Accounting Grade 11 Gauteng June 2018 Memo

Downloaded from hlayiso.com GAUTENG DEPARTMENT OF EDUCATION PROVINCIAL EXAMINATION JUNE 2018 GRADE 11 ACCOUNTING MEMORANDUM 19 pages 1

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 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 item) 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 GRADE 11 QUESTION 1 (40 marks; 24 minutes) Stale cheque 1.1.1 Debit order 1.1.2 Bank charges  1.1.3 Dishonoured cheque  1.1.4 Bank overdraft  1.1.5 5 5 1.2.1 General ledger Bank B1 Debtors’ control 1 000 Balance 9 228 Donations 420 Debtors’ control 600 Sales 720 Drawings 1 440 Bank charges 80 Interest on overdraft 60 Trading stock 540 Sales 10 000 Balance 21 248 22 668 22 668 Balance 21 248 18 18 3

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 1.2.2 Prepare the Bank Reconciliation Statement on 30 June 2018. Debit Credit Balance as per Bank Statement 18 948 Outstanding deposit 5 620 Outstanding cheques  503 5 648  537 212  549 1 420  Outstanding EFT payment 640 Credit balance as per bank account 21 248  Operation for both totals must be the same 26 868 26 868  Foreign entries -1 maximum -2 9 9 4

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 1.2.3 (a) Why should the internal auditor be seriously concerned about the difference of R10 000? Any 2 x  Possibility of rolling of cash Fraud Embezzlement of funds 4 4 (b) What internal control methods, besides doing bank reconciliation, could the business implement to avoid this from happening again? Give TWO methods. Any 2 x  Division of duties EFT deposits and payments Owner does banking himself SMS received from the bank 4 4 40 40 QUESTION 2 (20 marks; 12 minutes) 2.1 Choose a description from COLUMN B that matches a concept in COLUMN A. 2.1.1 D 2.1.2 C 2.1.3 A 2.1.4 B 4 4 5

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 2.2 CREDITORS' LEDGER OF RAI TRADERS ON 31 JULY 2018 Balance as per ledger account 6 038 Error corrected on invoice 4260 (2 700) Interest 69 One part correct 3 407 6 6 2.3 CREDITORS’ RECONCILIATION STATEMENT ON 31 JULY 2018 Balance as per Creditor's Statement 14 846 Discount not yet recorded (320) Credit note 261 incorrectly recorded (50) Cheque 2368 issued after statement date (10 000) Discount received after statement date (1 069) Balance as per Creditors’ Ledger 3407 One part correct 7 7 6

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 2.4 Explain why the Creditors’ Control account balance should always be (2) equal to the total of the Creditors’ list.  Both are drawn up from the same source documents.   The Creditors’ Control account is a summary of the Creditors’ Ledger.  2.5 What is the purpose of preparing the Creditors’ reconciliation? (1) To reconcile the balance of the Statement of account with the records of the business 3 3 20 20 7

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 QUESTION 3 (60 marks; 36 minutes) 3.1 No. Answer 3.1.1 D√ 3.1.2 B√ 3.1.3 G√ 3.1.4 F√ 3.1.5 C√ 5 5 3.2.1 Calculations Amount Old equipment: 405 000  x 20% = 81 000  New equipment: 60 000 √ x 20% = 12 000 / 12 x 3 √ = 3 000  Total depreciation for the year 84 000  8 8 3.2.2 DEPRECIATION SCHEDULE FOR VEHICLE SOLD Accumulated Date Cost Depreciation depreciated Carrying value 2015/12/31 160 000 8 000 √√ 8 000 152 000 2016/12/31 160 000 15 200 √√ 23 200 136 800 2017/07/01 160 000 6 840 √√ 30 040 129 960 √√ 13 13 8

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 3.2.3 GENERAL LEDGER OF WESTVILLE DELIVERIES NOMINAL ACCOUNTS SECTION ASSET DISPOSAL N 20 Date Details Amount Date Details Amount July 01 Accumulated Jul 01 Vehicles √ 160 000 √ depreciation: 30 040  Vehicles √ Bank √ 89 960  Loss on sale of fixed assets √ 40 000 √ 160 000 160 000 8 8 Calculation for depreciation on vehicles: Old: 1 340 000 – 160 000 =1 180 000 530 000 -23 200 = 506 800 1 180 000 – 506 800 = 673 200 x 10/100 = 67 320 9

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 3.2.4 WESTVILLE DELIVERIES NOTES TO FINANCIAL STATEMENTS AS AT 31 DECEMBER 2017 Land and FIXED/TANGIBLE ASSETS buildings Vehicles Equipment Carrying value at beginning of year 740 000 810 000  285 000  Cost 740 000 √ 1 340 000 √ 405 000  Accumulated depreciation (530 000) (120 000) Movements Additions at cost 62 000 √ 60 000 √ ? Disposal at carrying value (129 960)  Depreciation for the year (6 840  + 67 320 √√) (74 160) (84 000)  Carrying value at end of year 802 000 605 880  261 000  Cost 802 000 √ 1 180 000 √ 465 000  Accumulated depreciation (574 120)  (204 000)  20 20 10

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 3.3 The owner is concerned that internal control over the fixed assets is poor and that the figures for the Fixed Assets in the books and the Financial Statements are unreliable. You have been appointed as the new internal auditor. Provide THREE suggestions on how to solve this potential problem. Any THREE √√ √√ √√  physical security needs to be improved (e.g. cameras; security guards)  proper log books need to be introduced; all employees must fill them in  proper supervision – spot checks on calculations; recording of transactions  the fixed asset register must be kept up to date at all times; checked regularly  separation of duties – the different aspects relating to fixed assets must never be done by one person only  proper authorization of the buying and selling of fixed assets (Any other reasonable answer) 6 6 60 60 11

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 QUESTION 4 (50 marks; 30 minutes) GENERAL LEDGER OF BEMBE ………………………………………… BALANCE SHEET ACCOUNTS SECTION Dr Current account: B. Bembe Cr b/ Interest on Balance d √2 300 Capital 36 200 Drawings: Bembe (25 000 + 45 000) √√70 000 Salary: Bembe 323 300 Appropriation acc 250 300 Balance 60 750 Bonus: Bembe 23 850 383 350 383 350 Balance 60 750 13 13 CALCULATIONS: SALARY: BEMBE 26 500 X 10 = 265 000√ 26 500 X 110/100 = 29 150√ X 2 = 58 300 TOTAL = 323 300 12

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 INTEREST ON CAPITAL: BEMBE 360 000 – 140 000 = 220 000 220 000√ X 12/100 X 5/12√ = 11 000 360 000√ X 12/100 X 7/12√ = 25 200 TOTAL = 36 200 8 8 4.2 Appropriation Account F Interest on capital 59 400 Profit and loss 1 200 000 Salary: Bembe 323 300 Salary: McCarthy 389 200 Bonus: Bembe 26 500 x 90/100 23 850 Bonus: McCarthy 28 800 Current Acc: Bembe 250 300 Current Acc: McCarthy 125 150 1 200 000 1 200 000 18 18 13

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 4.3 Calculate the percentage return earned by McCarthy on his average equity. Should he be satisfied? Motivate your answer. (11) 389 200 + 28 800 + 23 200 X 100 (760 000 + 680 000 + 4 500 – 12 300)/2 1 = 441 200 716 100 =62% Yes the partner should be satisfied with his return. It is much more than he will be receiving from any other investment. 11 11 50 50 14

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 QUESTION 5 (75 marks; 45 minutes) 5.1 5.1.1 E√ 5.1.2 C√ 5.1.3 A√ 5.1.4 B√ 5.1.5 D√ 5 5 15

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 5.2 INCOME STATEMENT FOR YEAR ENDED 28 FEBRUARY 2018 Note Sales (2 436 000√ – 12 000√) 3 2 424 000 Cost of sales 1 √(1 235 000) Gross profit 1 1 189 000 Other operating income 1 244 616 Commission income (12 396√ + 1 170√) 3 13 566 Rent income (246 400 √ – 19 600√√) 4 226 800 Bad debts recovered 1 2 475 Discount received 1 √1 775 Gross operating income 1  1 433 616 Operating expenses 2 (1 070 016) Insurance (4 260√ – 220√) 3 4 040 Bad debts (1 730√ + 1 170√√) 4 2 900 Discount allowed (2 340√ – 150√) 3 2 190 Bank charges 1 7 410 Salaries and wages (780 00√ + 27 400√ +1 350√ +1 370√ +274√ +274√) 7 810 668 Stationery (27 000√ – 700√ – 3 650√) 4 22 650 Telephone (43 200√ + 2 800√) 3 46 000 Packing material (1 860√√ + 12 100√ – 1 800√) 5 12 160 Advertising 1 √14 690 Water and electricity 1 √76 090 Stock losses (5 000 x 30/100) 3 √√√1 500 ? Provision for bad debts adjustment 2 √163 ? Depreciation 1 √46 920 ? Sundry Expenses Missing figure 2 22 635 Operating profit Check operation = 15% of sales 2 363 600 Interest income (2 300√ + 1 630√ ) 3 3 930 Profit before interest expense 1 367 530 Interest expense (312√ + 75 000√√) 4  (75 312) Net profit for the year 2 292 218 70 70 75 75 16

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 QUESTION 6 (55 marks; 33 minutes) 6.1 Name THREE parties interested in the results on the financial statements. Substantiate your answer with reasons. (6) Any THREE √√ √√ √√ Financial institutions – to provide short or long term credit Trade creditors – to determine if the business has sufficient assets to be turned into cash in order to meet current liability SARS – To determine if the tax return has been accurately completed Employees / Trade unions – interested in assessing whether salaries and wages are fairly remunerated Owner / proprietor – To monitor the profitability of the business 6 6 17

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 6.2.1 BALANCE SHEET ON …………………………………………. ASSETS Note Non-current assets 1 2 239 000 Fixed / Tangible assets (780 000√ + 78 000√ +98 000√ + 800 000√) 5 1 756 000 Financial assets: Fixed deposit (690 000√ – 207 000) 3 483 000 Current assets 305 600 Inventory (32 000√ + 1 700√) 3 33 700 Trade and other receivables (48 000√ – 2 300√ + 16 000√ + 4 000√ – 2 000√) 6 63 700 Cash and cash equivalents (1 200√ + 207 000) 3 208 200 Total assets 1 2 544 600 EQUITY AND LIABILITIES Capital and reserves / Owners’ equity 2 145 100 Capitals 1 501 570 Current accounts 643 530 Non-current liabilities 224 000 Mortgage bond (350 000√ + 15 000√ – 78 000√ – 63 000√) 5 224 000 Current liabilities 1 175 500 Trade and other payables (45 000√ + 4 500√ + 12 300√ + 5 400√ + 3 300√ – 2 000√ + 32 000√) 8 100 500 ?Bank overdraft  2 √12 000 ?Short term loan  2 63 000 Total equity and liabilities 2 544 600 40 40 18

Downloaded from hlayiso.com MEMORANDUM ACCOUNTING GRADE 11 6.2.2 Calculate the following ratios and comment of the liquidity of the business. (a) Calculate the Current Ratio. (3) 305 600 :175 500 1.74:1 (b) Calculate the Acid-test ratio. (4) 305 600 -33 700 :175 500 279 100:175 500 1.54:1 (c) Comment. (2) Any 2  The liquidity position of the business is favourable. The business will not experience cash flow problems. The current ratio reflects assets of 1,74 which is higher than current liabilities. The acid-test ratio reflects liquid assets of 1,54 which is higher than the current liabilities. 9 9 55 55 300 300 19