Accounting Grade 11 P1 Gauteng November 2022 Memo (English)

Downloaded from hlayiso.com PROVINCIAL EXAMINATION NOVEMBER 2022 GRADE 11 MARKING GUIDELINES ACCOUNTING (PAPER 1) 9 pages MARKING PRINCIPLES: 1. 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 items). No double- penalty is 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 the answer is 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). 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. Where penalties are applied, the marks for that section of the question cannot be a final negative. 8. 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. 9. 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 . 10. Be aware of candidates who provide valid alternatives beyond the marking guidelines. 11. Codes: f = foreign item; p = placement/presentation.

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 QUESTION 1: FIXED ASSETS AND INTERNAL CONTROL (25 marks; 20 minutes) 1.1 Calculations: Depreciation Vehicles Sold Remaining (old) New 100 000 – 36 000 = 64 000 300 000 – 100 000 = 200 000 √ 150 000 x 20% = 30 000 64 000 x 20% = 12 800 76 000 – 36 000 = 40 000 √ 6 6 = 12 800 x = 6 400 √ 160 000 x 20% = 32 000  = 30 000 x = 15 000 √ 12 12 Total depreciation for current year: 6 400 + 32 000 + 15 000 = 53 400 Equipment Old New 80 000 x 10% = 8 000 √ 6 000 x 2 = 12 000 12 000 x 10% = 1 200 3 = 1 200 x = 300 √ 12 Total depreciation for current year: 8 000 + 300 = 8 300 10 2

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 1.2 Land and Tangible Assets Vehicles Equipment Buildings Carrying value on (01-03-2021) 400 000 224 000 60 000 Cost 400 000 300 000 80 000 Accumulated depreciation (76 000) (20 000) Movements Additions at cost √ 120 000 √ 150 000 12 000 Disposals at carrying value √√ (57 600) Depreciation  (53 400)  (8 300) Carrying value on (28-02-2022) 520 000  263 000  63 700 Cost 520 000 350 000 92 000 Accumulated depreciation  (87 000)  (28 300) 10 1.3.1 The land and buildings were revalued in January 2021 and the market value of the land and buildings is R700 000. The financial records of RnB Traders are reflecting R400 000. Which GAAP principle is being applied? (2) Historical cost concept √√ 1.3.2 The owner is concerned about high maintenance expenses of trucks and he needs your advice. Provide THREE points. (3) • Keep a log book. • Install tracking devices on all trucks. • Take out a maintenance or service plan. √√√ Any THREE acceptable answers. TOTAL: 25 3

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 QUESTION 2: STATEMENT OF COMPREHENSIVE INCOME (50 marks: 45 minutes) MK Traders Statement of Comprehensive Income for the year ended 30 June 2022 Sales (1 032 000 – 32 000 √ – 225 √) 999 775 Cost of sales (427 000 – 150 √) (426 850) Gross profit  572 925 Other operating income 49 010 Rent income ( 47 250 – 3 850 √√)  43 400 Discount received 4 200 Bad debts recovered (1 000 + 210 √)  1 210 Provision for bad debts adjustment √√ 200 Gross operating income  621 935 Other operating expenses  (281 110) Salaries and wages (125 000 + 30 000) √√ 155 000 Water and electricity (25 000 + 5 000) √√ 30 000 Discount allowed 1 500 Insurance (6 400 – 1 200) √√ 5 200 Packing material (4 200 + 500 √ – 900 √√)  3 800 Stationery (4 100 – 500 √)  3 600 Bad debts (1 500 + 450) √√ 1 950 Medical contribution (3 000 + 2 600) √√ 5 600 UIF contribution (1 250 + 300) √√1 550 Skills development levy (1 250 + 300) √√ 1 550 Bank charges √ 840 Sundry expenses 41 000 Trading Stock deficit (81 000 + 150 √ – 79 100 √) √ 2 050 Depreciation √ 27 470 Operating profit  340 825 Interest income (500 + 500) √√ 1 000 Profit before interest expense  341 825 Interest expense (360 + 7 125 √√)  (7 485) Net profit for the year  334 340 TOTAL: 50 4

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 QUESTION 3: PARTNERSHIPS (40 marks; 30 minutes) 3.1 3.1.1 False √ 3.1.2 False √ 3.1.3 True √ 3.1.4 False √ 3.1.5 False √ 5 Bryan Adam Stores Notes to Financial Statements as at 28 February 2022 3.2 Current Accounts A. Bryan B. Adam Total Net profit as per income statement 174 600 136 700 √ 311 300 Partners' salaries see calculations below √√ 80 400 √ 102 000 182 400 Partners' bonuses 16 000 0 16 000 Partners' interest on capital √√√ 28 200 √√ 14 700 42 900 see calculations below Primary distribution of profits  124 600 116 700  241 300 Final distribution of profits  50 000  20 000  70 000 see calculations below Drawings for the year √√ (93 860) √ (132 600) (226 460) see calculations below Retained income for the year 80 740 4 100 84 840 Balance at beginning of the year √ 6 300 √ (1 400) 4 900 Balance at end of the year  87 040  2 700  89 740 23 5

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 Bryan Adam Stores Extract of the Statement of Financial Position as at 28 February 2022 3.3 EQUITY AND LIABILITIES OWNERS' EQUITY  369 740 Capital 280 000 Current accounts √ 89 740 NON-CURRENT LIABILITIES 147 896 Loan : AB Bank (Do not accept minus 15 000) √√ 147 896 See calc below CURRENT LIABILITIES  82 490 Trade and other payables (45 050 √ + 10 500 √)  55 550 Bank overdraft 11 940 Short term loan √15 000 TOTAL EQUITY AND LIABILITIES  600 126 12 Calculations for drawings: A. Bryan √ mark for both 6 700 x 12 = 80 400 √ + 4 670 + 8 790 = 93 860 Calculation for salaries: A. Bryan 6 700 x 12 = 80 400 √√ 6

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 Calculations for interest on capital: A. Bryan 6 160 000 x 15% = 24 000 24 000 x = 12 000 √ 12 3 160 000 x 18% = 28 800 28 800 x = 7 200 √ 12 3 200 000 x 18% = 36 000 200 000 x = 9 000 √ 12 Total = 12 000 + 7 200 + 9 000 Calculations for interest on capital: B. Adam 6 100 000 x 15% = 15 000 15 000 x = 7 500 √ 12 6 80 000 x 18% = 14 400 14 400 x = 7 200 √ 12 Total = 7 500 + 7 200 = 14 700 Calculation for share of remaining Calculation for share of remaining profit/loss: A. Bryan profit/loss: A. Bryan 5 2 70 000 x = 50 000 70 000 x = 20 000 7 7 Calculation of loan from owners’ equity 369 740 √ x 0,4 √ = 147 896 TOTAL: 40 7

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 QUESTION 4: FINANCIAL INDICATORS (35 marks; 25 minutes) 4.1 Calculate the percentage return earned on average equity for the business for 2022. (5) = 58 000 √ . (420 000 + 234 000) √√ ½ √ x 100 654 000 2 marks 327 000 3 marks = 17,74%  4.2 Calculate the percentage return earned by Verma on his average equity for 2022. (5) = 37 000 √ . (160 000 + 200 000 + 2 000 + 8 000) √√ ½ √ x 100 370 000 2 marks 185 000 3 marks = 20%  4.3 Comment on the two return financial indicators of the business mentioned in QUESTIONS 4.1 and 4.2. (4) Ratios with trend √√ Conclusion √√ The % return earned on equity for the business has decreased from last year’s 24% to this year’s 17,74% in 2022. The return earned by Verma has also decreased from 26% in 2021 to 20% in 2022. Overall, the return of the business is decreasing but is still above the average of about 9% which can be earned on an outside investment like a fixed deposit. 4.4 Calculate the Debt : Equity ratio for 2022. (4) 360 000 √ : ( 200 000 + 200 000 + 8 000 + 12 000) √√ 360 000 : 420 000 0,86 : 1  8

Downloaded from hlayiso.com ACCOUNTING MARKING GUIDELINES (PAPER 1) GRADE 11 4.5 In your opinion was it a good idea to increase the loan? Motivate your answer. (4) Yes, it was a good idea to increase the loan. √ The debt : equity ratio √has improved from 1,2:1 in 2021 to 0,86:1 in 2022. The business has more of its own capital now than borrowed funds. √ The business has also become less risky compared to last year. √ OR No, it was a not good idea to increase the loan. √ Although the debt : equity ratio√ has improved from 1,2:1 in 2021 to 0,86:1 in 2022. The business has more of its own capital now than borrowed funds. √ The business is still highly geared/high risk. √ 4.6 Calculate the current ratio for 2022. (3) Current assets : Current liabilities 160 000 √ : 70 000 √ 2,29 :1  4.7 Calculate the acid-test ratio for 2022. (4) 160 000 √ – 95 000 √ : 70 000 √ 65 000 : 70 000 0,93 : 1  4.8 Comment briefly on the liquidity position of the business for 2022. Provide TWO financial indicators with figures. (6) Ratios √√ Trends √√ Conclusion √√ The liquidity of the business is improving. The current ratio has improved from 1,6 : 1 in 2021 to 2,29 : 1 in 2022. The acid-test ratio has also improved from 0,6 : 1 in 2021 to 0,93 : 1 in 2022. The business is more liquid now compared to last year and they would be able to convert their assets into liquid cash quickly and more efficiently. DO NOT ACCEPT STOCK TURNOVER RATE. TOTAL: 35 TOTAL: 150 9