Accounting Grade 12 Paper 1 NSC November 2023 Memo (English)

Downloaded from hlayiso.com basic education Department: Basic Education REPUBLIC OF SOUTH AFRICA NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING P1 NOVEMBER 2023 MARKING GUIDELINES EDUCATION PRIVATE BAG X595, PRETORIA 0001 5EPARTMENT OF BASIG APPROVED MARKING GUIDELINE Approved Approved Approved Approved Mh Hu Cy. "Woedre ff flaceces T HALL P GOVENDER D WOODROFFE ‘M VANNEER DBE Internal moderator DBE Internal moderator Umalusi External moderator Umalusi External moderator 26 Nov 2023 26 Nov 2023 26 Nov 2023 26 Nov 2023 MARKS: 150 MARKING PRINCIPLES: Unless otherwise stated in the marking guidelines, 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. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item. Unless otherwise stated, give full marks for a correct answer. If answer is incorrect, mark workings. If a pre-adjustment figure is shown as a final figure, allocate the part-mark as a working mark for that figure (not the method mark for the answer). Note: figures stipulated in the marking guidelines as components of workings are marked together; these do not carry the method mark for parts thereof. 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. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. If candidates provide more than the required number of responses, inspect all responses to give benefit to the candidate. Penalties may be applied for foreign entries if candidates earn full marks on a question (max -2 per Q). These marking guidelines are not for public distribution as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions. Where penalties are applied, the marks for that section of the question cannot be a final negative. Where method marks are awarded for operation, markers must inspect reasonableness of the answer. ‘Operation’ means check operation. 'One part correct’ means operation and one part correct. Note: check operation must be +, -, x, + as per candidate's calculation (if valid) or per marking guidelines. In calculations, do not award marks for workings if numerator & denominator are swapped — this also applies to ratios. 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 &. Be aware of candidates who provide valid alternatives beyond the marking guidelines. Note that one comment could contain different aspects. Codes: f = foreign item; p = placement/presentation. These marking guidelines consist of 10 pages. Copyright reserved

Downloaded from hlayiso.com Accounting/P1 2 NSC - Marking Guidelines DBE/November 2023 QUESTION 1 1.1 Calculate the value of closing stock of bicycles using FIFO method. WORKINGS ANSWER 740-40 1.009 - 700* / if both adds up to 1009 (700*vv xR2 100“) + 309M x R2 020 v 1 470 000 three marks 624 180 two marks Pe ea ee 6 1.2 Statement of Comprehensive Income for the year ended 28 February 2023 Sales 21 017 200 21 353 200 two marks Cost of sales (21017 200 + 336000) x 100/220 v (9 706 000) 1* Be alert to other alternative arrangements for calculations Gross profit Sales-cos 5 11311 200M ; Other income 942 900 O 1s wl, Bad debts recovered @ fe aS Commission income 277 000 + 41000 318 000 vv O15 . SIs one mark __one mark KO Sow 2 Fee income (47 150-23 000) two marks (47 150 x 105/205) two marks 278 850M* Ce ze , $8 303 000V_— 24 150 vv zie = xis Sundry income an 4 u oO 2 & alg Gross operating income 6 12 254 100 ge a ™~ = | Operating expenses ; 12 254 100 — 4 150 300 (8 103 800) ¥ & $ = q Accept without brackets as operation would be correct oO Ha a a | ee Uy Salaries and wages Depreciation Sundry expenses — 1 foreign items (max — 2); misplaced items, award marks for workings only Note Principle 11 when awarding method marks: Operation as per candidate’s operation Copyright reserved Do not accept 2 125 380 or 2 094 180 as a final answer 31 200 MM Trading stock deficit 2 125 380 — 2 094 180 see 1.1 If subtracted from Loss due to theft / stock loss 2 125 380 Rent expense — (1950 x 330) (350 x 330) 643 500 vv —- 115 500 vv (900 x 330) (700 x 330) (1500 x 330) (100 x 330) 528 000 W* OR 297 000 + 231000 OR 495 000 + 33 000 two marks two marks two marks two marks Directors’ fees 85 000 three marks * 1610 000v + 75 000v v + 10000 v 1 695 000M Operating profit 13 4 150 300 Interest income Profit before interest expense Interest expense Net profit before tax 3.737 250 Income tax (1 152 000) Net profit after tax 2 585 250 24 * 1 part correct Please turn over

Downloaded from hlayiso.com Accounting/P1 3 DBE/November 2023 NSC = Marking Guidelines 1.3 Statement of Financial Position on 28 February 2023 ASSETS NON-CURRENT ASSETS Fixed assets Investment: Fixed deposit 2 vey ONE mark for 1 500 000 as a final answer 1 000 000 vv" CURRENT ASSETS accept any order of items under CA 3 860 090@* Inventories seet.1 2094 180M Trade and other receivables see comminc transfer seerentexp [one mark only] 636 910 M* 483 110+ 41 000Y — 2 700 + 115 500 M or [350 x 330] Cash and cash equivalents 629 000 v+ 500 000 v 1 129 000 * TOTAL ASSETS 10 EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS' EQUITY 22 562 750V v Ordinary share capital 20 000 000 - . 2 562 750M Retained income SHE - OSC 3 Do not accept 0 as an answer NON-CURRENT LIABILITIES 4512 550 Loan 4512 550 CURRENT LIABILITIES operation 3 793 340 M* Trade and other payables see fee inc see dir.fees transfer 630 340 M* 523 890 v + 24 150 M+ 85 000M —2700v Current portion of loan 420 000 SARS: Income tax 1152000” - 1049000 103 000M* must be positive form.m. must be negative for m.m Must subtract prov tax Shareholders for dividends 2 640 000” TOTAL EQUITY AND LIABILITIES id 25 Inspect: SARS:IT and SFD may be included in TROP * 1 part correct ~ 1 foreign item (max -2); presentation -1 (max -1); misplaced items, award marks for workings only Note Principte 11 when awarding method marks: Operation as per candidate's operation, unless specified. TOTAL MARKS 55 DEPARTMENT OF BASIC | EOUCATION PRIVATE BAG KO9S, PRETORIA HOt 2023 -1i- 26 Copyright reserved APPROVED MARKING GUIDELINE Please turn over PUBLIC EXAMINATION

Downloaded from hlayiso.com Accounting/P1 4 DBE/November 2023 NSC — Marking Guidelines QUESTION 2 SHERBIZ LTD 2.1 ORDINARY SHARE CAPITAL NOTE ~1 poor presentation (max -1) 1200000 | Shares in issue on 1 March 2022 7 200 000 Shares issued on 30 June 2022 300 000 v Always treat this as the balancing figure. 2 700 vee 4 Ignore workings on this aspect. Balancing figure (90 000)*v Shares repurchased (ASP: R6,60 © ) (594 000)* 4 9 306 000/1 410 000 | Do not accept 90 000 x 0,8 1410000 4 one part correct’ | Shares in issue on 28 February 2023 9 306 000 v must include 1.200 000 “Ignore brackets, check correct operation for balancing figures. 2.2 -1 poor presentation (max -1) CASH FLOW OF OPERATING ACTIVITIES Cash generated from operations Interest paid (117 600) Dividends paid [1 200 000 x 0,24) [1 500 000 x 0,30] 288000VM + 450000vM (738 000) Z if x by correct DPS if x by correct DPS must be in brackets OR - 288 000 — 450 000 for the m.mark, at least one (450 000 + 282 000) mark in one of components OR (using total dividends) + 288 000 +732000 -282 000 must be eared two marks one mark one mark (267 200) 4 Income tax paid must be in brackets 337 500 vv — 42 500 v —- 27 800 v “OR — 337 500 + 42 500 + 27 800 for the m.mark, at least one part must be correct Be alert to alternative workings such as ledger account or use of brackets or signs reversed. Ensure that only one option is marked consistenily. If final answers are not in brackets, assume an inflow of cash — award marks for workings only. 'f a workings amount is shown as a final figure, award the mark/s allocated, ignore the brackets; If the correct amount is provided without workings or the brackets, award all working marks only (not final mark). CASH FLOW OF FINANGING ACTIVITIES 1878 600 4 One part correct . 2 700 000 4 Proceeds from shares issued See 2.1 No brackets Funds used to repurchase shares (90 000 x 6,60) see 2.1 + (90 000 0,80) wy 594 000 see 2.1 + 72000 (666 000)" one m.mark one mark Change on loan * 273 000 — 117 600 OR 1 834 000-1 678 600 (Gr nd 55 400)" OR -273 000 + 117600 OR-1 834 000 + 1 678 600 part of the workings must Method mark only if figures above are part of a calculation; not as a final answer. be correct Be alert to different permutations of calculations — check calculation to for validity. * If final answers are not in brackets, do not award m.mark; one mark only. | BEPARTMENT OF BASIC EDUCATION iT PRIVATE BAG X894, PRETORIA 0807 | Copyright reserved 2023 -tt- 26 APPROVED MARKING | PUIIG BMAMINATION |

Downloaded from hlayiso.com Accounting/P1 5 DBE/November 2023 NSC — Marking Guidelines 2.3 Calculate the following financia! indicators: Net asset value per share WORKINGS ANSWER 723,4 cents MJ 10.200 000 »" x 100 must be in cents, assume 1 410 000 see 2.1 1 cents if not specified: accept R7,23 or 723c Dividend payout rate WORKINGS ANSWER Choose ONE option only, mark consistently OPTION 1: Must use correct method of calculating interim DPS & final DPS vv + v 20 a 20 x ‘00 75,5% , OR Accept 0,2 +0.3 x 100 80,2% 0,662 ‘one part correct must be %; assume % if not specified OR_ OPTION 2: If total dividends and NPAT are used accept 75% 76% 80% 732 000 three marks one mark two marks 450 000 + 282000 x 100 912 500 1 one mark % return on average shareholders’ equity WORKINGS ANSWER 912 500 v x 100 10,0% MI q v v one part correct, (10 200 000¥+ 7 985500) 1 Beye at 9 092 750 two marks plus m.mark on answer % sign not necessary « For EACH calculation, the ‘x 100’ is not ‘one part correct’ * Numerators and denominators must be marked as such. ¢ Do not award marks for any operations done to stand-alone figures e.g. no tick if anything else added to 912 500. . Superfluous entries: award marks for correct figures, apply & to final answer. TOTAL MARKS 35 | DEPARTMENT OF BASIC EDUCATION PRIVATE BAG X85, PRETORIA 0007 | 2023 -11- 26 Copyright reserved Please turn over APPROVED MARKING GUIDELINE PUBLIC EXAMINATION |

Downloaded from hlayiso.com Accounting/P1 6 DBE/November 2023 NSC — Marking Guidelines QUESTION 3 3.1 13.44 Cy 3.1.2 Dv 3.1.3 By 3 3.2. Liquidity: Identify the company that is managing its working capital well. Quote TWO financial indicators with figures and trends. Guardian Ltd ” If incorrect company is identified, award marks for the correct financial indicators (max 2) Further explanations (beyond figures and trends) are not required. Trends may be implied in an explanation. Candidates might motivate by showing the negatives of Navarra Ltd. Financial indicators ¥ figures (showing trend) ¥ ¥ Current ratio: Increased (from 1,5:1) to 1,7:1 / by 0,2: 1. Acid test ratio: Increased (from 1,0:1) to 1,2:1 / by 0,2: 1 Debtors collection period: Decreased (from 22 days) to 19 days / by 3 days Creditors payment period: Increased (from 48 days) to 50 days / by 2 days 5 3.3. Financing strategies and gearing: Guardian Ltd What were the causes of the change in the debt-equity ratio? Provide TWO causes with figures. v Increase in loan from W R3 600 000 to R5 000 000 / by R1 400 000 / by 38,8% Y Increase in OSC from “ R12 000 000 to R20 960 000 / by R8 960 000 / by 74,6% / by issuing an additional 800 000 shares 4 Explain why it was wise for the company to make more use of loans. Quote and explain ONE other financial indicator (with figures and trends) to support this opinion. Do not accept Debt/Equity ratio here Financial indicator “figures (accept final % figures) V % Return on average capital employed (ROTCE): Increased (from 13,5%) to 16,6% / by 23% / by 3,1% points. Comment on gearing must cover positive gearing with interest rate which can be implied v W part marks for unclear / partial answer ¢ Company is positively geared as return (16,6%) is greater than rate of borrowing (14%). ¢ The loan (which increased) was productively used (at a rate of 14%) to generate more profits (at 16,6% ROTCE). ¢ The company was positively geared (at 13,5% when interest rate was 13%); positive gearing improved in spite of the increase in interest rate (to 14%). 4 See Principle 7: -1 for foreign entries (per Q), if full marks earned and more than the required number of financial indicators quoted. | GEPARTMENT OF BABIC | EDUCATION | PRIVATE BAG X896, PRETORIA 0001 Copyright reserved Please turn over 2023 <1 26 i APPROVED MARKING GUIDELINE

Downloaded from hlayiso.com Accounting/P1 7 DBE/November 2023 NSC — Marking Guidelines 3.4 Dividends, earnings and returns: Navarra Ltd Explain ONE financial indicator which indicates that a concerned shareholder should not be satisfied with the change in the dividend policy of the company. Quote figures and trends. Financial indicator v Figures and trend v e Dividend pay-out rate increased (from 34,8%) to 103,8% / by 198% / by 69% points. e [DPS at 83c is 43c more than last year and EPS dropped from 115c to 80c / by 35c] (must cover both EPS & DPS together) Comment ~ Do not accept ‘shareholders are / are not satisfied’ as a comment for one mark; must mention that they are not retaining funds (for future growth). Expected responses: Funds of retained income were used for current year’s dividends / directors are depleting reserves which could be used for future expansion / directors not concerned about future growth or sustainability of the company / directors simply concerned about being re-elected or keeping shareholders happy. Explain whether the shareholders should be satisfied with the earnings and returns of the company. Quote TWO financial indicators with figures and trends. NB: Do not accept DPS as a response. Please contact the DBE IM if candidates use Earnings Yield or Dividend Yield (i.e. EPS/MP or DPS/MP) in this question. Financial indicators v ~ Figures &trendY « Earnings per share (EPS): Decreased (from 115 cents) to 80 cents / by 35 cents / by 30,4%. e Return on average shareholders’ equity (ROSHE): Decreased (from 11%) to 6,4% / by 41,8% / by 4,6% points. Comment v ¥ part marks for unclear / partial answer Shareholders should be concerned as the return is now lower than the return on outside investments (9%) / the decrease in profitability has contributed to the lower returns. _ ONE MARK: Shareholders should not be satisfied. 6 3.5 Shareholding of Nathan Crewe in Navarra Ltd: identify the effect that the repurchase of Nathan's shares had on his % shareholding. Quote figures and trends. Figures with trend vv Figures with trend ~~ % shareholding dropped (from 55,2%) to 40,2% / by 15% points / by 27,2%. ONE MARK: He is no longer the majority shareholder / his shareholding is 40,2%. Explain how the company was able to raise approximately R4,4 million to finance the repurchase of shares and dividends earned by shareholders. Provide TWO points. Quote figures. Trend can be implied in answer. ¢ Loan increased v by R3 500 000 “(from R3m to R6,5m) ¢ Bank balance Y moved to an overdraft of R3 200 000 / from a debit balance of R380 000 to a credit balance of R3 200 000 / by R 3 580 000 ” 4 Give TWO reasons why the decision to repurchase Nathan's shares should be considered as irresponsible. Figures not necessary. Do not accept loss of majority shareholding here. Any TWO different reasons e.g. ethics / affordability VV ~~ part marks for unclear / partial answer e Repurchase price (1150c) is high while market price dropped over the year (to 400c). « Does not comply with law on funding of repurchased shares / contravention of Co.Act. e Company did not comply with solvency and liquidity testing / compromises liquidity / creates large overdraft or cash flow problem / places company in risky financial position. « Company performance (profitability) has declined / buy-back unaffordable. « Misused his majority status to gain from share repurchase / promoted his own (selfish) interest at the expense of co. / element of corruption — may have used privileged info. e Contributed to decline in some key financial indicators (candidate could specify). 4 See Principle 7: -1 for foreign entries (per Q), if full marks earned and more thanthe required number of financial indicators quoted. Copyright reserved Please turn over VERPARTMENT OF BAGIC ARTMENT OF | i RIVATE BAG AEBS, PRETORIA 0001 | H i | i

Downloaded from hlayiso.com Accounting/P1 8 DBE/November 2023 NSC - Marking Guidelines 3.6 Directorship: 'The CFO (chief financial officer) has a significant influence on the success of a company.’ Explain why you would agree with this statement. ONE point vv part marks for unclear / partial answer Expected responses: ¢ He must be an expert in Accounting and financial management tasked to safeguard the investment by stakeholders. e As head of finance, he is responsible for good financial management / expected to advise the Board / lead by example / display good corporate governance (ethics & professionalism). e Should be aware of the performance / financial position / available financial resources and create structure for sound checks and balances (controls) e He should not place the business at risk / focus on the growth and sustainability of the company / he must report regularly / transparent. 2 Explain whether the directors should be satisfied or not with the share prices of the companies at the end of the financial year. Quote TWO financial indicators in EACH case with figures and trends. Financial indicators (with figures) Trends not compulsory. vy NAVis 1230c v MP is 1 350c OR MP increased to 1 350c and NAV to 1 230c GUARDIAN | Comment: ~ Must cover demand for shares or investor confidence or LTD success of the company. Do not accept ‘satisfied’ as an explanation. Expected responses: Shares are in demand or potential investors willing to purchase shares or good image or investor confidence / company has performed well (or shows adequate internal growth or upward trend) which has had a beneficial effect on MP. Financial indicators (with figures) | Trends not compulsory. vy NAVis 992c v MP is 400c OR MP dropped to 400c whilst NAV dropped to 992c NAVARRA Comment: “ Must cover lack of demand for shares or investor LTD pessimism or lack of success of the company. Do not accept ‘not satisfied’ as an explanation. Expected responses: Shares not in demand as they have a poor image or lack of potential investors / drastic drop in MP indicates serious issues in management which negatively affects MP. 6 The CEO (chief executive officer) of Guardian Ltd intends to offer the vacant position of CFO to Nathan Crewe in March 2023. Explain ONE point of advice to the CEO. ONE valid point ~~ part mark for unclear / partial answer Do not accept ‘qualifications’ as a response. e Nathan takes selfish decisions at the expense of the company. No good track record / he placed the company at financial risk / high debt/equity e The company borrowed excessively; negatively geared / money not used to increase productivity / profitability. e There is limited demand for shares in the company he managed. Guardian is a profitable company which must be maintained. He does not appear to be a loyal person and may destroy that progress / conflict of interest as he is still involved in the other company. e ¢ Nepotism should not be allowed as it leads to corruption. * Retain the services of Sheryl as she is a reliable and capable employee whereas Nathan has destroyed Navarro Ltd. TOTAL MARKS 45 ; | SSPARTMENT OF BASIC Copyright reserved ATION Please turn over PRIVATE BAG X696, PRETORIA 0004

Downloaded from hlayiso.com Accounting/P1 9 DBE/November 2023 NSC = Marking Guidelines QUESTION 4: CORPORATE GOVERNANCE 41 Auditing: Explain ONE duty of an internal auditor. Any valid explanation vv part marks for unclear / partial answer ¢ Set up / implement / advise on internal control processes in line with external auditing requirement. * Oversee the preparation / internal audit of financial statements before and external audit. ¢ Chairperson of the internal auditing committee. 2 Give ONE reason why the accounting records of a listed company must be audited by an external auditor. Any valid explanation Vv ~ part marks for unclear / partial answer e tis a requirement of the Companies Act / it confirms that the company complies for standards / accounting principles / international reporting. e Protect public investment / interest of shareholders for possible mismanagement and /or fraud / an unbiased opinion is expected. e¢ Comply with corporate governance / King Code requirements relating to ethical conduct / transparency. e Shareholders will be confident that the financial results are reliable and credible / enhance confidence in financial statements.” 2 4.2 Whistle-blowers (Informants): What would you say to Sally regarding her statement in the first paragraph about whistle-blowers not being willing to take a stand against corruption? Explain ONE point. Any valid explanation v ~ part marks for unclear / partial answer Expected responses: Responses must support whistle-blowing. e tis understandable that she feels victimised (lost her job) / citizens should be grateful to whistle-blowers / if whistle-blowers do not come forward with information, crime will not be brought under control. « Whistle-blowers help to expose / minimise corruptive actions of managers / employees. ¢ She had no choice but to report on this behaviour as she was the appointed internal auditor at the time / could have been accused over negligence of not doing her job. She could take the company to court or the CCMA. Criminals will think twice if they realise that people are watching their actions / behaviour / Promote ethical conduct in the corporate world. e SA government has stated that whistle-blowers must be protected and remain anonymous. jE PARTMENT OF BABIC | [ were EDUCATION Please turn over Copyright reserved | BRIVATE BAG X095, PRETORIA 2001

Downloaded from hlayiso.com Accounting/P1 4.3 10 DBE/November 2023 NSC — Marking Guidelines Shareholders’ opinions and concerns: NOTE TO MARKERS: Be aware of alternative opinions from candidates. Concerns and reasons could be marked independently. Do not accept the same responses or points for concerns or reasons that are simply reworded in a different way. A concern could be viewed as a reason; but the reason must not be a simple repetition or rewording of the concern. As a shareholder, explain THREE points that would concern you about the actions of the board of directors of Monaco Ltd. In EACH case, give a suitable reason for your concern. THREE valid & different concerns with reasons CONCERN REASON part marks for unclear / partial answer vv Vv VV VY Vo No protection of whistle-blowers Their anonymity may not be respected. Investigation of whistle-blowers They may not speak out on further wrong doings The law is expected to ensure that their identity is not revealed. Collusion with service providers / management Nepotism / Conflict of interest Self-enrichment at the expense of the company / Results in financial losses for the company / financial losses not a result of performance Competence of appointees is questioned. Honesty / Loyalty to the company is not recognised / Sally lost her job unfairly / treated unfairly Public investment is not being considered / protected / advanced Growth in company profits may be compromised. Shareholder interest in shares may be negatively affected. Corruption not detected over a long period Apathy of (honest) employees Lack of transparency Honest workers look the other way Company policies can be easily manipulated / no accountability / no checks and balances in place Corruption will continue / No consequences of crime Fear of victimisation/lose their jobs Credibility & integrity of management Labour law requirements & company policy (e.g. procurement, recruitment & performance bonus policies) Consequences of this for the future of the company — image, share price Unfair dismissal may place the company in a legal battle. Share prices will take a tumble / investors will not be interested / shareholders may want to sell their shares. Copyright reserved TOTAL MARKS 15 TOTAL: EDUCATION [ SECARTMENT OF BASIC PRIVATE BAG X395, PRETORIA 0001 (023 “He 26 ws APPROVED MARKING GUIDELINE PUBLIC EXAMINATION 150