Gr11 Accounting TeacherSupportDocument Term2 2017

Downloaded from hlayiso.com CURRICULUM GRADE 10 - 12 DIRECTORATE NCS (CAPS) TEACHER SUPPORT DOCUMENT GRADE 11 ACCOUNTING Partnerships, Analysis and Interpretation, Clubs and Internal control Term 2 Topics 1

Downloaded from hlayiso.com PREFACE This document is intended to assist the Accounting learners with the Grade 11 Term 2 curriculum implementation in the classroom. The document covers the following: Ø Partnerships Ø Analysis and Interpretation of a Partnership Ø Clubs Ø Internal control The aim of this document is to support teachers so as to enable them to facilitate the content. Exemplar questions will guide teachers on what and how to assess the work covered. Covering all these aspects will empower the teachers in delivering the curriculum to the learners. The Curriculum Grade 10 – 12 Directorate acknowledges the contribution made in conceptualizing and producing this document by the KwaZulu-Natal Department of Education Accounting Subject Advisers. 2

Downloaded from hlayiso.com CONTENTS 1. Financial statements of a Partnership ………………………………..…… 2. Analysis and interpretation of a Partnership …..………………………… 3. Clubs …………………………………………………………………………….. 3

Downloaded from hlayiso.com BALANCE SHEET ACTIVITY A1 110 Marks You are provided with the information relating to Twalabanks Computer Shop for the financial year ended 28 February 2017. The business is owned by two partners Thandi Thwala and Bernie Banks. The bookkeeper has processed some of the year-end transactions, but has omitted others. REQUIRED: 1. Balance sheet on 28 February 2017. Where notes are not required, show workings in brackets. (48) 2. Notes for: • Fixed assets (17) • Capital (8) • Current accounts (25) 3. Internal control and ethics: Answer the questions which follow. (12) INFORMATION: 1. The following balances appeared in the ledger on 28 February 2017 Capital:Twala R 800 000 Capital:Banks 600 000 Current account: Twala (Cr.) 76 000 Current account: Banks (Dr.) 24 000 Drawings:Twala 110 000 Drawings: Banks 200 000 Cash float 12 000 Bank overdraft 102 260 Loan from partner: Twala( to be repaid in 2019) 300 000 Equipment 540 000 Accumulated depreciation on equipment 210 000 Land and buildings 1 147 800 Mortgage loan : Hi-Road Bank 360 000 Fixed deposit : Hi-Road Bank 110 000 Savings account : 70 000 4

Downloaded from hlayiso.com Debtors Control 91 000 Provision for bad debts 14 000 Creditors Control 165 000 Trading stock 780 000 Income receivable (Accrued) 23 000 Expenses payable (Accrued) 7 000 Expenses prepaid 15 000 Deferred income ( received in advance) 9 000 Consumable stores on hand 14 000 2. Adjustments and additional information: (a) The following items are reflected on the bank statement for February 2017 but have not been recorded: • Dishonoured cheque in respect of debtor, R8 000. • Direct transfer of rent from tenant, R11 000. • Bank charges, R780. • Interest on overdraft, R1 360. (b) Interest for February 2017 on the mortgage loan from Hi- Road Bank has not been recorded. This interest is capitalised at a rate of 15 % p. a. The mortgage loan is expected to decrease by R42 000 over the next financial year. (c) 50% of the fixed deposit matures in August 2017. The rest matures in August 2019. (d) The provision for bad debts is to be reduced by R900. (e) Some items of stock, i.e. 20 ‘Vula’ Computers, are now out of date (absolete) and will have to be sold below their cost price of R8 000 each. The partners believe they can sell these items for R3 200 each. (f) The shop premises were extended at a cost of R160 000. This was paid and recorded in July 2016. However ,the bookkeeper has incorrectly debited the repairs account in the ledger (g) The following affects equipment: • Certain unused equipment was scrapped at a book value on 30 November 2016. The cost price was R72 000 and the accumulated depreciation at the beginning of the year was R40 000.No entry has been made. • Depreciation must be written off equipment at 10% p.a. on cost. 5

Downloaded from hlayiso.com (h) A post –dated cheque issued to Juno Software for R33 000 was recorded in the CPJ on 15 February 2017. This cheque falls due on 15 April 2017. 3. The partnership agreement provides the following: • Salary to Twala , R20 000 per month. Twala’s salary is 20% more than that of Banks. • Bonus to Twala of R80 000 for the year for extra time worked. • Interest on capital at 8% p.a. Note that the ledger reflects that Twala increased her capital by R100 000 on 31 August 2016, while Banks decreased his capital by R200 000 on the first day of the financial year. • Banks’ share of the remaining loss is R51 000. The profit sharing ratio between Twala and Banks is 5:3. 3. INTERNAL CONTROL AND ETHICS Consider the following statements made by partner Twala and express your opinions on each . 3.1. Twala feels that the partners have not been controlling their cash resources well. 3.2 Twala feels that she is bearing an unfair financial burden in this business, especially as she works much longer hours than Banks. 3.3 Twala is not happy with the write down of the ‘Vula’ range of stock. See information 2e. You are told that ‘Vula’ computers were purchases from a business owned by Bernie Banks ’wife. 3.4. Thwala tried to contact a new debtor who owes R32 000, but his phone number appears to be false. Partner Banks has sold computers on credit to the customer when Twala was busy with other customers. 6

Downloaded from hlayiso.com ANSWER SHEET 1. TWALABANKS COMPUTER STORE BALANCE SHEET ON 28 FEBRUARY 2017 Note 7

Downloaded from hlayiso.com 2. NOTES FIXED/TANGIBLE ASSETS Land & Equipment Total Buildings Carrying value at beginning of year Cost Accumulated depreciation Movements Additions Disposal at carrying value Depreciation Carrying value at beginning of year Cost Accumulated depreciation 8

Downloaded from hlayiso.com CAPITAL Twala Banks Total CURRENT ACCOUNTS Twala Banks Total 9

Downloaded from hlayiso.com ACTIVITY A2 BALANCE SHEET AND NOTES Nozipho and Nokuthula are partners in the firm trading as NN Traders. Their bookkeeper did not complete the Equity and Liabilities Section in the Balance Sheet and Notes to the Financial Statements because he was on sick leave. The financial period ends on 28 February 2017. REQUIRED: 1 NN Traders request you to assist in completing the EQUITY AND LIABILITIES section of the Balance Sheet on 28 February 2017. Show calculations in brackets for part marks if the note is not required. (18) 2 Complete the following notes to the financial statements • Note 7: Capital accounts of partners (6) • Note 8: Current accounts of partners (30) NB: Some of the amounts have already been entered in the Balance Sheet and notes 3 Nozipho wants you to: • Calculate her total earnings for the year ending 28 February 2017 (4) • Calculate the percentage return earned by Nozipho on her investment in the partnership. Should she be satisfied? (8) INFORMATION: 1. Extract from Appropriation Statement on 28 February 2017: NOZIPHO NOKUTHULA TOTAL Interest on capital ? ? ? Salaries 4 000 per month 25 000 per year ? Bonus to partners - ? ? Share in remaining profit ? 14 000 28 000 10

Downloaded from hlayiso.com 2. Details extracted from the financial statements on 28 February 2017: 28 February 2017 28 February 2016 Capital: Nozipho 300 000 200 000 Capital: Nokuthula 300 000 100 000 Current account: Nozipho 10 000 (Cr) 5 000 (Dr) Current account: Nokuthula 14 000 (Cr) 2 000 (Cr) 3. Extract: Pre- Adjustment Trial Balance on 28 February 2017. Balance Sheet Section Debit Credit Loan: ABSA Bank 210 000 Creditors Control 95 000 Bank 102 500 Petty cash 240 Nominal Account Section Interest on loan 23 328 11

Downloaded from hlayiso.com ADDITIONAL INFORMATION ON 28 FEBRUARY 2017 1 The net profit for the year was R176 000 2 The partners are entitled to 15% p.a. interest on capital. Both partners increased their capital on 31 October 2016. 3 Nokuthula is entitled to 5% bonus calculated from his capital contribution at the end of the financial year 4 The loan from ABSA Bank was negotiated on 1 September 2013. The loan agreement stipulates that the loan must be repaid in 6 equal annual instalments commencing on 31 August 2014. The interest has been correctly calculated. 5 When reconciling the bank account with the bank statement which was received on 28 February 2017, the following were found: • An outstanding cheque of R4 000, which was issued to a trade creditor and dated 30 March 2017. • Cheque 200 to restore the petty cash imprest amount of R3 000. • Bank charges, R4 400 and interest on overdraft R15 400. 6 An amount of R800 was transferred by EFT from a foreign bank account directly into the bank account of the business. This amount was transferred by A. Tshabangu, who had left the country. His account has previously been written off as irrecoverable. 12

Downloaded from hlayiso.com ANSWER SHEET 1 BALANCE SHEET OF NN TRADERS AT 28 FEBRUARY 2016 EQUITY AND LIABILITIES OWNERS’ EQUITY 7 8 NON CURRENT LIABILITIES CURRENT LIABILITIES TOTAL EQUITY AND LIABILITIES 18 13

Downloaded from hlayiso.com 2 NOTES TO THE FINANCIAL STATEMENTS AS AT 28 FEBRUARY 2016 7. CAPITAL NOZIPHO NOKUTHULA TOTAL Balance at the beginning of the year Balance at the end of the year 300 000 300 000 6 8. CURRENT ACCOUNTS NOZIPHO NOKUTHULA TOTAL Profit per income statement 176 000 Partners salaries Interest on capital 60 000 Bonus to partners Primary distribution of profits 148 000 Final distribution of profits 14 000 28 000 Drawings during the year * Balance for the year * Balance at the beginning of year Balance at the end of year 30 14

Downloaded from hlayiso.com 3 Calculate Nozipho’s total earnings for the year ending 28 February 2017. 4 Calculate the percentage return earned by Nozipho on her investment in the partnership. 8 Should she be satisfied? . 15

Downloaded from hlayiso.com ACTIVITY A3 FINANCIAL STATEMENTS OF PARTNERSHIPS (75 marks; 45 minutes) You are provided with information relating to So Quick Traders on 29 February 2012. The business is owned by Ms Sonja and Mr Quickfall. The business fixes and sells bicycles. REQUIRED 3.1 Prepare the Income Statement for the year ended 29 February 2012. (50) 3.2 Prepare the Appropriation account (15) 3.3 Prepare the note for Capital. (10) INFORMATION SO QUICK TRADERS: PRE-ADJUSTMENT TRIAL BALANCE ON 29 FEBRUARY 2012 Balance Sheet Section Debit Credit Capital: Sonja 900 000 Capital: Quickfall 600 000 Current: Sonja (1 March 2011) 63 000 Current: Quickfall (1 March 2011) 76 500 Drawings: Sonja 270 000 Drawings: Quickfall 270 000 Bank 99 243 Vehicles at cost price 999 000 Accumulated depreciation on vehicles 249 550 Equipment at cost price 345 000 Accumulated depreciation on equipment 142 500 Loan: Nippy Financers 315 000 Trading stock 1 015 000 Debtors’ control 382 500 Provision for bad debts 24 000 Cash float 4 500 Petty cash 3 000 Creditors’ control 273 100 SARS (PAYE) 28 950 Medical fund 9 900 Unemployment Insurance Fund 1 200 16

Downloaded from hlayiso.com Nominal accounts section Sales 4 590 000 Cost of sales 2 700 000 Debtors’ allowances 765 000 Fee income 1 327 500 Rent expense 135 600 Salaries and wages 947 500 Employees’ contribution to UIF and medical fund 118 500 Bank charges 42 000 Bad debts 8 100 Electricity and water 25 500 Stationery and printing 26 550 Insurance 42 900 Telephone 28 950 Consumable stores 198 000 Interest income (on current account) 1 650 Sundry expenses 50 007 8 539 850 8 539 850 ADJUSTMENTS AND ADDITIONAL INFORMATION 1. The telephone account for February has not yet been paid, R2 600 2. The rent has been paid till 30 April 2012. The rent was increased by R1 350 on 1 January 2012. 3. During a burglary in February the following were stolen: § Bicycles to the value of R90 000 § Consumable stores worth R4 500 The insurance company has undertaken to cover 80% of the loss but the money has not yet been received. 4. A physical stocktaking revealed the following stock on hand: § Trading stock, R880 000 § Consumable stores, R21 300 5. A debtor who owes us R6 000 has been declared insolvent. His debt must be written off as irrecoverable. 6. The provision for bad debts must be adjusted to 5% of trade debtors. 7. Vehicles must be depreciated at 20% p.a. on the cost price. 8. New equipment with a cost price of R81 000 was purchased on 1 January 2012. This has been correctly recorded. Depreciation on equipment must be calculated at 10% p.a. on the diminishing balance method. 9. The loan statement received from Nippy Financers reflected the following: 17

Downloaded from hlayiso.com Balance on 1 March 2011 R426 000 § Interest capitalised ? Repayments during the year including interest R111 000 Balance on 29 February 2012 R359 100 10. One of the employees has erroneously been omitted from the salaries journal. He has not yet been paid and his details are as follows: Gross salary Deductions Net salary PAYE Medical UIF fund R9 300 R1 527 R1 200 R82 R6 491 The business contributes on a Rand-for-Rand basis to the Medical Aid and the UIF 11. The partnership agreement stipulates the following: § Sonja receives a salary of R12 000 per month § Quickfall receives a salary of R10 000 per month § Interest on capital is calculated at 10% p.a. NB: The capital accounts of the partners reflected the following: Ø Sonja increased her capital contribution mid-way through the year with R120 000 Ø Quickfall decreased his capital with R75 000 on the last day of the financial year. This has been properly recorded. § Quickfall received a bonus of R15 000 during the year § The remaining profits or losses are to be shared equally between the partners. 75 18

Downloaded from hlayiso.com ACTIVITY A3 ANSWER SHEET 3.2 SO QUICK TRADERS INCOME STATEMENT FOR THE YEAR ENDED 29 FEBRUARY 2012 Sales Cost of sales Gross profit Other operating income Gross operating income Operating expenses 19

Downloaded from hlayiso.com 3.3 Appropriation 3.4 SO QUICK TRADERS: NOTES TO FINANCIAL STATEMENTS ON 29 FEBRUARY 2012 CAPITAL Sonja Quickfall Total 10 20

Downloaded from hlayiso.com PARTNERSHIPS: INTERPRETATION OF FINACIAL STATEMENTS Key Focus • Understand the need to analyse a partnership financial statement • Understand the various categories of ratios: ü Profitability ü Solvency ü Liquidity ü Risk and return • Be able to comment on the financial position of a business • Make informed decisions on whether or not to invest in a partnership X-planation Profitability – determines the ability of a business to make a profit Indicators: Ø Gross profit on sales Ø Gross profit on cost of sales (important as this relates to the target mark-up) Ø Operating profit on sales Ø Operating expenses on sales Ø Net profit on sales Liquidity – determines the ability of a business to meet its short-term commitments (=cash flow of the business) Indicators: Ø Current ratio Ø Acid-test ratio Solvency – whether or not the business is solvent (= not bankrupt!) Indicators: Ø Solvency ratio Return – how much the partners are earning from the business Indicators: Ø Return on equity Ø Return earned by each partner Risk – the creditworthiness of the business Indicator: Ø Debt/Equity ratio • Remember that the right hand side of the ratio is always equal to 1! • Round off to the number of decimal places indicated in the question • LEARN YOUR FORMULAS! 21

Downloaded from hlayiso.com Activity B1 : PARTNERSHIPS – ANALYSIS AND INTERPRETATION ( 30 minutes) You are provided with information relating to Hot & Trendy, a clothing store owned by H. Hot and T. Trendy on 30 June 2012. REQUIRED: 1.1 Below is a list of concepts that answers questions on financial statements. Choose the concept that answers the questions 4.1.1 to 4.1.4. Write only the concept next to the question number. Solvency; Return on equity; Liquidity; Profitability 1.1.1 Can the business comfortably pay off its immediate debts? 1.1.2 Is the business able to make a profit and how well is it controlling its expenses? 1.1.3 Can the business comfortably pay off all its debts? 1.1.4 Is the business a good investment for the owner? (8) 1.2 Calculate the following financial indicators on 30 June 2012. 1.2.1 Operating expenses on turnover (3) 1.2.2 Acid test ratio (4) 1.2.3 % Return on average owners’ equity (8) 1.2.4 Stock turnover rate (5) 1.3 Comment on the liquidity position for 2012. Quote THREE relevant financial indicators (actual ratios or figures) to support your answer. (8) 1.4 The owners are not satisfied with the rate at which the stock is being sold. Explain why they feel this way by quoting a relevant financial indicator to support your explanation. (4) 1.5 Discuss THREE reasons why a business should not have too much stock. (6) 1.6 Will the owners of this business be satisfied with the return on equity? Explain by quoting a financial indicator to support your opinion. (4) 22

Downloaded from hlayiso.com INFORMATION A. Extract from the Post Closing Trial Balance on 30 June 2012 2012 2011 Capital: H. Hot 600 000 700 000 Capital: T Trendy 360 000 360 000 Current account: H. Hot 92 100 72 000 Current account: T Trendy (24 000) (11 400) Trading stock 320 000 300 000 Debtors’ control 84 000 60 000 Bank - 72 000 Creditors control 144 000 114 000 Bank overdraft 240 000 - B. Extract from Income Statements 2012 2011 Sales 1 800 000 1 620 000 Cost of sales 720 000 720 000 Gross profit 1 080 000 900 000 Operating expenses 648 000 480 000 Net profit 432 000 420 000 23

Downloaded from hlayiso.com C. Financial indicators: 2012 2011 Net profit on sales 24% 25,9% Operating expenses on turnover ? 29,6% Current ratio 1,1 : 1 3,4 : 1 Acid test ratio ? 1,2 : 1 Stock turnover rate ? 3,9 times Debtors’ collection period 48,7 days 40 days % Return on average owners’ equity ? 44% 50 24

Downloaded from hlayiso.com ACIVITY B1 – ANSWER SHEET 1.1 Choose the concept that answers the questions 1.1.1 to 1.1.4. Write only the concept next to the question number. 1.1.1 1.1.2 1.1.3 1.1.4 8 1.2.1 Calculate operating expenses on turnover. 3 1.2.2 Calculate the acid test ratio. 4 1.2.3 Calculate the % return on average owners’ equity. 8 25

Downloaded from hlayiso.com 1.2.4 Calculate stock turnover rate. 5 1.3 Comment on the liquidity position for 2012. Quote THREE relevant financial indicators (actual ratios or figures) to support your answer. 8 26

Downloaded from hlayiso.com 1.4 The owners are not satisfied with the rate at which the stock is being sold. Explain why they feel this way by quoting a relevant financial indicator and actual figures, ratios or % to support your explanation. 4 1.5 Discuss THREE reasons why a business should not have too much stock. 6 1.6 Will the owners of this business be satisfied with the return on equity? Explain by quoting a financial indicator to support your opinion. 4 27

Downloaded from hlayiso.com ACTIVITY B2 – ANSWER SHEET 2.3 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS The following information was extracted from the records of Mona Lisa Traders owned by partners M. Mona and L. Lisa. Their financial year ended on 28 February 2015. 2.3.1 REQUIRED Show what effect each of the given transactions has on the degree of profitability, current ratio and the acid test ratio. Show an increase with a “+”, a decrease with a “-” and no change with a “0”. (5) Note 1. The bank balance is favourable at all times, unless otherwise indicated. 2. Current assets are compared to current liabilities at all times. Example: Received the monthly rental by cheque. No. Degree of profitability Current Ratio Acid Test Ratio e.g. + + + 28

Downloaded from hlayiso.com Transactions A Purchased trading stock on account from Sun Ltd for R5 700. B Sold goods costing R870 for R1 250 cash. C The bank debited the business with R150 interest on overdraft. 2.3.2 REQUIRED Calculate the following financial indicators. A Period for which enough stock is on hand [Stock-holding period] (4) B Debtors’ average collection period (4) C Debt-equity ratio (3) D Return on M.Mona’s equity (3) 2.3.3 REQUIRED Respond to the following questions. A Comment on the liquidity position of the business. Use TWO financial indicators to support your answer. (6) B Explain the results of the Debt-equity ratio. (2) C Explain whether M.Mona should be satisfied with his returns. (3) 29

Downloaded from hlayiso.com INFORMATION A 2015 Cash sales 475 000 Credit sales 680 000 Cost of sales 796 550 Trading stock on hand 227 750 Debtors’ Control 184 440 Partnership equity 875 000 M.Mona’s equity 450 000 Earnings for the year : M.Mona 260 000 Loan: Marine Bank [17% p.a.] 270 000 B 2015 2014 Period for which enough stock is on hand ? 180 days Stock turnover rate 7 times 5 times Debtors’ collection period ? 114 days Creditors’ payment period 60 days 60 days Debt-equity ratio ? 0.53:1 Interest rate on fixed deposit 8 % p.a. 9 % p.a. Interest rate on loan 17 % p.a. 18 % p.a. 30

Downloaded from hlayiso.com 2.3.1 No. Degree of profitability Current Ratio Acid Test Ratio e.g. + + + A B + C - 05 2.3.2 A Period for which enough stock is on hand [Stock-holding period] 04 B Debtors’ average collection period 04 C Debt-equity ratio 03 D Return on M.Mona’s equity 31

Downloaded from hlayiso.com 03 2.3.3 Respond to the following questions: A Comment on the liquidity position of the business. Use TWO financial indicators to support your answer. Two financial indicators P P figures and trends P P CommentsP P B Explain the results of the debt-equity ratio. C Explain whether M.Mona should be satisfied with his returns. ACTIVITY B3 32

Downloaded from hlayiso.com PARTNERSHIPS – ANALYSIS AND INTERPRETATION You are provided with the incomplete Financial Statements of a partnership, Sunshine Stationers, together with additional information and financial indicators. Round all answers to 1 decimal place. REQUIRED: 3.1 Sunshine Stationers uses a mark up of 50% at all times. 3.3.1 Calculate the actual mark up percentage achieved for the 2016 financial year. (5) 3.3.2 Comment on the mark up achieved in 2016. Mention TWO actions the business can do take to ensure they achieve their desired mark up in the future. (6) 3.2 Calculate the Net Profit for 2016. (6) 3.3 Should the partners be satisfied with the percentage return earned in 2016, compared to the 21.7% earned in 2015. Give TWO reasons for your answer. (5) 3.4 Is this business positively or negatively geared? Give a reason for your answer. (3) 3.5 Calculate the missing amounts in the Balance Sheet labeled A - H. (24) 3.6 Comment on this businesses liquidity position for the year ended 29 February 2016. Identify and quote TWO financial indicators to support your answer. (6) INFORMATION Sunshine Stationers Extract from the Income Statement for the year ended 29 February 2016 2016 2015 Sales 2 181 120 1 715 200 Cost of Sales 1 536 000 1 280 000 Interest Income 12 150 12 150 Net Profit ? 226 000 Balance Sheet for the year ended 29 February 2016 33

Downloaded from hlayiso.com 2016 2015 Assets Non-current Assets 1 111 000 937 900 Fixed Assets ? ? Financial Assets (Fixed Deposit – 9%) F F Current Assets G 421 600 Inventories (all Trading Stock) H D Trade & other Receivables (all Trade Debtors) ? 144 600 Cash & Cash Equivalents 133 000 E Total Assets 1 586 000 1 359 500 Equity and Liabilities Owners Equity 1 160 000 1 040 000 Capital 1 100 000 A Current Accounts 60 000 B Non-current Liabilities 236 000 C Loan: Best Bank (13% p.a.) 236 000 C Current Liabilities 190 000 163 500 Trade & other Payables (all Trade Creditors) 190 000 163 500 Total Assets and Liabilities 1 586 000 1 359 500 ADDITIONAL INFORMATION • The business achieved a 28% return on average equity for 2016. • Both partners contributed additional capital of R50 000 each on 1 March 2015. • An extra R80 000 was borrowed from Best Bank during the 2015 financial year. • The Debt/equity ratio for 2015 was 0.15 : 1. • The stock turnover rate for the year ended 28 February 2015 was 8 times. The stock on hand was constant throughout 2015 financial year. 34

Downloaded from hlayiso.com • The fixed deposit was taken out on 1 June 2013 for 3 years. The interest rate is fixed at 9% per annum. Interest is not capitalised. • The Current Ratio for 2016 is 2.5 : 1 and for 2015 it was 2.6 : 1 • The Acid Test Ratio for 2016 is 1.2 : 1 and for 2015 it was 1.6 : 1. ACTIVITY B3 – ANSWER SHEET 35

Downloaded from hlayiso.com PARTNERSHIPS – ANALYSIS AND INTERPRETATION 3.1 Sunshine Stationers uses a mark up of 50% at all times. 3.3.1 Calculate the actual mark up percentage achieved for the 2016 financial year. (5) 3.3.2 Comment on the mark up achieved in 2016. Mention TWO actions the (6) business can do take to ensure they achieve their desired mark up in the future. Comment Actions 3.2 Calculate the Net Profit for 2016. (6) Should the partners be satisfied with the percentage return earned in 2016, compared (5) to the 21.7% earned in 2015. Give TWO reasons for your answer. 3.3 36

Downloaded from hlayiso.com 3.4 Is this business positively or negatively geared? Give a reason for your answer. (3) 3.5 Calculate the missing amounts in the Balance Sheet labeled A - H. (24) Number Calculation Amount A B C D E F G H Comment on this businesses liquidity position for the year ended 29 February 2016. (6) Identify and quote TWO financial indicators to support your answer. 3.6 37

Downloaded from hlayiso.com ACTIVITY B4 38

Downloaded from hlayiso.com One of the most important aspects in the accounting world that makes a business to be successful or become a failure, is the way in which financial statements are analysed and interpreted by the owners (partners) in order to make sound financial decisions. Gadaffi Phakade and Jack Mabaso are partners in a business, trading as GJ Traders selling T -Shirts for young boys and girls. GJ Traders approached you to assist and advice with the analysis and interpretation of the financial statements on 28 February 2017. REQUIRED Briefly explain and/or calculate the following requested by the two partners in order for them to understand the financial statements: 1 What does liquidity mean? (1) 2 Explain the difference between current ratio and the acid test ratio. (4) 3 Identify THREE other liquidity ratios which they may look at to address their cash (6) problems. Do not mention the ratios mentioned in 2. 4 The partners want you to calculate the debt/ equity ratio for 2017. Comment on your (4) findings. 5 Calculate the acid test ratio of the business on 28 February 2017. Comment on you (6) findings. 6 Calculate the stock turnover rate. (4) 7 The business aimed at the mark-up of 70% on cost. Identify the indicator that they (1) will use to check whether they reached their goal. 1. INFORMATION: 39

Downloaded from hlayiso.com Extract from Balance sheet on 28 February 2017 2016 ASSETS Current assets 100 000 82 000 Inventory 60 000 50 000 Accounts receivable (Debtors) 10 000 32 000 EQUITY AND LIABILITIES Owners’ equity 1 246 625 1 100 000 Non-Current Liabilities Mortgage loan 20% p.a. 240 000 300 000 Current liabilities 68 000 124 000 Accounts payable (Creditors) 45 000 32 000 Bank overdraft 23 000 92 000 The following information relates to GJ Traders: 28 February 2017 28 February 2016 Current ratio ? 0,7 : 1 Acid test ratio ? 0,3 : 1 Stock turnover rate ? 73 days Debt equity ratio ? 0,3: 1 Extract from the Income statement on 28 February 2017 28 February 2017 Sales 575 000 Cost of sales 380 000 ACTIVITY B4 – ANSWER SHEET 40

Downloaded from hlayiso.com 1 What does liquidity mean? 1 2 Explain the difference between current ratio and the acid test ratio. 4 Current ratio: Acid test ratio: 3 Identify THREE liquidity ratios which they may look at to address their cash problems. Do not 6 mention ratios mentioned in 2. 4 The partners want you to calculate the debt/ equity ratio for 2017. Comment on your findings. 4 Calculation Comment . 5 Calculate the acid test ratio of the business on 28 February 2017. 6 41

Downloaded from hlayiso.com Calculation Comment . 6 Calculate the stock turnover rate. 4 7 The business aimed at the mark up of 70% on cost. Identify the formula that they will use to check 1 whether they have reached their goal. 8 GJ Traders could not achieve a mark-up of 70%. Provide TWO possible reasons why they could 4 not achieve the mark-up percentage. NON PROFIT ORGANISATIONS ACTIVITY C1 (28 Marks, 17 Minutes) 42

Downloaded from hlayiso.com You are provided with information relating to Kings Rugby Club for their financial year ended 31 March 2016. REQUIRED: 1.1 Are the following sentences TRUE or FALSE? If FALSE, correct the underlined word to make the (10) sentence TRUE. a) Monies that a club makes during the twelve month period are transferred into the accumulated fund account at the end of the financial year. b) The secretary of Kings Rugby Club is responsible for collecting the membership fees from the club members and controlling the clubs finances. c) The Statement of Income and Expenditure is used to calculate the Profit or Loss of the club. d) The clubs office bearers can request to that their honorariums are offset against their membership fees. 1.2 Complete the Statement of Receipts’ and Payments for the year ended 31 March 2016. (18) Information: Cash received for membership fees 69 000 2015 1 000 2016 65 000 2017 3 000 Affiliation fees paid to SARFU 15 000 Membership fees written off 1 250 Discounts allowed for early payment of memberships 500 Water and Electricity 6 000 Coaches Salaries (Included is an advance of R2 000 for April 2016) 16 500 Purchase of Snacks for AGM 2 500 Maintenance of grounds 13 800 Equipment purchased on credit 12 250 Payments to creditors 10 000 Cash donations received 12 500 Gate takings received in cash 5 250 Refreshment cash sales 17 500 Refreshment purchased for cash 8 750 Sundry expenses paid in cash 1 500 The current bank account at ABSA bank was unfavourable R15 200 on the 1 April 2015. ACTIVITY C1- ANSWER SHEET 43

Downloaded from hlayiso.com NON PROFIT ORGANISATIONS 1.1 a) (10) b) c) d) (18) 1.2 Statement of Receipts & Payments for the year ended 31 March 2016 Receipts Payments Cash Surplus / Deficit for the year Bank Balance on 1 April 2015 Bank Balance on 31 March 2016 ACTIVITY C2 (40 Marks, 24 Minutes) CLUBS - LEDGER 2.1 REFRESHMENTS AND INTERPRETATION 44

Downloaded from hlayiso.com Sharkie’s Lifesaving Club has a small shop in which cans of cold drink are sold for cash. Study the refreshment account in the General Ledger of Sharkie’s Lifesaving Club and answer the questions below: INFORMATION: Sharkies Lifesaving Club Nominal Section N3 Refreshments 2015 Stock of 2015 31 1 GJ 12 300 Donation GJ 8 400 Jan Refreshments Dec 2015 31 Bank CPJ 23 000 Bank (Sales) CRJ 269 010 Dec Creditors Control CJ 116 800 Stock of Refreshments GJ 15 190 Membership GJ 2 800 Fees ? GJ 137 700 292 600 292 600 QUESTIONS: 2.1.1 Why do many clubs sell refreshments to their members? Give TWO reasons. (4) 2.1.2 If each can of cold drink was sold for a constant price of R15 during the 2015 financial year, calculate (2) how many cans were sold, 2.1.3 Did Sharkie’s Lifesaving Club receive or give a refreshments donation of R8 400? Give a reason for your answer. (3) 2.1.4 Provide the contra account details for the entry of R137 700 on the debit side. (2) 2.1.5 Give an explanation for the entry of R2 800 for membership fees on the debit side of the refreshments account. (2) 2.1.6 Explain the difference between the Stock of Refreshments on the debit side and on the credit side. ACTIVITY C2 – ANSWER SHEET CLUBS - LEDGER 45

Downloaded from hlayiso.com 2.1.1 Why do many clubs sell refreshments to their members? Give TWO reasons. (4) If each can of cold drink was sold for a constant price of R15 During the 2015 financial year, calculate 2.1.2 (2) how many cans were sold, 2.1.3 Did Sharkie’s Lifesaving Club receive or give a refreshments donation of R8 400? Give a reason for (3) your answer. 2.1.4 (2) Provide the contra account details for the entry of R137 700 on the debit side. (2) Give an explanation for the entry of R2 800 for membership fees on the debit side of the refreshments 2.1.5 account. 46

Downloaded from hlayiso.com 2.1.6 (4) Explain the difference between the Stock of Refreshments on the debit side and on the credit side. DR Side CR Side ACTIVITY D3 3. MEMBERSHIP FEES The following information was extracted from the accounting records of Nemo’s Swimming Club for the year ended 31 December 2015. REQUIRED: 3.1 Draw up the membership fees account in the General Ledger for the year ending 31 December 2015. (23) INFORMATION • Extract from the Post-closing Trial Balance on 31 December 2015: Accrued Income (Membership Fees) 5 400 Accrued Expenses (Honorarium) 1 800 Deferred Income (Membership Fees) 14 400 • Extract from the Statement of Receipts and Payments for the year ended 31 December 2015: Receipts 47

Downloaded from hlayiso.com Membership Fees 97 200 2014 3 600 2015 84 600 2016 9 000 Payments Membership Fees Refunded 900 • Membership fees are R1 800 per member per year. • Two members who had each paid their membership fees for 6 months were transferred during the year. One member claimed a refund on his half-year’s membership fees. The other member donated his half-year’s fees to the club. The committee decided to enter this as a donation. • Any membership fees outstanding from the previous year are to be written off and the names of these members are to be removed from the register. • The secretary requested that part of the honorarium due to him from 2014, be retained by the club as his membership fees for 2015. • At the end of the year, 7 members still owed membership fees for 2015. ACTIVITY C3- ANSWER SHEET 3.1 Membership Fees 48

Downloaded from hlayiso.com General Ledger of Nemo’s Swimming Club (23) N1 Membership Fees ACTIVITY C4 (40 marks; 20 minutes) The following information was taken from the accounting records of Golden Valley Sports Club on 30 June 2015, the last day of the financial year. 49

Downloaded from hlayiso.com REQUIRED: 4.1 Concepts relating to non-profit organisations are listed in COLUMN A and explanations are listed in COLUMN B. Choose an explanation from COLUMN B that matches a concept in COLUMN A. Write only the letter (A-D) next to the question number in the ANSWER BOOK. COLUMN A COLUMN B 4.1.1 Membership fees A The money given to the secretary or treasurer of a club as a token of appreciation. 4.1.2 Affiliation fees B. A once-off amount paid by a member when joining a club. 4.1.3 Honorarium C. The money a club pays to another organisation in order to participate in tournaments or competitions. 4.1.4 Entrance fees D. The annual fees each member must pay to belong to a club. (8) 4.2 Prepare the Statement of Receipts and Payments for the year ended 30 June 2015. (24) 4.3 Calculate the profit made at the annual dance. (4) 4.4 The membership fee is R2 000 per member per year whilst the entrance fee payable by new members is R5 000 per member. Calculate the following: 4.4.1 How many new members joined the club in 2015? (2) 4.4.2 How many members paid their 2016 membership fees during 2015 (2) INFORMATION 50

Downloaded from hlayiso.com The following information was taken from the General Ledger on 30 June 2015: Cash in the bank account (1 July 2014) R 65 780 Membership fees received during the year: 2014 10 000 2015 160 000 2016 16 000 Entrance fees received 50 000 Cash donations received 5 220 Cash sales of annual dance tickets 69 000 Annual dance expenses paid by cheque 26 400 Creditors paid by cheque 3 600 Bank charges 4 450 Office chair received as a donation 2 800 Honorarium 8 000 Payment for hire of squash courts 12 000 Computer purchases but not yet paid 55 000 Refreshments purchased for cash 38 850 Refreshments donated to local school 1 800 Rent paid 24 000 Telephone paid by cheque 14 560 Repayment of loan by cheque 15 000 Cash sale of old squash balls 560 Repairs and maintenance paid by cheque 7 200 Sale of refreshments for cash 49 200 Stationery purchased for cash 3 300 Squash balls purchased on credit 2 500 Squash balls purchased for cash 3 600 Wages paid 84 600 Additional information: 51

Downloaded from hlayiso.com 1. The value of refreshments on hand were as follows: § On 30 June 2015 – R4 500 § On 30 June 2014 – R3 300 2. Some members sold tickets for the dance but they have not yet handed over the money to the treasurer. The total amount outstanding is R7 120. 40 ACTIVITY C4- ANSWER SHEET 4.1 Match the concept to the explanation. 4.1.1 4.1.2 4.1.3 4.1.4 8 4.2 See next page 4.3 Calculate the profit made at the annual dance. 4 4.4.1 How many new members joined the club in 2015? 2 4.4.2 How many members paid their 2013 fees during 2015? 52

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Downloaded from hlayiso.com 4.2 GOLDEN VALLEY SPORTS CLUB STATEMENT OF RECEIPTS AND PAYMENTS FOR THE YEAR ENDED 30 JUNE 2016 RECEIPTS PAYMENTS Bank charges 4 450 Rent paid 24 000 Telephone 14 560 Surplus/(deficit) for the year Balance at the beginning of the year Balance at the end of the year 54

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