Gr12 Accounting Teacher Support for Learner Assisstance Revision Document

CURRICULUM GRADE 10 -12 DIRECTORATE NCS (CAPS) SUPPORT DOCUMENT GRADE 12 ACCOUNTING PROGRESSED LEARNERS: SOLUTIONS 2020

QUESTION A1 1.1 1.1.1 Give ONE purpose of the IFRS To make international comparisons as easy as possible.  OR To reduce the number of different variations in the financial statements.  2 1.2.1 AQUA LTD. INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018 5 920 000 * Sales (2 720 000 + 3 200 000 ) OR (2 720 000 x 185/85) (3 200 000) * Cost of sales (2 720 000 x 100/85 ) OR (5 920 000 – 2 720 000) 4 Gross profit 2 720 000 201 460 * Other operating income 185 960 * Rent income (234 950  – 48 990  ) 2 400  Bad debts recovered 1 100  Provision for bad debts adjustment (22 000 – 20 900) **Trading stock surplus (1 531 000 – 1 534 000 + 15 000) 12 000  OR (1 534 000 -1 531 000 – 15 000) No part marks * 2 921 460 11 Gross operating income (2 347 660) * Operating expenses 243 418 Sundry expenses 840 000 Directors’ fees Salaries and wages (821 000 + 10 538  + 1 950  + 2 880 ) 836 368 * Audit fees (66 000  x 4/3 ) OR (66 000 one mark + 22 000 one mark) 88 000 * 84 900 * Pension fund contribution (81 000 + 3 900) Bad debts (12 100  + 675  ) OR (12 100 + [450x100/40=1125-450) 12 775 * 39 000  Consumable stores Depreciation (83 200  + 10 000  + 109 999  ) 203 199 * OR (93 200 2 marks + 109 999 2 marks) 22 Operational profit 573 800 * 27 000  Interest income 600 800

Interest expense (75 000) * (600 000 + 423 000  - 948 000 ) 525 800 Profit before tax 8 Income tax (150 000  + 7 740 ) (157 740)  Net profit (loss) for the year 368 060 45 1.2.2 (a) ORDINARY SHARE CAPITAL Authorised shares: 3 000 000 ordinary shares Issued share capital: 2 000 000 Ordinary shares on 1 March 2017 5 225 000  250 000 Shares issued at R2,50 each 625 000 * (10 000) Shares re-purchased R2,60  * (26 000) * (ASP: 2,60) (5 824 000/2 240 000) 2 240 000  Ordinary shares on 28 February 5 824 000 2018 7 (b) RETAINED INCOME 1 525 000 Balance on 1 March 2017 368 060 Net profit after income tax 10 000 shares re-purchased (5 000) ** (R3,10 – R2,60) 10 000  x 50c  OR (R31 000 – R26 000) One mark One mark (617 500) * Ordinary share dividends 55 000  Interim dividends 562 500 * Final dividends (2 250 000  x R0,25) 1 270 560 * 9 Balance on 28 February 2018 QUESTION A2: FIXED ASSETS, INCOME STATEMENT AND AUDIT REPORT 2.1 2.1.1 Equity  or shareholders’ equity 2.1.2 Current asset  2.1.3 Non-current asset  2.1.4 Expense  4

2.2 YASHPAL LTD 2.2.1 Refer to Information A: WORKINGS ANSWER (i) 838 000 – 420 000 418 000  (ii) 838 000 x 15% = 125 700  139 200  216 000  x 15% x 5/12  = 13 500  one part correct (iii) 26 250  – 4 250  22 000  11 2.2.2 ASSET DISPOSAL (N12) Accumulated 2018 2018 1 Equipment 105000 * 1 Depreciation on 83000 * Jan Jan Equipment  Profit on sale 4 250  Bank 26250  of asset (622 000 – Equipment 517 000) 109250 109250 *balancing figure 5 2.2.3 Income Statement for the year ended 28 February 2018 Sales 7 437 500 + 32 200 or COS x 175% 7 469 700  Cost of sales 4 250 000  + 18 400  (4 268 400) * Gross profit 7 3 201 300  Sales – COS Other income 98 700  operation Fee income 79 350 Discount received 14 280  Profit on sale of asset 4 250  Provision for bad debts adjustment (7 480 – 6 660) 820 * Gross income 6 3 300 000  GP + OI

Operating expenses (1 350 000)  GI – OP Depreciation (139 200  + 35 400 ) 174 600 * Trading stock deficit (728 400 – 18 400 – 706 350) 3 650 * Packing material (43 730 – 3 880) 39 850 * Directors fees (336 500  + 23 500 ) 360 000  Audit fees (19 450  + 19 450 ) 38 900  Bad debts (23 555  + 11 245 ) 34 800 * Rent expense (146 080  – 11 770 ) 134 310 * Salaries and wages 222 700  Sundry expenses 341 190  25 Operating profit 1 950 000  Interest income 195 000 x 8% x ½ 7 800 * Profit before interest expense 1 957 800 Interest expense 565 800 - 542 000 (23 800)  Net profit before income tax 560 860 x 1 934 000  100/29 Income tax (560 860)  Net profit after tax 560 860 x 8 1 373 140 * 46 71/29 QUESTION A3 3.1 INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2019. Sales (6 200 000 – 20 000 + 80 000  – 70 000) 6 190 000  Cost of sales ( 3 000 000 + 62 500 – 43 750) (3 187 750)  10 Gross profit 3 171 250  Other operating income 122 989  Rent income ( 128 740 – 27 060) 101 680  Bad debts recovered ( 2 760 + 2 400) 5 160  Provision for bad debts adjustment 3 149  Profit on sale of an asset 13 001  11 Gross income 3 294 240 Operating expenses (2 676 240)  Audit fees 33 800 Insurance 21 222 Bad debts 74 000 Bank charges 3 200

Directors fees (260 000 + 260 000) 520 000  Salaries (1 220 000 + 15 368) 1 235 368  Pension fund contribution (36 200 + 3 900) 40 100  Packing material (22 000 – 4 000) 18 000  Sundry expenses 77 100  Trading stock deficit 81 250  17 Depreciation (525 200+ 47 000) 572 200  Operating profit 618 000  Interest income 32 000  Operating profit before interest expense 650 000  Interest expense (30 000)  Net profit before taxation 620 000  Income tax (186 000)  7 Net profit after tax 434 000  ACTIVITY B 1 MAHAYE LIMITED BALANCE SHEET ON 30 JUNE 2009 ASSETS NON CURRENT ASSETS 4 061 000 Fixed / Tangible assets 4 021 000 Financial Assets Fixed deposit: Supra Bank 40 000 (60 000 - 20 000 ) CURRENT ASSETS 259 350 Inventories 135 200 (129 600 + 5 600 ) Trade and other receivables 75 700 (45 000 – 2 250 + 25 000 + 7 950 Cash and Cash equivalents 48 450 (20 00 see FD + 28 450 ) TOTAL ASSETS 4 320 350 EQUITY AND LIABILITIES CAPITAL AND RESERVES 3 593 000 Ordinary share capital 2 648 000 Retained income 945 000 NON-CURRENT LIABILITIES 288 000 Mortgage loan: Supa Bank 288 000 (336 000 - 48 000 )

CURRENT LIABILITIES 439 350 Trade and other Payables 111 350 (85 200 + 7 200 + 12 300 + 6 650) Shareholders for dividends 280 000 Current portion of loan (12 X 4 000) 48 000 TOTAL EQUITY AND LIABILITIES 4 320 350 38

ACTIVITY B 2 2.1.1 SHARE CAPITAL AUTHORISED SHARE CAPITAL 750 000 ordinary shares ISSUED SHARE CAPITAL Ordinary shares in issue on 450 000  3 215 000 1 March 2019  Ordinary shares issued during 80 000 760 000 the year  Ordinary shares re-purchased operation (75 000) (562 500)  (average price of R7,50 ) Ordinary shares in issue on 3 412 500  455 000  28 Feb 9 2.1.2 RETAINED INCOME Balance on 1 March 2019 (105 000 + 217 500 ) 322 500  Net profit after tax 812 700  Shares repurchased (217 500)  75 000 x 2,90 Ordinary share dividends (482 000)  Interim dividends / Paid 270 000  Final dividends / Declared 530 000  212 000  Balance on 28 February 2020 operation 435 700  11

2.2 VIJAY LIMITED BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) ON 28 FEBRUARY 2020 ASSETS Non-current assets operation 3 884 000  2 (total assets – current assets) Fixed assets (3 346 000– 5600 – 106 400 3 234 000   Financial asset: Fixed deposit 650 000 Current assets operation 863 100  5 Inventories 275 400 Trade and other receivables (243 500  + 7 600  ) 251 100  Cash and cash equivalents 336 600 TOTAL ASSETS transfer total equities and liabilities 4 747 100  EQUITY AND LIABILITIES Shareholders' equity operation 3 848 200  3 Ordinary share capital see 2.1.1 3 412 500  Retained income see 2.1.2 435 700  Non-current liabilities 451 200 4 Loan : William Bank (482 600 + 81 400  – 112 800  ) one part 451 200  correct Current liabilities operation 447 700  12 Trade and other payables (62 460 + 12 120) one part correct 74 580 Refer 2.1.2 Shareholders for dividends OR 482 000 212 000  # SARS : Income Tax 48 320  (348 300 – 299 980  must be deducted under CL) Current portion of loan check that loan has been reduced by this 112 800  TOTAL EQUITY AND LIABILITIES operation 4 747 100  Foreign entries -1 (max -2) Presentation / Placement / Incorrect or incomplete details -1 (max -2)

2.3 Calculate the return on average shareholders' equity for 2020. 812 700 see 2.1.2 x 100 = 22,0% operation, %, one part correct ½ (3 537 500+ 3 848 200) see 2.2 3 692 850 3 marks 5 2.4 From 2019 to 2020 the directors made a deliberate decision to change the policy on the distribution of profits in the form of dividends. Comment on this change. Quote financial indicators or figures to support your answer. They paid out 100% (all) of their earnings in 2019 compared to 59%  of their earnings (100÷170 cents) in 2020. The business is retaining funds for future expansions / development / support equalising dividends in future / to improve NAV.  OR They did not retain any earnings in 2019 (1 mark). In 2020 they retained 70 cents (41%) of EPS (2 marks). The business is retaining funds for future expansions / development / support equalising dividends in future / to improve NAV. (1 mark). 4 2.5 Comment on whether the shareholders should be satisfied with the percentage return and the market price of their shares. Quote TWO relevant financial indicators (actual figures/ratios/percentages) and their trends. Give an additional comment in each case. Indicators  Trends & figures  Extra comment  ROSHE (1 mark): Increased from 18,3% to 22% (1 method mark) / by 3,7% points. (see 2.3) This exceeds the return on alternative investments (of 9%). (1 mark) Must mention NAV as the indicator; Allocate 1 mark for trend of either the NAV or market price NAV (1 mark) is 846 cents NAV increased by 60 cents (from 786c to 846c) Market price decreased by 28 cents (from 1060c to 1032c) The market price exceeds the NAV (1 mark) / investors are prepared to pay extra for the shares. 6

2.6 The external auditors, Hassan and Jacob, have employed Janet to work on the audit of Vijay Ltd. Janet owns 10 000 shares in Vijay Ltd. Explain why this is a problem. Any one valid reason; part-marks for partial answers • It is a conflict of interest/unethical. • She could influence the results in a positive or negative way. • Overlooking issues/insider information. • She could be biased / not independent. • Could put the validity / credibility of the audit at risk. Give a valid solution.  Any one valid reason; part-marks for partial answers • She should sell the shares if she wants to continue working on the audit. • She must be removed from this audit / she recuses herself from the audit / she takes on other projects within this audit firm. • She must disclose her vested interest and ensure that her employers / review committee make a decision on her participation in the audit. 4 TOTAL MARKS 65

ACTIVITY B 3 3.1 CONCEPTS 3.1.1 B  3.1.2 D  3.1.3 A  3.1.4 C  4 3.2 PARADISE LIMITED 3.2.1 Ordinary share capital Presentation or incorrect / incomplete details -1 max -2 3 000 000 shares in issue at beginning 6 000 000 1 000 000 shares issued during the year 5 000 000 shares repurchased (average issue price: R2,75  per share) must be in (200 000) (550 000) brackets or subtracted if 200 000 or R2,75 is used shares in issue at end operation one 3 800 000  10 450 000 6 part correct Retained income Presentation or incorrect / incomplete details -1 max -2 Balance at beginning of year (1 414 000 + 220 000) 1 634 000 Funds used for shares repurchased (200 000 x R1,10) OR 770 000 – OSC amount above (220 000) Do not accept 770 000 as a final -1 if no brackets Net profit after tax (3 800 000 – 1 064 000) / (3 800 000 x 72/100) 2 736 000 Ordinary share dividends must be in brackets or subtracted (2 600 000) operation one part correct one part correct Interim (3 000 000 x 0.28)   840 000 Final (4 000 000 x0.44) one part correct 1 760 000 Balance at end of year check operation one part correct 1 550 000 10 3.2.2 (STATEMENT OF FINANCIAL POSITION) ON 29 FEBRUARY 2016 ASSETS

NON-CURRENT ASSETS TA - CA 11 918 400 Fixed assets (14 235 500 – 2 847 100) 11 388 400 5 Fixed deposit: Sandton Bank balancing figure 530 000 CURRENT ASSETS 3 538 600  Inventories balancing figure / CL x 0,5 1 361 000  Trade and other receivables (356 000 – 17 800 + 6 800) 345 000 338 200 3 marks  Cash and cash equivalents CL x 0,8 – TOR (above) 1 832 600 12 TOTAL ASSETS see total equity + liabilities 15 457 000 EQUITY AND LIABILITIES ORDINARY SHAREHOLDERS' EQUITY operation 12 000 000 Ordinary share capital refer 3.2.1 10 450 000 3 Retained income refer 3.2.1 1 550 000 NON-CURRENT LIABILITIES 735 000 Loan from Helpu Bank 735 000 4 (1 155 000 – 420 000 )one part correct CURRENT LIABILITIES CA/1,3 2 722 000 490 000 Trade and other payables (478 000 + 12 000 ) If balancing figure SARS: Income tax (1 064 000  – 1 012 000 ) 52 000 See Retained Income Note Current portion of loan see NCL above 420 000 Shareholders for dividends refer 3.2.1 1 760 000 11 TOTAL EQUITY AND LIABILITIES operation 15 457 000 ACTIVITY B 4: COMPANY FINANCIAL STATEMENTS AND AUDIT REPORT 4.1 CONCEPTS

Match the concepts in Column A with the descriptions in Column B. 4.1.1 C  4.1.2 E  4.1.3 B  4.1.4 A  4.1.5 D  5 3.2 AMARA LIMITED 3.2.1 Calculate the Net Profit after Tax. R Incorrect Net Profit before Tax 1 024 400 Telephone  (3 000) Insurance  4 500 220 177 600  (26 400) Rent Income x 1 480 1 Stationery  500 Net profit before tax one part correct 1 000 000 Income Tax NPBT X 0,28  (280 000) Net Profit after tax tax must be deducted one part correct 720 000 4.2.2 ORDINARY SHARE CAPITAL AUTHORISED Number of authorised ordinary shares: 400 000 shares ISSUED R 160 000 Ordinary shares at the beginning of the year 4 000 000 50 000 Ordinary shares repurchased at the average  (1 250 000) share price *R25 any one part correct 100 000  Ordinary shares issued during the financial 1 750 000 year at @R17,50 each operation 210 000 Ordinary shares in issue at the end of the year  4 500 000 one part correct operation

RETAINED INCOME R Balance at the beginning of the year 540 000 Net profit after tax for the year see 3.2.1  720 000 Repurchase of 50 000 ordinary shares @R5,00   (250 000) one part correct Dividends on ordinary shares operation  (264 000) Paid  96 000 Recommended one part correct  168 000 Balance at the end of the year one part correct  746 000 10 AMARA LIMITED BALANCE SHEET AS AT 28 FEBRUARY 2017 ASSETS R NON-CURRENT ASSETS  5 872 000 Fixed/Tangible Assets 5 002 000 + 562 500+ 250 000 – 112 500 – 90 000  5 612 000 Financial Assets  260 000 (8) CURRENT ASSETS operation  1 058 000 Inventories balancing figure 325 500 Trade and other receivables 696 000 + 20 000 + 4 500 see 4.2.1  720 500 Cash and Cash equivalent  12 000 TOTAL ASSETS calculation  6 930 000 (7) EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY operation  5 246 000 Ordinary Share Capital see 4.2.2  4 500 000 Retained Income see 4.2.2  746 000 (3) NON-CURRENT ASSETS 780 000 Loan from 1 140 000  – 360 000  (517 500 – 157 500)  780 000 (4)

CURRENT LIABILITIES operation  904 000 Trade and other payables 294 600  + 3 000  + 26 400  + 168 000   492 000 one part correct Bank overdraft  52 000 Current loan portion see loan above  360 000 TOTAL EQUITY AND LIABILITIES operation  6 930 000 (9) ACTIVITY C3. 3.1 SUNCITY LTD. 3.1.1 ORDINARY SHARE CAPITAL AUTHORISED: 1 500 000 Ordinary shares ISSUED: 460 000 Ordinary shares in issue at the 1 012 000 beginning of the year Additional shares issued on 383 000  160 000 1 November 2019. (10 000) (22 500)  if 10 00 Shares bought back during the financial not year @ R2,25  (one bracketed, part correct, 22 500 must be check bracketed) operation below 610 000 Ordinary shares in issue at the end of 1 372 500   the year (check operation) 8 RETAINED INCOME Retained income at the beginning 415 600 Net profit after tax 682 990  (975 700 – 292 710) (must be minus) Repurchase of 10 000  shares x R,25  (2 500)  One part correct, must be an outflow Ordinary share dividends (one part correct) (192 000)  Interim dividends paid and declared (72 000)  Declared and not paid (120 000)  Retained income at the end of the year 904 090  10 (check operation)

3.1.2 Calculate the amount that would appear in the Cash Flow Statement for: Taxation paid 23 800 + 292 710  + 8 200  = 324 710  4 Accept alternative presentations (signs reversed / ledger account) Dividends paid 88 000 + 192 000  - 120 000  See 4.1.1= 160 000  4 OR 88 000 + 72 000 two marks = 160 000 Accept alternative presentations (signs reversed / ledger account)

3.1.3 Prepare the following note to the Cash Flow Statement Net profit before tax 975 700 Adjustment for : Depreciation 156 800  Interest on loan/expense 46 000  Profit before changes in working capital 1 178 500  (Check operation) Changes in Working capital 49 800  (Check operation) Decrease in inventory (164 000 – 112 000) 52 000  No brackets, if bracketed, no marks Decrease in debtors 38 200  119 800  – (102 000  + 56 000) (One part correct, no brackets) Decrease in creditors (40 400)  (104 000  + 9 600) – 154 000  (One part correct, brackets) Cash generated from operations 1 228 300  (Check operation) 15 3.1.4 Cash flows from investing activities (629 490)  (Check operation) Purchase of fixed assets (720 000)  Proceeds of sale on non-current assets 30 510  (1 201 500+ 720 000 – 156 800 - 1 734 190) One part correct Decrease in investments 60 000  (860 000 - 800 000) 8 Cash flows from financing activities 278 000  (Check operation) Proceeds from the issue of share capital 383 000  Repurchase of shares (10 000 x R2,50)  (25 000)  Repayment of long-term borrowings (80 000)  5 Net change in cash equivalents 346 100  (Check operation) Cash and cash equivalents – (210 100)  beginning of year. (3 400 – 213 500)  Cash and cash equivalents – 136 000  end of year 4

ACTIVITY C4 4.1.1 Calculate the cost price of the delivery vehicle that was traded in on 31 August 2019 1 120 000 + 450 000–1 270 000 =300 000 operation one part correct 4 4.1.2 Calculate the amount for which this vehicle was traded in on 31 August 2019 300 000 – 108 000 – 19 200 = 172 800  check operation 5 4.1.3 FIXED ASSET NOTE Land and Vehicles Equipment Buildings Carrying value at the beginning of the 5 715 000 660 000 101 000 year Cost 5 715 000 1 120 000 200 000 Accumulated depreciation (0) (460 000) (99 000) Movements Additions (at cost) 700 000 450 000 65 000 Disposals (at carrying value) (172 800) (400 000)  (0) See 4.1.2 Depreciation (38 925) * (0) (157 800) Equipment (36 000 + 2 925 ) Any figure Carrying value at the end of the year 6 015 000 779 400 127 075 Cost 6 015 000 1 270 000 265 000 Accumulated depreciation (0) (490 600)  (137 925) 18

BHAPU LIMITED 4.2 CASH FLOW STATEMENT FOR THE YEAR ENDED 29 FEBRUARY 2020 R Cash effects of operating activities (377 628) Cash generated from operations see 4.2 1 899 760  Interest paid (143 000)  Dividends paid (690 000+ 800 000) (1 490 000) 13  Taxation paid (569 688+ 31 900 + 42 800) (644 388)  Cash effects of investing activities (642 200) Fixed assets purchased see 4.1.2 (1 215 000)  4 Proceeds from sale/disposing of fixed assets see .4.1.2 572 800 Cash effects of financing activities 1 200 000 Proceeds from shares issued (100 000 X R18) 1 800 000 Repurchased shares (60 000 X R20) (1 200 000) Mortgage loan 600 000 Net change in cash and cash equivalents 180 172 Cash and cash equivalents at beginning of year (– 89 400 + 4 740) 1 mark 1 mark (84 660) 10 Cash and cash equivalents at end of year 95 512

Refer to the Cash Flow Statement that you prepared in 4.2 above. Mention TWO major decisions reflected in the statement and support the decision by quoting the relevant figures. Also indicate ONE possible point of impact that each decision would have on the company's future operations. Decision with figures Impact on future business   operations Purchasing of new fixed assets for R1 Will improve the company's productive 215 000 capacity; enable expansion of productive activities; improves the company's ability to generate more income; will drastically reduce the cash flow; etc. A huge dividend payout of R1 Will result in small retention of profits; 490 000 impact negatively on future expansion of productive activities; reduce the company's capacity; will result in happy and satisfied shareholders; etc. Issuing of new shares for Will boost the company's cash flow; R1 800 000 improve capacity to generate profits and future expansion of activities; etc. Repurchase of the shares for Pay out less dividends in the future. R1 200 000

ACTIVITY D1 AUDIT REPORTS AND INTERNAL CONTROL 1.1 MATCHING 1.1.1 C 1.1.2 A 1.1.3 B 1.2.1 Explain why the above – mentioned report will be regarded and an unqualified report.  The shareholders of a company need to have confidence in the company’s ability to look after the investment   Separation of ownership from control 1.2.2 Explain TWO major consequences for John and Sydwell should they be negligent in performing their duties. Any two valid consequences   Possible responses 1.2.3 Provide Can beTWO actions sued thatcaused for losses John andas aSydwell result ofwill haveontotheir relying takeopinion. to verify the Fixed/ Tangible Assets figure in Not be the as re-appointed Balance Sheet? auditors AnyFace disciplinary one action  procedures  by the professional body Possible responses  Examine the financial records of the business- external audit.  Assess the internal control of the business.  Assess the accounting principle used by the business.  Check the Fixed Assets Register.  Physical count of the fixed assets.

1.2.4 The Directors in charge was given a new laptop by Brats Computers on 31 March 2014. Brats Computers have tendered to supply computers to Zodwa Ltd next year. Comment on ACT whether or not this will affect the audit report next year. Explain. IVIT  Comment:  Y It is not appropriate for Brats Computers to give the director a laptop since they are part of D2 applicants for the tender. This might be seen as a bribe to get the tender. AUD  Advice: IT The director must give back the computer to Brats Computers because REP what they are doing is unethical. ORT S AND INT 1.2.5 Some of the stocks comprise chemicals that will reach their sell-by date on 31 May 2014. ERN The storeroom manager says that he will pour these into a nearby river so that they can be AL washed away. Comment and also offer advice to the directors CO  Comment NTR The storeroom manager/directors will be polluting the environment if they throw these OLS stocks of chemicals into the river. This will harm the residents and this is a punishable act by law.  Advice They must find a proper way of disposing these chemicals. They can dump them in the recognized dumping site 2.1.1 Who is responsible to see to it that the financial statements are drawn up? Directors of the company. 2.1.2 To which main group of people should the auditors address their report and why is the report directed to this group of people? Shareholders – They are the owners of the company who want to see which recommendations the auditors will make. 2.1.3 The auditor’s report refers to the International Financial Reporting Standards (IFRS). Explain why the auditors have to bring the IFRS into account when they give their opinion? It is a requirement of audit standards and assures that the financial statements of a company comply with International Standards and can thus be compared with other companies. 2.1.4 Should the shareholders be satisfied with the auditor’s report? Give ONE reason for your answer. Yes, it is said that the financial statements fairly present the financial position of the company. It is therefore an unqualified report.

2.1.5 If the auditors neglect to fulfill their duties, it could have serious consequences for them. Discuss TWO advantages for the shareholders of Langberg Limited that all auditors be members of a professional body. Any TWO valid advantages    Conduct of auditors to respond with ethical code.  All auditors are CAs and bound to the professional body – SAICA.  SAICA guarantee a high standard of professional auditors.  SAICA guarantee a high level of competence and integrity. 2.1.6 J. Mei, the auditor’s partner, who does the auditing at Langberg Limited, is going to marry A. Mabote, the financial director at Langberg Limited. Would this influence the audit at Langberg Limited in any way? Give a reason for your answer. Yes, One valid reason   There is a conflict of interest.  It can bring the objectivity of the audit under suspicion.  It can threaten the independency of the audit. What advice will you give J. Mei? Any valid advice  J. Mei must excuse him from auditing the financial results of Langberg Limited. ACTIVITY E1 1.1 INVENTORY SYSTEMS AND VALUATION 1.1.1 Calculate the value of the closing stock on 31 August 2018. 10 x 140 31 570  + 156 050  - 1 770  - 1 400  206  + 1 005  - 11  - 10  =184 450 x 160 (R155 x 160) 1 190 = R24 800 one part correct Calculate the gross profit on 31 August 2018. Sales (993 x R220) R 218 460 one part correct Cost of sales( 184 450 see above – 24 800) (R159 650)  one part correct Gross profit 58 810 one part correct

1.1.2 Oratile has found that Zinhle changed the supplier of smart watches in January without informing her. He discovered that the new supplier of smart watches is a family member of Zinhle. What advice would you offer to Oratile in this regard? State TWO points. Expected responses:  Oratile must explain to Zinhle that this is unethical and that her decision to favour her family member is disadvantaging the business.  He must put a procurement policy in place and must ensure that employees abide by this policy.  It is important to support loyal suppliers but the quality and price of the product must not be compromised. 1.2 MANAGEMENT OF INVENTORIES 1.2.1 Provide a calculation to prove that smart watches are being stolen. 206 + 984 – 993 – 160 = 37 one part correct Give TWO points of advice. Regular stock checks (count and check against records) Order smaller quantities, but more frequently Improve physical security, e.g. controls at entrance 1.2.2 Oratile is unsure whether he is charging the right prices for the Smart phones and Smart cameras. Give him advice on EACH product. Quote figures. PRODUCT ADVICE WITH FIGURES Any valid advice   Figure   Smart phones Mark-up% is reasonable (25%) as they are selling a large number of units (895). Customers are prepared to pay the price being asked (R6 875). Stock holding period is only 21 days. Smart cameras Mark-up% possibly too high (80%). These products are not popular (only sold 370/580=60% units sold). Stock-holding period of 207 days. If mark-up is reduced, stock may sell quicker.

TANGIBLE ASSET SOLUTIONS ACTIVITY F 1 MVELASE LIMITED NOTE TO THE BALANCE SHEET ON 30 JUNE 2019 FIXED/TANGIBLE ASSETS Land and Equipment Vehicles Buildings Carrying value – 1 July 2018 930 000 220 000 519 200 Cost 930 000 561 000 814 000 Accumulated depreciation 0 (341 000) (294 800) Movements Additions at cost 650 000  55 000 0 Disposal at carrying value 0 0  ( 84 150) (165 000 - 66 000 - 14 850) Depreciation 0 ( 58 850) (98 890) (E: 2 750  + 56 100 ) Carrying value – 30 June 2019 1 580 000  216 150  336 160 Cost 1 580 000 616 000  649 000 Accumulated depreciation 0  (399 850)  (312 840) ACTIVITY F2 2.1 A 1 980 000 – 1 550 000 = 430 000 (Refer to B) B 720 000 – 250 000 = 470 000 (one part correct) (Refer to B) C 470 000 – 132 000 = 338 000 (one part correct) 588 000 D (338 000 + 250 000 ) – 481 500 = 106 500 or (106 500) E 176 000 – 96 200 = 79 800

F 96 200 – 54 150 – 20 050 = 22 000 or (22 000) 2.2 Calculate the total accumulated depreciation on the equipment sold. 45 000 (answer of F above) (176 000  – 131 000 )– 22 000  = 23 000  Or 79 800 + 20 050 – 76 850 = 23 000 (The accumulated depreciation account) 2.3 When was the new vehicle purchased? (Show workings Depreciation on B : 470 000 x 20% = 94 000  106 500 – 94 000) = 12 500  250 000 x 20% x y/12 )  = 12 500 y = 3 months  Therefore bought on 31 March 2014 or 1 April 2014  2.4 Provide a suitable reason why the business would sell a portion of their fixed property Any reasonable response  The business may be experiencing cash flow problems. They may have got a good offer (large profit on sale of asset) Idle land not being productive. Planning to downsize the business with the view of leaving to better premises. SOLUTION: ACTIVITY F 3 3.1 ASSET DISPOSAL Accumulated 2016 Equipment 40 000 2016 depreciation on 15 000 Dec. 31 Dec. 31 equipment (12 000 + 3 000 ) IfBank separate lose mark 25 000 on total 40 000 40 000

3.2 Land and Equipment Buildings Carrying value on 28 February 2016 4 139 000 165 000 Cost 4 139 000 300 000 Accumulated depreciation 0 (135 000) Movements Additions at cost 0 160 000 Disposals (1 375 000) See 3.1 (25 000) Depreciation see 3.1 0 (52 000) Carrying value on 28 February 2017 2 764 000 248 000 Cost 2 764 000 420 000 Accumulated depreciation 0 (172 000) SOLUTION: ACTIVITY F 4 4.1 Vehicles Equipment Carrying value on 28 February 2015 check 420 000 335 000 operation Cost 900 000 425 000 Accumulated depreciation (480 000) (90 000) Movements Additions at cost 450 000 200 000 Disposals 75 000 – 18 750  0 (56 250)  Depreciation (85 500)  (48 750)  (63 000 + 22 500) (10000+35 000 +3750 ) Carrying value on 28 February 2016 784 500 430 000 Cost 1 350 000 550 000 Accumulated depreciation (565 500)  (120 000)  4.2 Cash flows from investing activities (593 750) Fixed assets purchased (650 000) Proceeds from sale of fixed assets 56 250 COST ACCOUNTING SOLUTIONS

ACTIVITY G1 1.1 Make use of the words in brackets to complete the statements. Write the answer only next to the question number. 1.1.1 Factory overhead costs  1.1.2 Break-even point 1.1.3 Fixed costs  3 1.2.1 Factory Overheads Cost Indirect materials (5 500+ 46 000– 11 000) x one part correct ¾ 30 375 one part correct Maintenance (45 000 – 10 000) x 80% 28 000 Rent expense (129 408– 10 368) x 600/1000 one part correct 62 000 – 3 marks 71 424 Indirect wages (5 x 45 x 192) + (2 x 40 x 67,50) 48 600 43 200 – 2 marks 5 400 – 2 marks Depreciation on factory equipment 37 500 Salary: Foreman 391 680 (–1 foreign items max – 2) 607 579 22 1.2.2 Calculate the following on 29 February 2020 Direct material cost 264 500 + 1 110 800 + 43 300+ 140 000 – 221 000 = 1 337 600 Direct labour cost 735 600  + 203 700  + 55 800  =995 100 operation one part correct 4 1.3.1 Calculate the break-even point. R576 000 = R576 000 = 5 939 units One part correct R260 – R163 R97 4 Will Mark be satisfied with this? Explain.  The break-even point dropped from 9 000 units to 5 938   The business is producing 12 000 units, which exceeds the break-even point  This indicates that the business will be making a profit 4

1.3.2 Explain why the fixed costs per unit decreased. Quote figures. Total fixed costs remained the same at R576 000  but the number of units produced increased to 12 000 units  2 Identify one specific factory cost that improved. Quote figures. Direct materials cost  per unit reduced from R90 to R85  Provide TWO possible reasons for this. Any two valid reasons e.g.   Reduction in price/exchange rate (if imported)  Greater efficiency in using raw materials/less wastage  Better quality of raw materials leading to less wastage  Found a supplier closer to the factory to reduce carriage 4

ACTIVITY G 2 2.1.1 Production Cost Statement on 29 February 2020 Direct Materials Cost (1 770 000 – 10 000) 1 760 000  Direct Labour Cost Balancing figure 1 475 000  Prime Cost Operation 3 235 000  Factory Overhead Cost (327 000 + 10 000) 337 000  Total Cost of Production Operation 3 572 000  Work-in Process at the beginning of the year 37 600  3 609 600 Work-in Process at the end of the year (84 600)  Cost of Production of Finished Good 3 525 000  (315 000 + 3 337 000 – 127 000 ) Operation one 15 part correct 2.1.2 Calculate the Net profit Sales 6 390 000 Cost of sales (3 337 000)  Selling and distribution cost (603 000)  Administration cost (810 000)  Net profit Operation one 1 640 000 part correct OR 6 390 000 – 3 337 000 – 603 000 – 810 000 = 1 640 000 5 2.2.1 Calculate the break-even point for the year ended 29 February 2020. 246 000 + 102 500 150 – 70 80 three marks 4 356 or 4 357 units Operation one part correct 6 2.2.2 Should the business be satisfied with the number of units that are currently produced? Explain. Any one explanation Figure Compare BEP with units produce and sold see 2.2.1 They are producing 4 100 and the break-even is 4 356/4 357 units. OR Produce 256/257 units less than what is required to break-even. 3

2.2.3 Despite the fact that there was an increase in the price of direct material, the direct material cost per unit decreased from R32 to R27. Give TWO valid reasons for the decrease. Any two valid points    Better training of workers resulted to less wastage.  Raw material obtained at a cheaper price.  Greater care or efficiency in the use of raw material resulted to less wastage.  Tighter control over use of raw material. Award one mark for the following response  Training of workers.  Less wastage. 4 2.2.4 Despite the fact that there was no increase in wages during the year, the direct labour cost per unit increased from R20 to R28. Give a valid reason for the increase. Any valid point   More overtime  Decrease in productivity, working slower, demotivated or lazy workers  Poor supervision of workers.  Unproductive workers due to power cuts 2 ACTIVITY H 1 Calculate the correct bank balance on 30 June 2019. Cash Receipts Journal Cash Payments Journal (figures only) (figures only) 87 220 74 860 *OR: 7900 in CRJ  21 000 & 9700 in CPJ * 1 800  10 500 Both essential: 2 marks  6 500 8 960: 3 marks 8750 / 6710 / 2460: 2 marks  2 250  210 118 720 85 620 Bank balance on 30 June 2019: 33 100 2 method marks See CRJ total See CPJ total – 2 300  + 118 720  – 85 620 = 30 800  one part correct OR: – 2 300 + 87 220 – 74 860 + 21 000 + 10 500 – 1 800 – 6 500 – 2 250 – 210 = 30 800

Bank Reconciliation Statement on 30 June 2019 Alternative Debit Credit Balance per Bank Statement R20 400 Balancing figure R 20 400  Could be Dr / Cr Credit outstanding deposit 18 500 18 500  Debit outstanding cheques: Could use – signs No. 962 (4 500) R 4 500  No. 982 (2 200) 2 200  No. 986 (1 400) 1 400  Balance as per Bank Account 30 800 30 800 See 1.1.1 38 900 38 900 -1 incorrect / no details (max -2) Foreign entries -1 (max -2) For 2-column method with no Debit/Credit indicated, assume left=Debit and right=Credit. For 2-column method with brackets used, do not accept brackets/negatives in any column. Refer to Information E. Identify TWO separate problems with evidence from the information. Give advice for EACH problem. PROBLEM WITH EVIDENCE ADVICE Theft / Fraud / Error/ Internal control Check that the total of cash slips agree measures are lacking. Some of the cash to the total of the deposit slip.  slips (R7 000) have not been deposited / Specific advice required based on evidence. recorded. Problem  Evidence  Figures not required Rolling of cash / The deposit occurs Cash collected must be deposited much later after receipt of cash (15 days). immediately / Sales person must not deposit cash / Divide duties  Problem  Evidence  Figures not required Specific advice required based on evidence. Activity H 2 2.1 CONCEPTS 2.1.1 Bank overdraft  2.1.2 Dishonoured cheque  2.1.3 Debit order  2.1.4 Stale cheque 

4 2.2 BANK RECONCILIATION 2.2.1 Explain how this loss of R24 000 would be treated in the books. Any ONE valid response  Expected responses:  Enter in CPJ and describe as loss due to theft.  Apply rule of prudence to reduce Bank and to record a loss. Explain how Roy can prevent a loss of this nature in the future. Provide TWO points. Any TWO valid responses   Expected responses:  Insist that all cash collected is deposited into the Bank daily.  Division of duties where one person collects cash and another deposits the cash.  Check documentation on a daily basis; receipts must equal deposits. 4 2.2.2 Calculate the correct bank account balance on 31 October 2019. 16 160  – 2 710  – 1 650  + 450  - 24 000  = overdraft of 11 750  one part correct 6 2.2.3 Give a suitable reason for the entry from the Bank Reconciliation Statement of the amount incorrectly debited, R2 500. Any suitable reason  Possible reasons:  The bank had in error shown a cheque of another client in the current banking account of the business.  The bank duplicated an entry (example bank charges, debit order) on the debit side of the bank statement. 2

The office assistant of Manto Traders takes money from the cash register to make payments for business expenses. Explain why this is bad accounting practice.  2.2.4 Expected responses:  All cash must be deposited intact to ensure that internal control is not compromised.  This will lead to abuse and the possibility of fraud because there will be no authorisation or documentation. Provide ONE point of advice to Roy. Any ONE valid point  Expected responses:  Stop this practice immediately and use the petty-cash system for daily expenses. 4 Activity H 3 3.1 RECONCILIATI 3.2 Provisional Bank R16 785 balance + 450  Cheque No. + 285 186 Interest – 950 income Bank – 3 600 charges  Correction Cheque No. – 37 800 374 Theft of cash – 24 830  8 Correct Bank balance One part correct 3.1.2 Bank Reconciliation Statement as at 31 July 2019

Alternative DEBIT CREDIT Balance as per bank statement (26 960) 26 960 Balancing figure Outstanding deposit 27 180 27 180 Outstanding cheques: No. 305 (8 400) 8 400 No. 401 (18 600) 18 600 Debit order erroneously debited 1 950 1 950 Balance as per bank account (24 830) 24 830 See 1.3.1 -1 Foreign items, max -2 if marked is earned in 53 960 53 960 bank calculation above 6 Explain ONE internal control measure that the business should implement to ensure that this does not happen in the future. Any valid internal control measure  two or zero marks (no part marks) Possible responses for two marks:  Follow up on unpaid cheques and cancel if a problem exists – this may prevent cheques being fraudulently cashed.  Ensure that the correct address is used when cheques are posted – follow up on payee to verify that it was received.  Minimise the use of cheques by encouraging the use of EFTs and Internet banking. ACTIVITY I 1.1 VAT 1. VAT is the abbreviation for Value Added Tax, which is an indirect tax that is charged whenever

goods are sold or the service are rendered, by a registered VAT vendor.  2. Match Column A and Column B Column A – Column B-Description VAT terms 1.1. Compulsory C. VAT registration by a business whose annual registration income exceeds R1million.  1. 2. Voluntary G. VAT registration by a business whose annual registration income is less than R1million, but more than R50 000.  1.3. Standard A. The normal rate at which VAT is charged when rate goods are sold or services are rendered, by a registered VAT vendor.  1.4. Zero-rated B. Goods or services on which VAT is charged at a items rate of 0% 1.5. Exempt F. Goods or services on which no VAT is charged.  items 1.6. Output tax E. The VAT charged by a vendor when it sells goods or renders services.  1.7. Input VAT D. The VAT charged to or paid by a vendor in acquiring goods or services from another VAT vendor  3 .Table showing input VAT and Output VAT for April 2015 Transactions Input VAT Output VAT Total Sales R 18 830 Total purchases of trading R 9 030 stock Stationery purchased R 210 Fees received for repair R 5 068 work done Electricity paid R 336 Equipment purchased R 2 786 Accounting fees paid R 1 120  Total R 13 482   R 23 898   b.. VAT Payable to SARS R23 898  – R13482  = R10 416  Activity I 2: VAT AND ETHICS 2.1 Why would Bankhara not wish to produce proof of sales? Without a document it will be difficult for SARS to trace the sale. /Avoid tax charges 2

2.2 How would this affect Bankhara Stores’ VAT return? He would be underpaying SARS on the amount that he collected from the customer.  2 2.3 As Bankhara is experiencing cash flow problems at the moment, he has decided to go with this proposal. Advise him on the implications of his decision. This is fraud (illegal)  and Bankhara could find himself with a heavy fine or even a jail sentence.  4 Activity I3 3.1 CONCEPTS 3.1.1 Exempted items  3.1.2 An indirect  3.1.3 Input  3.1.4 the Minister of Finance  3.1.5 False  3.2.1 Calculate the amount owning to SARS in respect of VAT at the end of February 2019 after taking the transactions into account. No. Calculation Amount owing to SARS A 59 325 – 33 585 25 740  B 3 220 x 15/115 (420)  C 30 800 x 15/100 4 620  D (25 300 x 5/100 = 1 265) x 15/115 165  E (92 x 500 = 46 000) x 15/115 (6 000)  F 560  G (2 280 -2 050 = 230) x 15/115 30  H 427 - 247 (180)  24 515 * *one *accept a T account part correct

3.2.2 Pro Party Shop is experiencing cash flow problems and there is no money available to pay SARS. The bank account shows an overdraft of R52 110 on 31 January 2019. The directors have asked the account to reduce the sales amount so that the business will then receive a refund from SARS. Must the accountant go along with this suggestion? No  Give ONE reason for your decision. Any valid point   It is tax fraud which is a very serious offence. It is unethical.  SARS can charge interest and penalties and could have the guilty party imprisoned. Activity J1 1.1 Explain the importance of comparing budgeted figures with actual figures achieved for the same period. One valid explanation  Deviations can be determined and remedial measures will be put in place Establish whether the budgeting was realistic To identify trends of mismanagement of cash 2 1.2 Calculate the missing amounts (indicated by a, b and c) in the Debtors' Collection Schedule for the budgeted period March to May 2015. a 6 048  b 5 320  c 15 750  4 1.3 1.3.1 Calculate the budgeted total sales for March 2015. 10 500 x 100/20 = 52 500  2 1.3.2 Calculate the amount budgeted for payments to creditors during May 2015. 40 000 70 000  x 100/175  x 70%  = 28 000  any one part correct or 12 000/30 x 70 = 28 000 4

1.3.3 Calculate the budgeted salaries of the shop assistants for April 2015. 102 000/12 = 8 500 8 500 x 3 = 25 500 15 300 x 9 = 137 700 25 500 + 137 700 = 163 200 any one part correct 3

Accounting NSC – Memorandum 1.3.4 Calculate the % increase in the salary of the manager expected in May 2015. 3 200 (1 mark) (19 200 – 16 Calculate the000) /16 of amount 000  = 20% the  any additional loan expected to be one part correct acquired on 1 April 2015. 3 1.3.5 875 x (100 x12) /14  = 75 000 any one part correct An official of the local municipality has offered to recommend 3 1.4 Brakpan Stationers to supply stationery to the value of R500 000. However, he will only do this if Vukile pays him R20 000 in cash. Give Vukile advice in this regard. State TWO points. Any two suggestions    This is actually a bribe which is unethical.  If this information is made public, it will have a negative effect on the business in the future.  Vukile must tender formally to the municipality to secure the contract through the normal processes. 4 Copyright reserved Please turn over

Accounting NSC – Memorandum 1.5.Identify THREE over-payments in April. Provide figures to support your answer. Provide a valid reason for each over-payment to support Vukile's decisions. Explain how this difference of opinion with his wife can be avoide Over-payment with figures Valid reason Item and figure       1 The bonus of the manager in He has retained the services February 2015 (R24 000) was of a valuable employee not taken into account. 2 Purchase of vehicle The difference between motor (R180 000) vehicle expenses and delivery expenses is R5 200 per month 3 Cash purchase of Possibly to take advantage of merchandise (R28 000) was bulk discounts on purchases significantly higher than the 6 budgeted figure (R12 000) As they are jointly running the business they should have a specific meeting to determine the budget jointly and Vukile should consult his wife before spending on unbudgeted items.  State TWO other strategies that Vukile and his wife could consider in future to improve the results of the business. Any two valid points:    Advertise monthly.  Reduce number of shop assistants.  Reinstate deliveries to customers.  Negotiate longer credit terms with creditors. 2 Activity J2 2.1 Calculate the expected monthly percentage of goods sold on credit. Copyright reserved Please turn over 70 000  x 100 70 000 + 17 500 1 = 80% one part correct 

Accounting NSC – Memorandum 4 2.2 Complete the Debtors Collection Schedule for March 2017 MONTH CREDIT SALE FEBRUARY MARCH December 2018 74 000 16 280 0 January 2019 68 000 27 200 14 960  February 2019 70 000 24 010 28 000  March 2019 64 000 21 952  Cash from debtors 67 490 64 912  One part correct 5 2.3.1 Explain why the owner is concerned. Give TWO reasons with supporting figures. Explanation   Figures   Expected responses:  Actual amount collected from debtors in February (R43 870) is less than the budgeted amount of (R67 490) or by (R23 620)  Credit terms are 30 days but records show that 52% of debtors take 60 days or more to pay/Only 48% are meeting the credit terms. 4 2.3.2 Suggest ONE solution for this problem. Expected responses  Part marks can be awarded for partial answers  Offer discounts to encourage early/prompt payments  Charge interest on overdue accounts  Proper screening of debtors to ensure debtors is able to pay their debts promptly.  Send regular reminders 2 · WORKINGS ANSWER 2.4.1 Payment to (70 000 + 17 500) 66 500 creditors 87 500 x 100/125 = 70 000 x 95%  one part (a) correct OR 87 500 x 100/125 = 70 000 – 3 500 OR 87 500 x 0,8 3 500 6 Salaries of one part correct 27 560  sales 20 800 x 107,5% = 22 360  + 5 200 one part assistants correct (b) OR Two marks one method mark one mark 5 590 x 4 = 22 360 + 5 200  5 Copyright reserved Please turn over

Accounting NSC – Memorandum 2.4.2 Calculate the percentage increase in rent on 1 March 2019. (12 544 – 11 200) Two marks / zero 1 344 x 100 = 12%  one part correct 4 11 200  2.4.3 The amount of the interest on investment expected to be received in March 2019. Two marks or zero    16 830 x 2 /102 = R330 one part correct One mark two marks/0 one method mark 16 830 – (16830 ÷ 1,02) = R330 4 2.5 Identify TWO payments that you consider to be poorly managed in February 2019. In EACH case, give a suggestion to improve the internal control of the items identified. PAYMENT ADVICE   Relevant advice   (no part marks) Advertising The business must make use of the budgeted amount for advertising to influence sales Stationery The business should minimise wastage/theft and use stationery effectively. Drawings Stick to the budget or amend the budget to accommodate the increase in drawings. Maintenance of office Equipment must be maintained properly to equipment prevent it from breaking down. 6 TOTAL MARKS 40 Activity J3 Copyright reserved Please turn over

Accounting NSC – Memorandum 3.1 (a) 2 Operating profit 46 500 – 350 = 46 150  (b) 3 Cost of sales 198 000  x 100/160 = 123 750  one part correct OR 198 000 one mark x 62,5% one mark = 123 750 one mark (c) 3 Wages 1 800 x 1,08 = 1 944  one part correct OR 1 800 one mark + 144 one mark = 1 944 one part correct OR 1 800 one mark + 8% one mark = 1 944 one part correct (d) 4 Rent income 10 028 x 100  = R9 200  one part correct 109  OR 10 028 one mark - 828 two marks = R9 200 one part correct Be alert for solve for x method 12 3.2.1 Calculate the monthly salary due to the sales manager in June 2019. (18 000 – 400) 2 (8 800  + 400 ) x 107%  = 9 844  one part correct 9 200 two marks 4 3.2.2 Calculate the total credit sales expected in July 2019. 221 760 two marks 198 000 x 1,12  x 80%  = 177 408  one part correctOR If based on May actual figures 4 240 240 two marks 195 000 one mark x (1,1 x 1,12) one mark x 80% one mark = 192 192 one part correct Copyright reserved Please turn over

Accounting NSC – Memorandum 3.2.3 Calculate the cost price of the new vehicle purchased on 1 May 2016. (9 000 – 6 200) 2 800 x 12  x 100/15  = 224 000  one part correct 33 600 two marks 4 3.3 Comment on the control of telephone and water and electricity. What advice would you offer Susan? State ONE point. Comment:  No part marks No figures necessary She has overspent / under-budgeted / not well controlled. (Budgeted R2 000, spent R4 880 / 2 880 more/144%) Advice:   She must monitor the use of telephone, water and electricity.  She must budget to take into account increase in tariffs or usage.  Keep/Check records regularly.  Investigate reasons for overspending 4 3.4 Susan wants to reduce the maintenance budget to R500 per month and then use this saving for staff training. What should she consider before making this change? State TWO points. Any TWO valid points   No part marks  Her actual maintenance expense is more than R500 (R2 000).  She will be under-budgeting.  Maintenance will be neglected – may cost more in the long run.  Replacement of old equipment sooner.  Benefits of training to the business and will it impact on the use of machines.  It would be irresponsible to reduce an important expense by so much 4 Copyright reserved Please turn over

Accounting NSC – Memorandum 3.5. Explain how Susan responded to this threat. State THREE points. Provide figures/calculations to support your answer. Any THREE valid points     Figures     Bought a new vehicle to do deliveries – vehicle expenses incurred (R4 000) and depreciation increased  Reduced mark-up from 60% to 30% (45 000/150 000) to increase sales 6  Advertised more – increased from 2 400 to 9 600 or by R7 200 (3 times) Explain whether Susan's response was successful or not. Provide figures. ONE valid point with figures   Answer for two marks: Susan's efforts were not successful because even though sales increased gross profit decreased (R45 000) OR Susan's efforts were not successful because even though sales increased expenses such as cost of sales (R150 000) / Vehicle expenses (R4 000), etc. increased significantly Answer for one mark:  Sales exceed budget by R15 000 2 TOTAL MARKS 40 Copyright reserved Please turn over

Accounting NSC – Memorandum Copyright reserved Please turn over