7 341 500 + 7 868 600 ) 1 7 605 050 see above SE three marks = 9% One part correct; % sign not essential; cannot be Rands, cents, units etc 5 5.2.5 The shareholders are satisfied with the improvement in the liquidity position. Quote THREE financial indicators (with figures) to support this statement. THREE valid indicators    Trend figures    Current ratio increased from 0,7 : 1 to 1,8 : 1 Acid test ratio increased from 0,4 : 1 to 1 : 1 see 5.2.4 Debtors collection period improved from 39 days to 28 days Creditors payment period must not be accepted 6 5.2.6 The company increased the share capital by R840 000, and the loan by R550 000. Explain how this affected the gearing and risk of the company. Quote TWO financial indicators. TWO valid indicators   with figures   Comment  Debt/equity ratio moved from 0,1 : 1 to 0,2 : 1 see 5.2.4 ROTCE decreased from 14,4% to 12,9% The company is lowly geared (not making extensive use of loans) Increasing the loan has caused the company to be negatively geared as the interest rate is 13,5%. The business is not making effective use of the money borrowed to increase profitability. 5 Copyright reserved

Downloaded from hlayiso.com Accounting 13 DBE/2019 SC/NSC – Marking Guidelines Explain what the directors have done with this cash inflow. State TWO points. TWO points   with figures   Fixed assets purchased; R580 400 see 5.2.3 Addressed the overdraft; - R142 520 to + R260 180 Increased investment by R50 000 Dividends paid; R610 000 see 5.2.2 Decreased creditors balances, R227 400; more stock purchased, R167 000 Shares repurchased, R540 000 4 5.2.7 Provide calculations to show the change in the pay-out rate. one mark In 2018: 80/83 x 100 = 96,4%  of EPS was distributed as dividends OR: retained 3,6% one mark In 2019: 47/71 x 100 = 66,2%  of EPS was distributed as dividends OR: retained 33,8% 4 Give ONE reason why many shareholders were satisfied with the change in policy. Quote figures. Any ONE valid explanation  Relevant figures  Cash earnings from dividends decreased by 33 cents per share because the company is retaining money for capital growth. Market price of shares increased (807c to 840c) probably due to higher retained income (R141 500 to R311 000) see 5.2.1 Market price of shares increased (807c to 840c) probably due or NAV (816c to 837c) 2 5.2.8 Explain how the repurchase of the shares benefited Martha's shareholding. Quote figures. Explanation  figure (calculation)  Majority shareholding must be mentioned to get two marks Part-mark for explanation for unclear or incomplete answers After the repurchase, she once again became the majority shareholder. 475 000 / 940 000 = 50,5% 4 TOTAL MARKS 75 Copyright reserved

Downloaded from hlayiso.com Accounting 14 DBE/2019 SC/NSC – Marking Guidelines QUESTION 6 6.1 Identify TWO items on the Cash Budget that will not appear in a Projected Income Statement. Any TWO of:   Items must come from Info A Cash from debtors Fixed deposit: Protea Bank Cash purchases of trading stock Payment to creditors Drawings 2 6.2 (i) Calculate: Rent income, June 2019 9 180 x 100/108 = 8 500  (ii) Calculate: Fixed deposit: Protea Bank, July 2019 400  x 100/6  x 12 = 80 000  one part correct 400 x 12 6% (iii) Calculate: Cash purchases of trading stock, July 2019 760 000 x 60% = 456 000  7 6.3 Calculate the total purchases for April 2019. 192 000 = 480 000  40% 2 6.4 DEBTORS' COLLECTION SCHEDULE CREDIT SALES JUNE JULY MAY 576 000 374 400 JUNE 558 000 159 030 362 700 If 65% of credit sales JULY 855 000 x 30% x 95% 243 675 256 500 one mark TOTAL 533 430 606 375* 8 *one part correct Copyright reserved

Downloaded from hlayiso.com Accounting 15 DBE/2019 SC/NSC – Marking Guidelines 6.5.1 Comment on the following (provide figures): Effect of the advertising on sales Comment on advertising (with figures)  Comment on sales (with figures)  Effect on sales  Max one mark if no figures provided Advertising was over budget by R28 800 (80%) Total sales increased by R4 000 (0,6%), due to an increase in credit sales. Effect on sales: The large increase in advertising was not effective / did not achieve the desired effect on sales. 3 Payment to creditors Comment on creditors  Figures  Creditors were underpaid by R75 000 (while purchases increased; if this trend continues, creditors will decrease credit limits, stop supplying on credit, may incur interest charges). 2 6.5.2 Identify TWO strategies (except advertising) that the business used to achieve sales targets for May 2019. Quote figures. TWO strategies   Figures   Increased the credit sales, R36 000; (R412 000 more than cash sales) Introduced delivery service, R19 000 4 Explain whether these were good strategies, or not. Provide ONE point with figures. Comment on collection  Figures  Not effective: • Collection from debtors was poor (business will face cash challenges in respect of future collections) – less than budget by R95 000 or 20% • Cash flow problems impacted on payments to creditors – paid R75 000 less than budget • Delivery service impacted on cash flow – paid R19 000 which was not budgeted • Small increase in total sales by R4 000 OR Effective: • Increase in credit sales was R36 000 – increase in number of customers • Increase in sales was R4 000 – increase in number of customers 2 TOTAL MARKS 30 TOTAL: 300 Copyright reserved