Accounting Grade 11 Gauteng June 2016 Memo

Downloaded from hlayiso.com GAUTENG DEPARTMENT OF EDUCATION PROVINCIAL EXAMINATION JUNE 2016 GRADE 11 ACCOUNTING MEMORANDUM Question Topic Marks 1 Bank Reconciliation 60 2 Creditors’ Reconciliation 25 3 Asset Disposal 50 4 Partnerships 40 5 Financial statements 75 Analysis and Interpretation of Financial 6 50 Statements Total 300 19 pages 1

Downloaded from hlayiso.com MEMORANDUM Accounting GAUTENG DEPARTMENT OF EDUCATION PROVINCIAL EXAMINATION ACCOUNTING MEMORANDUM 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 foreign item penalty for misplaced items) 2. Full marks for correct answer. If answer is incorrect, mark the workings provided. 3. 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) 4. 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. 5. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. 6. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer before awarding the mark. 7. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect 8. Code f = foreign item 2

Downloaded from hlayiso.com MEMORANDUM Accounting QUESTION 1 1.1 What is the purpose of Bank reconciliation? Any 1 for 2 marks  It is an internal control process  To ensure that all entries are correctly captured by the business and the bank  To ensure that there are no fraudulent errors and omissions  To reconcile the bank account in the General Ledger with the bank statement 2 1.2 Indicate whether the statements are TRUE or FALSE. 1.2.1 TRUE  1 1.2.2 FALSE  1 1.2.3 TRUE  1 1.2.4 FALSE  1 4 3

Downloaded from hlayiso.com MEMORANDUM Accounting 1.3.1 Cash Receipts Journal of Sabe Traders – March 2016 Sundry accounts Doc. Day Details Bank Amount Fol Details 31 Totals 31 400 13 000 Health Welfare Org. 88 (cancelled) 3 400 3 400 Donations Neotel (correct 173 amount) 40 40 Telephone BM Garage 170 (cancelled) 840 840 Fuel BS M. Sabe 35 000 35 000 Capital BS F. Fun 8 300 8 300 Rent income For all 78 980 60 580 doc. If total is above 31 400 18 4

Downloaded from hlayiso.com MEMORANDUM Accounting Cash Payments Journal of Sabe Traders – March 2016 Debtors Sundry accounts Doc. Day Name of payee Bank Control Amount Fol Details 31 Totals 54 800 240 10 960 RSA Distributors 160 (correct amount) 2 700 2 700 Stationery 181 BM Garage 840 840 Fuel BS Mawali bank 2 000 2 000 Loan: Mawali Bank  DN M. Lid (RD cheque) 420 420 BS Mawali Bank 93 93 Interest on overdraft BS Mawali Bank 380 380 Bank Can combine for 2 charges marks(93+380=473) For all doc 61 233 660 16 973 If total is above 54 800 18 1.3.2 GENERAL LEDGER OF SABE TRADERS Dr. Bank B8 Cr. Mar 31 Total CRJ 78 980 Mar 1 Balance b/d 27 130 Receipts Balance c/d 9 383 31 Total Payments CPJ 61 233 88 363 88 363 Apr 1 Balance b/d 9 383 8 5

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Downloaded from hlayiso.com MEMORANDUM Accounting 1.3.3 Bank Reconciliation statement on 31 March 2016 Debit Credit Credit balance according to bank statement 17 367 Credit outstanding deposit  8 100 Debit outstanding cheques: No. 165  3 710 No. 178  9 800 No. 180 11 600 No. 181 840 No. 176  8 900 Credit balance according to bank account   9 383 If both totals are the same  34 850 34 850 10 60 7

Downloaded from hlayiso.com MEMORANDUM Accounting QUESTION 2 2.1 Why must the balance of the Creditors’ Control Account in the General Ledger be the same as the total of the Creditors’ List in the Creditors’ Ledger? The two are prepared from the same set of information. The Creditors’ Control Account is a summary of the Creditors’ Accounts in the Creditors’ Ledger; If the two do not correspond it could mean that wrong entries were made in the journals; posting errors; calculation mistakes; omissions; etc. that need to be corrected.  2 2 2.2 Calculate the correct balance of the Creditors’ Control Account in the General Ledger Balance R153 800 A No entry  B 10 100  C No entry  D 440  E No entry  F (11 000)  G (27 000)  Final balance R126 340  Check operation 12 8

Downloaded from hlayiso.com MEMORANDUM Accounting 2.3 Prepare the correct Creditors’ List of balances on 30 June 2016. Stand Traders 26 000 (two marks)  (29 200 – 2 200 + (13 000 + 13 000) 53 000 Walk Wholesalers  (95 600 + 2 200 – 27 000  ) 70 800 Run Stores  (44 100 – 42 000  + 440)  2 540  (operation and one part correct) 126 340  11 25 9

Downloaded from hlayiso.com MEMORANDUM Accounting QUESTION 3 No. Calculations Answer 3.1.1 Calculate the depreciation on Equipment sold on 31 August 2016. (80 000 x 15% x 6/12) 6 000 3.1.2 Calculate the TOTAL depreciation on Equipment on 29 February 2016. Old: [(510 000 - 80 000) x 15%] = 64 500 New: [140 000 x 15% x 6/12] = 10 500 81 000  if any one 8 Sold see 3.1.1 6 000 part correct. 3.2.1 GENERAL LEDGER OF BONANZA TRADERS BALANCE SHEET ACCOUNTS SECTION Dr EQUIPMENT B Cr 2015 2015 Mar 1 Balance b/d 510 000 Sept 1 Asset disposal GJ 80 000 Creditors’ CJ 2016 Sept 1 control 140 000 Feb 29 Balance c/d 570 000 650 000 650 000 2016 Balance Mar 1 (both balances) b/d 570 000 5 10

Downloaded from hlayiso.com MEMORANDUM Accounting 3.2.2 ACCUMULATED DEPRECIATION ON EQUIPMENT B 2015 2015 Asset Sept 1 disposal GJ 66 000 Mar 1 Balance b/d 270 000 2016 Sept 1 Depreciation GJ 3.1.16 000 Feb 29 Balance c/d 285 000 2016 Feb 29 Depreciation GJ 75 000 351 000 351 000 Mar 1 Balance b/d 285 000 8 3.2.3 NOMINAL ACCOUNTS SECTION ASSET DISPOSAL N 2016 2016 Aug 31 Equipment GJ 80 000 Aug 31 Accumulated 66 000 depreciation on 3.2.2 equipment GJ Profit on sale of Creditors’ control asset GJ 5 000 GJ 19 000 85 000 85 000  check operation 8 11

Downloaded from hlayiso.com MEMORANDUM Accounting 3.3 NOTE TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 29 FEBRUARY 2016 FIXED ASSETS Land & Vehicles Equipment buildings Carrying value at beginning 450 000 540 000 240 000 Cost 450 000 800 000 510 000 Accumulated depreciation (260 000) (270 000) Movements Additions at cost 50 000 200 000 140 000 Disposals at carrying value 0 (14 000) Depreciation 0 (128 000) (81 000) 3.1.2 Carrying value at end 500 000 612 000 285 000 Cost 500 000 1 000 000 570 000 Accumulated depreciation 0 (388 000) (285 000)* *any figure greater than 270 000 15 3.4 Any 3     A tracking device could be installed.  Physical checks could be conducted regularly by inspecting log sheets.  It should be locked in the garage when not in use.  Owner should take responsibility for the keys himself after hours.  Control over the use of the petrol card (Any other relevant answer) 6 50 12

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Downloaded from hlayiso.com MEMORANDUM Accounting QUESTION 4 4.1 NO. 4.1.1 Going concern  4.1.2 Matching  4.1.3 Finance cost  4.1.4 Partners’ earnings  4.1.5 Reliability  5 4.2 Calculation of interest on capital Answer Gifford: (880 000 x 9/100 x 6/12) = 39 600 (700 000 x 9/100 x 6/12) = 31 500 71 100 operation if one part correct 4 Ndlovu: (900 000 x 9/100 x 10/12) = 67 500 (1 150 000 x 9/100 x 2/12) = 17 250 84 750 operation if one part correct 4 4.2.1 CAPITAL Gifford Ndlovu Total Balance at the beginning of the 880 000 900 000 year Contribution of capital during 250 000 the year Withdrawal of capital during (180 000) the year Balance at the end of the year 700 000 1 150 000 6 14

Downloaded from hlayiso.com MEMORANDUM Accounting 4.2.2 CURRENT ACCOUNTS Gifford Ndlovu Total Partners’ salaries 504 000 350 000 Partner’s bonus 0 30 000 Interest on capital (see calculation 4.2) 71 100 84 750 Primary distribution of profits 575 100 464 750 1 039 850 Final distribution of profits 147 390 98 260 245 650 Profit as per Income Statement 722 490 563 010 1 285 500 Drawings during the year (167 800) (225 600) Retained income for the year 554 690 337 410 Balance at beginning of year 140 000 (90 000) Balance at end of year 649 690 247 410 21 40 15

Downloaded from hlayiso.com MEMORANDUM Accounting QUESTION 5 NAME OF BUSINESS: FLASHGORDON TRADERS 5.1 INCOME STATEMENT FOR YEAR ENDED 29 February 2016 Sales (1 280 000 – 6 500) 3 1 273 500 Cost of sales 1 (642 000) Gross profit 1 631 500 Other operating income 1 98 100 Bad debts recovered (700 + 7 200) 2 7 900 Discount Received (1 600 – 200) 2 1 400 Rent Income (79 650 – 6 550) 3 73 100 Commission income 1 15 000 ? Provision for Bad debts adjustment 2 700 Gross operating income 1 729 600 Operating expenses 1 (457 480) Water and electricity (8 900 + 1 200) 2 10 100 Insurance (8 800 – 770) 2 8 030 Bad debts (4 300 + 560) 2 4 860 Donations (2400 + 1 600) 2 4 000 Discount Allowed 1 1 800 Stationery (17 300 – 3 900) 2 13 400 Bank charges (8 410 + 290) 2 8 700 Telephone (10 900 + 1 300) 2 12 200 Salaries & wages (288 090 – 25 000 – 2 500 – 250) 4 260 340 ? Trading stock deficit (246 800 – 1 600 – 236 000) 2 9 200 ? Depreciation 1 124 850 Operating profit 1 272 120 Interest income (28 000 + 850) 3 28 000 Profit before interest expense 1 300 970 Interest expense (4 800 + 57 600) 3 (62 400) Net profit for the year 2 238 570 be guided by the signs(+/-) 50 16

Downloaded from hlayiso.com MEMORANDUM Accounting 5.2.1 TRADE AND OTHER RECEIVABLES Net trade debtors 32 200 Trade debtors (34 560 – 560) 34 000 Provision for bad debts (1 800) Prepaid expense See insurance amount in income statement 770 Accrued Income 15 000 SARS: PAYE 4 500 52 470 8 5.2.2 TRADE AND OTHER PAYABLES Trade creditors (32 000 + 2 000 + 7 280) 41 280 Accrued expenses (1 300 + 1 200) 2 500 Income received in advance See rent income in income statement 6 550 UIF (2 000 – 250 – 250) 1 500 Pension fund (15 000 – 1 875 – 2 500) 10 625 Short term loan 60 000 122 455 17 75 17

Downloaded from hlayiso.com MEMORANDUM Accounting QUESTION 6 6.1 Complete each of the following statements by supplying the missing word/s. Note: Do not re-write the sentences. Write only the missing words. 6.1.1 Cost of sales 6.1.2 Operating expenses 6.1.3 Owners’ equity / Partnership equity / Total assets – Total liabilities  6.1.4 Current ratio / Acid test ratio 6.1.5 Trading Stock deficit / surplus 10 Learner must have at least one component of the calculation correct to achieve the  6.2 Should the partners be satisfied with the stock turnover rate? Explain by quoting the financial indicators for both years to support your answer. Opinion: Yes  Comment: The business is selling its stock more quickly in 2016. Stock turnover rate has improved from 5 times in 2015 to 7 times in 2016. 3 (Any other relevant answer) 6.3 Comment on the Debtor’s collection period and the Creditors’ payment period Comment on Debtors’ collection  Comment on Creditors’ payment  Comparison of debtors and creditors and advice   There was an improvement in the debtors’ collection period,  65 days in 2014 to 55 days in 2015  Collection is now below 60 days.  There was an increase in the creditors’ payment period.  40 days in 2014 to 50 days in 2015  Creditors are paid before money is collected from debtors.  Creditors’ payment can be extended to 60 days. 3 18

Downloaded from hlayiso.com MEMORANDUM Accounting 6.4 In your opinion has the business been able to control its operating expenses well in 2016? Quote figures from both years to support your answer. Opinion: No  Comment: Operating expenses on sales increased from 30% to 47,2% 4 6.5 Explain reasons for the difference between the percentage operating expenses/profit on sales and the percentage net profit on sales. In both years the interest expenses exceeded the interest income. 2 6.6 Calculate the percentage return earned by the business on average equity for 2016. 990 000 X 100 (4 350 000 + 3 620 000)/2 990000  100 3 985000 = 24,84% 5 6.7 The percentage return earned by Flynn on his average equity is 20,53%. Provide a calculation to prove that this calculation is correct. 430 000 X100 (1 760 000 + 1 760 000 + 370 000 + 300 000)/2 430 000 x 100 2 095 000 =20,53% 5 19

Downloaded from hlayiso.com MEMORANDUM Accounting 6.8 Comment on the percentage return earned by Flynn. Quote a financial indicator for both years to support your answer. Indicator  Figures from 2015 & 2016  Comment  Flynn should not be completely satisfied as his return (20,53%) has decreased from 24,9%. It is lower than the average return on the average equity (30,46%) It is lower than the return earned by Blake (25,5%) 4 6.9 Comment on the debt/equity ratio. Quote a financial indicator for both years to support your answer. Trend 2015-2016  Comment  Debt/equity ratio increased from 0,9:1 in 2015 to 1,3:1 in 2016 This indicates that the business is making more use of loans. The business is at risk should the profits decrease in the future. 3 6.10 What percentage of the net income did the partners withdraw from the business in 2016? =38,89 3 20

Downloaded from hlayiso.com MEMORANDUM Accounting 6.11 Comment on the profitability of the business. Quote THREE financial indicators and figures to support your answer. Ratios  Figures  Comment  2016 2015 % Operating expenses on sales 47,2% 30% % Operating profit on sales 18% 22% % Net profit on sales 15% 17,5% Net profit percentage and percentage operating profit on sales has dropped from 2015. This was mainly due to an increase in percentage operating expenses on sales 8 40 50 TOTAL: 300 21