GR11 Accounting Practice exam June Paper 1

Study & Master Support Pack | Grade 11 CAPS Accounting Exemplar examination: June (Paper 1) This revision pack for Accounting Grade 11 provides support for learners revising the most important concepts and principles covered in the CAPS curriculum, by providing practice exams. This pack offers a sample of the June examination (Paper 1). You have permission to print or photocopy this document, and to distribute it electronically via email or WhatsApp. For more information on our Study & Master CAPS-approved  textbooks and valuable resource materials, visit www.cambridge.org Brighter Thinking | Better Learning i

Grade 11 JUNE Time: 2 hours PAPER 1 EXAMINATION Marks: 150 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL the questions. 2. Show workings in order to achieve part-marks. 3. You may use a non-programmable calculator. 4. Always answer questions using a dark pencil or blue/black ink. 5. Where applicable, show all calculations to ONE decimal point. 6. Write neatly and legibly. 7. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. QUESTION 1: 56 marks; 45 minutes Topic of the question: This question integrates: Financial Statements of a Partnership GAAP principles Statement of comprehensive income (Income Statement) QUESTION 2: 66 marks; 53 minutes Topic of the question: This question integrates: Financial Statements of a Partnership Statement of financial position (Balance Sheet) Notes to the financial statements QUESTION 3: 28 marks; 22 minutes Topic of the question: This question integrates: Interpretation of Financial Statements Calculating financial indicators and ratios Commenting on calculations QUESTION 1 [56 marks; 45 minutes] GAAP PRINCIPLES AND STATEMENT OF COMPREHENSIVE INCOME (INCOME STATEMENT) OF A PARTNERSHIP The following information relates to SS Stationers. This business is a partnership with partners Suzette Smit and Alexandra Smit. They sell stationery and office equipment and the financial year ends 30 June. 1.1 Choose a GAAP principle from Column B to match an adjustment/ transaction/description in Column A. Only write down the letter (A – D), next to the number (1.1.1 – 1.1.5). (5) 1

COLUMN A – Description COLUMN B – Term Inventory purchased two years ago for R2 100 has become obsolete and they will only be able to sell it for 1.1.1 R1 400. This inventory will be shown A Materiality on the Statement of Financial Position (Balance Sheet) at net realisable value (R1 400). The telephone account of R988 for June 2018 was still payable at the 1.1.2 end of the financial year. The payable B Separate entity amount is considered as an expense in 2018. The business will continue to operate 1.1.3 C Prudence in the future. Financial Statements must disclose items that are important to the users 1.1.4 D Matching to make correct evaluations and decisions. The business owner will have his own banking account in his name and the 1.1.5 business will have their own banking E Going concern account in their (the business’s) name. 1.2 Prepare the statement of comprehensive income (Income Statement) of SS Stationers for the financial period ended 30 June 2018). (51) INFORMATION Pre-adjustment Trial Balance on 30 June 2018 Debit Credit Balance Sheet account section Capital: Suzette 600 000 Capital: Alexandra 600 000 Current account: Suzette 1 050 Current account: Alexandra 3 120 Drawings: Suzette 140 000 Drawings: Alexandra 165 000 Land and buildings 900 000 Vehicles 140 000 Accumulated depreciation on vehicles 89 600 Equipment 31 800 Accumulated depreciation on equipment 11 925 Fixed deposit: AB Bank 30 000 Trading stock 114 600 Debtors control 52 722 Provision for bad debts 2 160 Bank 26 828 Creditors control 61 425 Nominal accounts section Sales 1 568 200 Cost of sales 976 600 Debtors allowances 5 640 Discount allowed 6 870 Discount received 5 440 2

Rent income 63 600 Bad debts 10 460 Bad debts recovered 1 060 Salaries and wages 321 000 UIF contribution 3 210 Insurance 10 712 Packing material 3 788 Stationery 2 476 Water and electricity 17 414 Telephone 16 213 Sundry expenses 30 147 3 006 530 3 006 530 Adjustments and additional information A Heavy rain in June 2018 has caused damage, due to a leaking roof, to magazines and other books to the value of R6 000. The insurance company has agreed to pay out damages to the value of R5 200 in July 2018. No entry has been made. B A debtor, M Clift, returned goods with a selling price of R1 392 to the business. The profit mark-up is 60% on the cost price. No entry was made. C No entry was made with regard to trading stock, to the value of R1 020 which was used in the office as stationery. D A physical stocktaking was done on 30 June 2018 and revealed the following on hand: Trading stock, R106 230 Stationery, R540 Packing material, R1 030 E A debtor, L Rossouw, previously written off as a bad debt, paid R670. This was incorrectly posted to the Debtors Control account as a payment on the account. F Make provision for bad debts at 4% of outstanding debtors. G Received a statement from AB Bank, indicating the following with regard to a fixed deposit. Interest is capitalised. Balance at the beginning of the year R 20 000 Additional amount invested on 30 November 2017 R 10 000 Interest for the year ? Balance at the end of the year R 32 133 H The telephone account of R988 for June 2018 was still payable at the end of the financial year. I The rent was received up to 31 July 2018. The rent was increased with R500 on 1 March 2018. J The bookkeeper forgot to process the June salary of a new employee. The details are as follows: Gross salary, R5 800 Deductions: PAYE, R1 160 UIF, R58 The business contributes toward the UIF on a rand-for-rand basis. K Depreciation must be taken into account as follows: • On vehicles at 20% p.a. on the diminishing balance. • On equipment at 15% p.a. on the cost price 3

QUESTION 2 [66 marks; 53 minutes] STATEMENT OF FINANCIAL POSITION (BALANCE SHEET) OF A PARTNERSHIP The information below was taken from the books of AnDa Traders, with partners Anuscka Anderson and Danelle Dale. Their financial year ends 28 February 2018. REQUIRED 2.1 Prepare the following notes to the financial statements on 28 February 2018: 2.1.1 Trade and other receivables (8) 2.1.2 Current accounts (23) 2.1.3 Trade and other payables (8) 2.2 Prepare the statement of financial position (Balance Sheet) on 28 February 2018. Where notes are not required, show your calculations in brackets. (27) INFORMATION POST-CLOSING TRIAL BALANCE ON 28 FEBRUARY 2018 Debit Credit Balance Sheet account section Capital: Anderson 600 000 Capital: Dale 400 000 Current account: Anderson 31 300 Current account: Dale 2 990 Land and buildings 1 200 000 Carrying value of vehicles and equipment 365 500 Mortgage loan: XY Bank 675 300 Fixed deposit: AB Bank 50 000 Trading stock 112 460 Debtors control 54 300 Provision for bad debts 2 172 Bank 18 640 Cash float 3 000 Creditors control 75 208 Medical Aid 4 600 SARS (PAYE) 13 400 Unemployment Insurance Fund 3 650 Creditors for salaries 4 000 Accrued expenses 7 800 Income received in advance 3 700 Prepaid expenses 4 100 Consumable stores on hand 2 140 1 817 130 1 817 130 4

ADDITIONAL INFORMATION 1. According to the mortgage loan agreement R32 000 will be paid in the next financial period. 2. All deductions with regard to salaries and wages get paid on the seventh day of the following month. 3. The debit balance in the Creditors for salaries account is due to one of the em- ployees who took an advance on his salary for March 2018, due to his daughter getting married. 4. R26 000 of the fixed deposit matures on 31 December 2018, and the rest on 31 December 2019. 5. The net profit for the year amounted to R526 000. 6. Drawings by the partners during the financial year amounted to the following: Anderson, R227 040 Dale, R274 010 7. The partnership agreement stipulates the following: • Anderson is entitled to a monthly salary of R15 000, while Dale is entitled to a monthly salary of R17 000. • Dale receives a bonus of R12 000 a year for legal services rendered to the partnership. • Interest on capital is calculated at 10% p.a. Partner Anderson increased her capital with R100 000 on 1 September 2017. • The remaining profits/losses are shared among Anderson and Dale in the ratio 3:2 respectively. QUESTION 3 [28 marks; 22 minutes] INTERPRETATION OF FINANCIAL STATEMENTS You are provided with information relating to ALLI Clothing Boutique for the year ended 31 December 2018, together with comparative figures for 2017. The business is owned by two partners, Alyssa and Lisa. REQUIRED 3.1 Below is a list of concepts that answers questions on the interpretation of financial statements. Choose the concept that answers questions 3.1.1 to 3.1.4. Write only the concepts next to the question number. Liquidity; Return on equity; Gearing; Operating efficiency; Solvency 3.1.1 To what extent is the business financed by loans in comparison to capital? 3.1.2 Does the business have good control over its income and running expenses? 3.1.3 Can the business pay off its short-term debts comfortably? 3.1.4 Is the business a good investment for the partners? (4) 3.2 Calculate the following financial indicators for 2018. Show all workings. a) Acid-test ratio (4) b) Debt-equity ratio (3) c) Percentage return on average partners’ equity (5) 3.3 Comment on the liquidity position of the business for 2018. Quote financial indicators to support your answer. State TWO points. (4) 5

3.4 The partners want to expand the business, but they will need funds to do so. Their options are the following: • Option 1 – to contribute more capital themselves • Option 2 – to take out a loan • Option 3 – to take in a third partner a) Discuss each option and your opinion about it. Quote figures to support your answer. b) Make a conclusion and advise the partners on how they should finance the expansions. (8) INFORMATION Extract from the financial statements 2018 2017 Statement of comprehensive income (Income Statement) Interest on loans (14% p.a.) (53 200) (70 000) Net profit for the year 505 160 279 376 Statement of financial position (Balance Sheet) Non-current assets (Fixed assets) 647 200 631 000 Current assets 430 560 262 300 Inventory 357 660 175 600 Debtors 31 700 29 800 Cash and cash equivalents 41 200 56 900 Partners’ equity at year-end 496 610 273 500 Non-current liabilities (Loans) 380 000 500 000 Current liabilities 201 150 119 800 Appropriation of profits according to partnership agreement Alyssa Lisa Partners’ salaries 200 000 190 000 Interest on capital 12 000 18 000 Partners’ bonuses 30 000 10 000 Share of remaining profit 22 580 22 580 264 580 240 580 Financial indicators 2018 2017 Current ratio 2,1:1 2,2:1 Acid-test ratio ? 0,7:1 Stock turnover rate 8 times 12,2 times Debtors collection period 34 days 36 days Debt: Equity ratio ? 1,8:1 % return on average partners’ equity ? 102,1% 6

ACCOUNTING – FORMULA SHEET Gross profit 100 Gross profit 100 Net profit 100 × × × Sales 1 Cost of sales 1 Sales 1 Operating expenses 100 Operating profit 100 × × Sales 1 Sales 1 Total earnings by partner 100 Net profit 100 × × Partners average equity 1 Average owners ’ equity 1 Current assets : Current liabilities (Current assets – Inventories) : Current liabilities (Trade and other receivables + Cash and cash equivalents) : Current liabilities Average debtors 365 or 12 Average creditors 365 or 12 × × Credit sales 1 Credit purchases 1 Average inventories 365 or 12 Cost of sales × Cost of sales 1 Average inventories Non-current liabilities : Owners’ equity Total assets : Total liabilities 7