Accounting Grade 11 P1 Gauteng November 2020 Memo (English)

Downloaded from hlayiso.com GAUTENG DEPARTMENT OF EDUCATION PROVINCIAL EXAMINATION NOVEMBER 2020 GRADE 11 ACCOUNTING PAPER 1 MARKING GUIDELINES 14 pages 1

Downloaded from hlayiso.com 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 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 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. ‘Operation’ means check operation. ‘One part correct’ means operation and one part correct. Note: ‘check operation’ must be +, -, x, - as per memo. 9. ‘One part correct’ means operation and one part correct. Where method marks are awarded for one part correct, the marker must inspect the reasonableness of the answer and at least one part must be correct before awarding the mark. If a figure has earned a method-mark, this will be regarded as ‘one part correct’. 10. In calculations, do not award marks for workings if numerator and denominator are swapped – this also applies to ratios. 11. In awarding method-marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. In such a case do not award a method-mark. Indicate with a . 12. Be aware of candidates who provide valid alternatives beyond the marking guideline. 13. Codes: f = foreign item; p = placement/presentation. 2

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 QUESTION 1: FINANCIAL STATEMENTS (55 marks; 42 minutes) Golden Gate Traders Statement of Comprehensive Income (Income Statement) for the year ending 30 June 2020 Sales (337 600√ – 1600√) 336 000 Cost of Sales (Award 3 marks if =sales + 4000 /1.6) (212 500) √√  Gross Profit 123 500  Other operating income 18 687  Rent income (17 836 – 1 456 √ √ ) 16 380 Discount received (600 – 100 √) 500 Trading stock surplus 437 √ √ Bad debts recovered 1 370 √ Gross operating income 142 187  Other operating expenses (136 587)  Repairs 1 618 Bad debts 1510 Telephone (2 350 + 230 √ ) 2 580 Rates 2 850 Insurance (4 120 - 1 000 √ √ ) 3 120 Packing materials (13 500 x 80%) 10800√√ Water and electricity 4 830 Salaries (78 000 + 4 200 √ ) 82 200 U.I.F. contributions (3 120 + 42 √ + 42 √ ) 3 204 Provision for bad debts adjustment 400 √ Depreciation 23 475√ Operating Profit 5600  Interest income (1 125 + 375 √ √ ) 1 500 Profit before Interest Expenses 7 100  Interest expenses (6 000) √  Net Profit for the Year 1 100  40 3

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 Golden Gate Traders Notes to Financial Statements as at 30 June 2020 1.2.1 Trade and other receivables Trade debtors (31 900 - 1 600 √ + 1 370√ ) 31 670 Provision for bad debts(550 + 400) (950) √ Net trade debtors 30 720 Prepaid expenses (must be same as Insurance adjustment) 1 000  Accrued income (must be same as Interest income adjustment) 375  32 095 6 1.2.2 Trade and other payables Trade creditors (21 363 + 2 000√) 23 363 √ Income received in advance (must be same as Rent adjustment) 1 456  Accrued expenses (must be same as Telephone adjustment) 230√ Creditors for salaries (4 200 - 840 -150 - 42) 3 168 √ SARS : PAYE 840 √ Medical aid fund 150 √ U.I.F. (42 √ + 42 √ ) 84 29 291 9 4

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 Calculations: Cost of sales: 336 000 + 4000 /11/160 = 212500 Trading stock deficit/surplus: 42563 +1000 – 44 000 = 437 Rent income: 15 600 / 12 x 7 = 9 100 15 600 + 12 % = 17 472 / 12 x 5 = 7 280 9 100 + 7 280 = 16 380 – 17 836 = - 1 456 Interest on fixed deposit: 10 000 x 15 % = 1 500 /12 x 3 = 375 10 000 x 15 % = 1 500 – 1 125 = 375 Interest on loan: 18 000 + 48 000 = 66 000 - 60 000 = 6 000 55 5

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 QUESTION 2: PARTNERSHIPS (40 marks; 32 minutes) 2.1 TRUE or FALSE Number Answer 2.1.1 False 2.1.2 False 2.1.3 True 2.1.4 False 2.1.5 False 5 2.2 Mighty Mouse Traders Notes to Financial Statements as at 28 February 2020 Current Accounts Mighty Mouse Total Net profit as per Income Statement 61 200 79 800 141 000 Partners’ salaries 54 400 √ √ 78 000 √ Interest on capital 13 000 √ √ 8 000 √ Primary distribution of profit 67 400 86 000 Final distribution of profit/loss (6 200)  (6 200)  Drawings for the year (20 300) √ √ (5 800) √ √ Retained income for the year 40 900 74 000 Balance at beginning of year (4 800) √ 6 200 √ Balance at end of year 36 100 80 200 116 300 14 6

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 Calculations for drawings: Mighty Calculations for drawings: Mouse 20 000 - 700 + 1 000 = 20 300 6 800 – 1 000 = 5 800 Calculation for salaries: Mighty Calculation for salaries: Mouse 49 600 = 11 months 4 + 7 (1,2) 12,4 49 600 = 4000 12,4 4 000 + 20 % = 4 800 49 600 + 4 800 = 54 400 Calculations for interest on capital: Calculations for interest on capital: Mouse Mighty 100 000 x 8 % = 8 000 100 000 x 8 % = 8 000 100 000 x 10 % = 10 000 / 12 x 6 = 5 000 8 000 + 5 000 = 13 000 Calculations for share of remaining profit/loss: 141 000 – 132 400 – 21 000 = (12 400) (12 400 / 2 = (6 200) Ratio: Each had R100 000 capital at beginning of year. So ratio is 1 : 1 Calculation for Total Current Assets using the given Current Ratio: CA : CL ??? : 67 250 1,2 : 1 67 250 x 1,2 = 80 700 7

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 Calculation for Trade and other Receivables using given Acid Test Ratio: Receivables + Cash : CL ??? + 11 500 : 67 250 0,5 : 1 67 250 x 0,5 = 33 625 – 11 500 = 22 125 Calculation for Total Non-Current Liabilities using given Debt-Equity Ratio: NCL : OE ??? : 416 300 1,5 : 416 300 416 300 x 1,5 = 624 450 Calculation for missing Inventories figure: : 80 700 – 22 125 – 11 500 = 47 075 Calculation for missing Fixed Assets figure: 1 108 000 – 80 700 = 1 027 300 – 20 000 = 1 007 300 8

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 2.3 Mighty Mouse Traders Statement of Financial Position (Balance Sheet) as at 28 February 2020 ASSETS NON-CURRENT ASSETS 1 027 300  Fixed assets 1 007 300  Financial assets Fixed deposit : Giant Bank (10 000 – 10 000) 0 Fixed Deposit : Small Bank (20 000) 20 000 √ CURRENT ASSETS (must be CL x 1,2) 80 700  Inventories 47 075  Trade and other receivables (must be CL x 0,5 – cash) 22 125  Cash and cash equivalents (500 + 1 000 + 10 000) 11 500 √  Total assets (must be same as total equity and liabilities) 1 108 000  EQUITY AND LIABILITIES OWNERS’ EQUITY 416 300  Capital (200 000 + 100 000) 300 000 √ √ Current accounts (must come from 2.2) 116 300  NON-CURRENT LIABILITIES (must be OE x 1,5) 624 450  Loan : Giant Bank ( ??? – 5 000) 624 450 CURRENT LIABILITIES 67 250  Trade and other payables (45 050 + 1 200) 46 250 √ Bank overdraft (12 200 + 5 000 – 1 200) 16 000 √  Short term loan 5 000 √  Total equity and liabilities 1 108 000  21 40 9

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 QUESTION 3: ANALYSIS AND INTERPRETATION (20 marks; 16 minutes) 3.1 Calculate King Ben’s percentage earnings for the year ended 31 December 2020. Does he have reason to be satisfied? Give ONE reason for your answer. Earnings of Ben x 100 Average equity of Ben 165 000 + 60 000 + (37 100 / 2 √) x 100 (505 562 + 597 012) / 2 √ 165 000 √ + 60 000 √ + 18 550  x 100 551 287 √ 243 550 x 100 551 287 44,1 %  Satisfied √ / Not satisfied Reason: His earnings of 34,2 % is above what he could earn on an outside investment like a fixed deposit, which currently earns about 5% interest. √ √ (Any other reasonable answer) (10) 3.2 Calculate the debt-equity ratio on 31 December 2020. Calculation: 250 000 √ : 1 038 154 √ 0,2 : 1  (3) 10

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 3.3 The partners are considering taking up an additional R200 000 loan at an interest rate of 12% per annum. Do you think this is a good idea? Refer to ONE financial indicator and to gearing to motivate your answer with figures Good idea √ Motivation: Debt-Equity ratio  improved from 0,3 : 1 to 0,2 : 1 √ Business is lowly geared, has more own than foreign capital. (Any other reasonable answer) (3) 3.4 Comment on the liquidity position of the business. Refer to TWO financial indicators for 2020 to motivate your answer. Financial indicator 1: Current ratio decreased from 1,7 : 1 to 1,4 : 1 √√ Financial indicator 2: Acid test ratio decreased from 1,2 : 1 to 0,8 :1 √√ 1 mark for each ratio 1 mark for each trend with figures. (4) 20 11

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 QUESTION 4: ASSET MANAGEMENT & INTERNAL CONTROL (35 marks; 30 minutes) 4.1 Ethics Number Answer 4.1.1 E√ 4.1.2 F√ 4.1.3 A√ 4.1.4 D√ 4.1.5 C√ 5 4.2 Accounting Equations Owners’ Number Account debited Account credited Assets Liabilities equity Example Bank Capital : Barack 0 + 50 000 - 50 000 4.2.1 Drawings : Barack √ Bank √ 0 - √ 8 000 + √ 8 000 4.2.2 Drawings : Michelle √ Trading stock √ - √ 800 - √ 800 0 8 12

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 4.3 Asset Management 4.3.1 If all vehicles are depreciated using the same method, what is the rate of depreciation used by the business? Calculations: 47 500 / 6 x 12 = 95 000 95 000 √ x 100 380 000 √ = 25 %  (3) 4.3.2 It was decided to sell Vehicle 2 (see fixed asset register) as it was costing too much in repairs and maintenance. Complete the asset register page to calculate the vehicle’s book value on the date it was sold. (Round off to the nearest rand when doing all depreciation amounts.) Movement Accumulated Carrying Date Cost price Depreciation depreciation value 28 February 2018 380 000 47 500 47 500 332 500 28 February 2019 380 000 83 125 130 625 249 375 28 February 2020 380 000 62 344 192 969 187 031 31 May 2020 380 000 11 689 204 658 175 342 Calculations: February 2020: 249 375 √ x 25 %  = 62 344 + 130 625√ = 192 969 ; 380 000 – 192 969 = 187 031  May 2020: 187 031  x 25 % = 46 758 / 12 x 3  = 11 689 + 192 969  = 204 658 380 000 – 204 658  = 175 342  Accept : 46 757,75 / 46 757 11 689,44 / 11 689,25 / 11 689,50 (10) 13 13

Downloaded from hlayiso.com ACCOUNTING MEMORANDUM PAPER 1 GRADE 11 4.4 Problem solving Accounting Made Easy Branch Problem√ with figures √ Solution √ School is not full. Get more learners by Place for another advertising more. √ Daveyton 60 learners. √√ Too many learners. Reduce the number of There are 40 more than learners. √ Actonville there should be. √√ Get more educators. School is not full. Advertise the school. √ There is no advertising. Get a cheaper premises. Rent is very high, Take control of expenses. Farramere R12 000. Not charging learners R120 √√ (For all the above accept any other reasonable answers.) 9 35 TOTAL: 150 14