Accounting Grade 11 KZN November 2018 Paper & Memo

— s2¢e basic education | (i Faq\y\| Department: G) Basic Education | gy a REPUBLIC OF SOUTH AFRICA ifs fo : = | ”” GREENBURY SECONDARY SCHOOL * : ACCOUNTING | n FINAL EXAMINATION: 2018 i MARKS: 300 TIME : 3 hours N. B. This paper consists of 18 pages.

- Accounting Grade11 2 ® /November 2018 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and fallow them precisely. 43 2. Answer ALL the questions. A special ANSWER BOOK is provided in which to answer ALL the questions. Show ALL workings to earn part-marks. You may use a non-programmable calculator. You may use a dark pencil or blue/black ink to answer the questions. Where applicable, show all calculations to ONE decimal point. Write neatly and legibly.

Accounting Grade11 3 . J/November 2018 8. Use the information in the table below as a guide when answering the question paper. Try NOT to deviate from it. QUESTION 1: 30 marks; 18 minutes Topic of the question: This question integrates: Managerial accounting Bank Reconciliation Creditors’ Reconciliation Managing resources Internal control Reconciliations QUESTION 2: 50 marks; 30 minutes Topic of the question: This question integrates: Financial accounting Concepts Manufacturing Calculations Ledger account Managing resources Internal control QUESTION 3: 100 marks; 60 minutes Topic of the question: This question integrates: Financial accounting Concepts Partnership Financial Statements | Income Statement and Fixed Assets Balance Sheet Managing resources Fixed assets QUESTION 4: 40 marks; 24 minutes Topic of the question: This question integrates: Financial accounting Concepts Analysis and Interpretation of Interpretation of financial information Financial Statements Managing resources Internal control QUESTION 5: 40 marks; 24 minutes | Topic of the question: This question integrates: Managerial accounting Concepts Cash Budget Cash Budget Calculations Managing resources Internal control QUESTION 6: 40 marks; 24 minutes Topic of the question: This question integrates: Managerial accounting Inventory systems and VAT Periodic inventory system Ledger account Calculations Managing resources {Internal contro!

Accounting Grade11 4 ~ **/November 2018 QUESTION 1: RECONCILIATIONS (30 marks; 18 minutes) 1.1 BANK RECONCILIATION The information provided, was taken from the records of Perfect Stores on 31 July 2018. REQUIRED: 1.1.1 Analyse each transaction by completing the columns in the table provided. (15) Example: The bank statement showed bank charges of R200. CASH BANK ACCOUNT BANK JOURNALS RECONCILIATION STATEMENT NO ENTRY NO. Account Amount | Amount | Amount | Amount (X) Details Debited | Credited | Debited Credited Eg. Bank charges R200 TRANSACTIONS: A. B. A deposit of R20 000 made on 30 July 2018 was in the cash journals but did not appear on the bank statement. Interest of R180 earned on the credit bank balance was not recorded by the business. . A stop-order payment of R5 000 for the monthly repayment on the loan from Flexi Bank must still be recorded by the business. . Cheque No.143, for R1 400 (a post-dated cheque) issued to a creditor in part- payment of account appeared in the cash journal only. Cheque No. 238 for R175 appeared on the bank statement. This cheque was issued to Get-Fit Gym for the owner’s membership fees. It was incorrectly entered as R157 in the cash journal. A cheque for R680 was received from P. Botha (a debtor), dated 31 August 2018 This will be deposited on the due date. . A cheque for R300 issued to the local newspaper for an advertisement was lost and must be cancelled. This cheque will be replaced with a new cheque for the same amount in August 2018. Cheque No. 151 for R600 from the previous reconciliation statement issued to Telkom for the monthly telephone account appeared in the July 2018 bank statement. An EFT payment for the salary of the receptionist who was on leave was not processed by the bank. The gross salary of the receptionist was R7 500. Total deductions for the month amounted to R2 200.

Accounting Grade11 5 . ;November 2018 1.2 CREDITORS’ RECONCILIATION A statement received from Fashion Traders, on 27 July 2018, reflects that Stylish Stores owes them R14 770. According to Stylish Stores, the amount due to Fashion Traders is only R10 300. REQUIRED: Complete the table in the ANSWER BOOK to show how the differences must be treated to reconcile the Creditor’s Ledger Account balance with the statement balance. Write the amounts in the appropriate columns and indicate the increase or decrease with a (+) or (-) with each amount. 1.2.1 Total the columns to show the correct balances at the end of July 2018 (11) 1.2.2 The internal auditor wants to improve the internal control of stock and creditors. Provide TWO control measures that he may consider. (4) INFORMATION: A. Stylish Stores entered a discount of R500 when a payment of R5000 was made during June 2018. Fashion Traders however, did not allow this discount stating that this cheque was received by them very late. Goods returned to Fashion Traders for R690 was recorded as R760 on the statement. Stylish Stores incorrectly calculated the cost of goods returned. Goods were purchased for R3 500 on 31 August 2018 after the statement received from Fashion Traders was closed off. An invoice received from Fashion Traders for R6 280 was correctly recorded in the books of Stylish Stores. It was incorrectly reflected as R6 820 on the statement. An invoice for R1 000 received from Fashion Traders was incorrectly recorded as a debit note in the Creditors Ledger of Stylish Stores. A cheque for R5 000 issued on 30 August 2018 to Fashion Traders appeared only in the Creditors Ledger account of Stylish Stores. 30

Accounting Grade11 6 _- 2 ‘November 2018 QUESTION 2: MANUFACTURING (50 marks; 30 minutes) 2.1. CONCEPTS Choose the correct word(s) fram those given in brackets. Write only the word(s) next to the question number (2.1.1— 2.1.3) in the ANSWER BOOK. 2.1.1 Factory rent is a (fixed/variable) cost. 2.1.2 Packing materials used are regarded as a/an (selling and distribution/ administration) cost. 2.1.3 Break-even point refers to the (minimum/maximum) number of units that must be produced and sold to cover all costs. (3x1) (8) 2.2 PANDA CLOTHING You are provided with information related to Panda Clothing. Panda Clothing make rugby jerseys. The financial year ends 28 February each year. NOTE: Show calculations in brackets to earn part marks. REQUIRED: 2.2.1 Calculate the Direct Materials cost. (10) 2.2.2 Calculate the Factory Overhead cost (19) 2.2.3 Prepare the Work in Process Stock account. (9) INFORMATION: A.__ Summary of transactions for the year 28 February 2018 Raw materials purchased for cash 850 000 Carriage on purchases paid on raw materials purchased 53 000 Customs duty paid on raw materials purchased 127 500 Indirect materials purchased 43 000 Rent paid 320 000 Water and electricity paid 28 000 Wages paid 835 000 Factory foreman’s salary 142 000 Salespersons’ salaries 150 000 Office administrative assistants’ salaries 130 000 Commission paid to salespersons 100 000 Insurance paid 42 000 Advertising paid 55 000 Motor vehicle expenses paid (selling and distribution) 25 200 Stationery and printing paid (all administration) 11 000 Telephone costs paid 32 000 Sundry expenses paid 17 400

Accounting Grade11 7 : /November 2018 B. The following balances appeared amongst others in the books of the business. 28 Feb 2018 1 March 2017 Raw materials stock 54 000 72 000 Consumable Stores on Hand (indirect materials) 3 800 7 000 Work in process stock 62 000 81 000 Finished goods stock 138 000 165 000 C. Additional information and adjustments: Special high quality imported fabric is used to make the jerseys. A supply was purchased on credit from the USA on 28 February 2018 but has not yet been recorded. The cost price was $8 000. The prevailing exchange rate was 15,50 to the US Dollar. The customs duty of 15% on this purchase was paid but not recorded. The office cleaner as well as the factory cleaner earn wages of R3 000 per month. All other wages relate to workers in the factory. Certain costs are allocated according to percentage floor space used: Factory : 80% Office : 5% Shop : 15%. These costs are: Rent and Sundry expenses. Insurance is to be apportioned in the ratio 4:1:1 to factory, selling and distribution and administration costs respectively. Water and electricity of R21 000 relates to the factory. The rest is shared equally between the administration and sales departments. Telephone costs are shared equally between the administration and sales departments. Motor vehicle expenses are shared between the factory, selling and administration departments in the ratio 5:3:1. However, it was allocated in the ratio 5:2:1 in error. 2.3 MISTRY MANUFACTURERS The following information relates to Mistry Manufacturers, a business making wooden tables. The business made and sold 5 000 tables for the financial year ending 28 February 2018. NOTE: There was no work-in-process at the beginning and at the end of the year,

Accounting Grade11 8 PGAS/November 2018 REQUIRED: 2.3.1 Calculate the break-even point for the year ended 28 February 2018. (4) 2.3.2. Why is the owner happy with the break-even point? Explain using figures. (2) 2.3.3 The owner has been importing hard wood from Brazil. He wants to change to a local supplier who is supplying locally grown, sustainable timber which is slightly of lower quality. Do you agree/disagree with his decision. Give a reason for your answer. (3) INFORMATION: The following information was extracted from the books. Selling price per unit R360 Variable cost per unit R120 Fixed costs R300 000 50 QUESTION 3: PARTNERSHIP FINANCIAL STATEMENTS — (100 marks; 60 minutes) 3.1 CONCEPTS Choose the correct word/s from those given in brackets. Write only the word/s next to the question number (3.1.1 — 3.1.3) in the ANSWER BOOK. 3.1.1 The difference between current assets and current liabilities is known as (net assets / net working capital). 3.1.2 This statement reflects the financial performance of the business (Income Statement / Balance Sheet). 3.1.3 The portion of fixed deposit that will mature within a year is a (non-current / current) asset. (3 x 1) (3) 3.2. INCOME STATEMENT You are provided with information relating to Ying-Yang Traders for the year ended 28 February 2018. The business is owned by partners, Y. Ying and Y. Yang. REQUIRED: 3.2.1 Prepare the Income Statement for the year ended 28 February 2018. (45)

Accounting Grade11 9 ~ ‘November 2018 INFORMATION: Figures extracted from the Pre-adjustment Trial Balance on 28 February 2018 Balance Sheet Accounts Section 7 R Capital : Ying 650 000 Capital : Yang 650 000 Debtors control 98 750 Provision for bad debts 3 555 | Creditors Control 75 900 Nominal Accounts Section Sales 2 000 000 Cost of Sales 2 Debtors Allowances 200 000 Rent income 22 225 Water and Electricity __ 25 350 Depreciation 78 350 Consumable Stores 2.900 Advertising 62 545 Repairs 5720 Interest on loan 9 180 Salaries and Wages 128 450 Sundry expenses 2 Interest Income 13 180 Bad Debts Recovered 3860 Bad Debts 2.900 Employers’ Contribution (for UIF and pension fund) 42 000 Adjustments and additional information: A. The business aims to achieve a mark-up percentage on cost of 90% but this year has only achieved an actual mark-up of 80%. Merchandise to the value of R38 000 was damaged because of a burst pipe during February 2018. After the claim, Outsurance agreed to pay R34 000 during March 2018. Stock counts on 28 February 2018 revealed the following: e Consumable Stores used for the financial year amounted to R2 750. e Trading stock deficit of R23 400 Ying-Yang Traders rents out a storeroom since 1 March 2014 to Izala Traders. Due to financial difficulties experienced in the current financial year, Izala Traders decided to decrease the floor space used. As a result, Ying-Yang decreased the rent by 10% on 1 January 2018. The rent for March 2018 has already been received.

Accounting Grade11 10 “YyNovember 2018 E. One employee was omitted from the Salaries Journal in error. The employee’s salary details are as follows: Gross Salary R96 000 p.a. | Deductions for February 2018 PAYE R860 Pension R520 UIF R80 The employer contriputes on a Rand for Rand basis to the Pension Fund and 1% of gross salary to UIF. F. Ying-Yang Traders paid a 40% deposit on repairs to the building’s roof. The outstanding balance will be settled on 5 June 2018. G. Advertising includes an amount of R43 200 that was paid for the period 1 January 2018 to 31 December 2018. H. A debtor, P.S. Soni with an outstanding balance of R600 has left the country. His account must be written off as irrecoverable. I. Use the following percentage to calculate certain missing figures: Operating profit on sales: 22% J. Sundry Expenses is the missing figure in the income statement. K. The partnership agreement stipulates the following: e Partners are entitled to a monthly salary of R15 Q00 each. e Interest on Capital is calculated at 10% p.a. ¢ Profit /losses are shared equally.

Accounting Gracle11 1 ‘ ofNovember 2018 3.3 BALANCE SHEET You are provided with information relating to Paradise Traders for the year ended 28 February 2018. The business is owned by two partners, Adam and Eve. REQUIRED: 3.3.1 Refer to Information A and Information B. Calculate the missing amounts denoted by (a) to (c) on the fixed asset note. (15) 3.3.2 Prepare the Balance Statement on 28 February 2018. (87) NOTE: All workings must be shown in brackets since notes are NOT required. A. INFORMATION: LIST OF BALANCES ON 28 FEBRUARY 2018 BALANCE SHEET ACCOUNTS SECTION R Capital: Adam 1 500 000 Capital: Eve . 1.577 000 Current Account: Adam 1.750 000} CR Current Account: Eve 598 950 | DR Fixed Assets at Carrying Value at end of the year 3 881 000 Fixed Deposit: Alpha Bank 600 000 Trading Stock 61750 Debtors Control 50 000 Bank (unfavourable balance) 15 000 Petty Cash 6 000 Cash Float 2 450 Deposit for water and electricity 14 850 Mortgage Loan: Omega Bank _ 336 000 Creditors Control 25 200 Expenses Payable/Accrued Expenses 9 000 Prepaid Expenses 8 000 Income Receivable/ Accrued Income 18 000 Income Received in Advance/Deferred Income 14 000 Creditors for salaries 12 300 B. FIXED ASSET NOTE: Fixed assets comprise only Land & Buildings and Equipment. LAND & EQUIPMENT BUILDINGS Carrying value (01/03/2017) —- 426 100 1 028 000} Cost (01/03/2017) 1 340 000) Accumulated depreciation (01/03/2017) (312 000) Movements: Additions (a) 300 000 Disposals (c) Depreciation (b) Carrying value (28/02/2018) : : 1.142 900 Cost (28/02/2018) : Accumulated depreciation (28/02/2018)

Accounting Graded 1 12 1 Axc/November 2018 Cc. LAND AND BUILDINGS Land was purchased for R1 500 000 for future expansion. An amount was also paid to Eden Construction for: e Tiling of the office Block, R129 000 e Extension to the existing factory area, R683 000 e Repairs to buildings, R24 000 EQUIPMENT Additional equipment was purchased on 1 June 2017. Equipment with a cost price of R44 000 was taken over by one of the partners on 28 February 2018 for personal use for R24 000 cash. This has been recorded in the Bank and Asset Disposal Account. No other entries have been made. The Accumulated Depreciation on 1 March 2017 was R11 000. Equipment is calculated at 10 % p.a. on the cost price. The following adjustment has not been taken into account yet: Provision for bad debts is set at 5% of the outstanding debtors. FIXED DEPOSIT One third of the total fixed deposit will mature on 30 April 2018 and the remainder will mature in 2020. G, LOAN STATEMENT ON 28 FEBRUARY 2018 OMEGA BANK Balance on 1 March 2017 R 384 000 Interest charged 57 600 Monthly instalments in terms of the loan agreement 105 600 (including interest) (R8 800 x 12) Balance on 28 February 2018 336 000 100

Accounting Grade11 13 _/November 2018 QUESTION 4: ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS (40 marks; 24 minutes) You are provided with the following information relating to ADEZ Stores, a partnership business selling expensive, brand name sports equipment owned by Adon and Ezra Naidoo. The partners are concerned about certain aspects of their business and approach you for assistancefadvice. The business sells for cash and on credit. Debtors are allowed credit terms of 30 days. Creditors allow the business a payment term of 60 days. REQUIRED: 4.1. Calculate the following indicators for 2018 (correct to one decimal place) 4.1.1. Acid test ratio (4) 4.1.2. Return on partners equity (average) (7) 4.1.3. Debt-equity ratio (4) 4.1.4. Percentage net profit on sales (4) 4.2. Partner Adon is of the opinion that the business is in an unsatisfactory liquidity position. 4.2.1. Quote THREE financial indicators in support of his opinion. (8) 4.2.2. Suggest TWO ways in which the business can improve its liquidity position. (4) 4.3. The business might need extra funds in the future. What must the partners consider before they take a further loan. Explain your reason by quoting ONE relevant indicator to support of your answer. (8) 44. Z. Zak, the store manager feels that she deserves a performance bonus for the efficient running and overall profitability of the business. Do you agree? (YES/NO). Provide TWO reasons, quoting appropriate indicators/figures. (5) 4.5. The partners have been approached by Mr. Zen, a manufacturer and supplier of counterfeit goods. ADEZ Stores will be able to buy fake stocks of most items sold at prices that are less than half the prices currently being paid. What advice would you give the partners regarding accepting Mr. Zen as a new supplier. Provide ONE reason for your answer. (3) INFORMATION: Extracts from the Financial Statements on 28 February BALANCE SHEET (extract) 2018 2017 Fixed/Tangible assets (carrying value) 800 000 700 000 Financial assets: Fixed deposit: XYZ Bank (8%) 120 000 140 000 Current assets (including trading stock) 160 000 300 000 Trading stock 100 000 100 000 Capital 600 000 250 000 Adon 400 000 100 000 Ezra 200 000 150 000 Current accounts 160 000 200 000 Adon 200 000 180 000 Ezra ee (40 000) 20 000 Non-current liabilities: Mortgage loan: ABC Bank (12%) 200 000 240 000 Current liabilities 120 000 150 000

Accounting Grade11 14 “2:4°/November 2018 INCOME STATEMENT (extract) 2018 2017 Sales 2 400 000 2 170 000 Cost of sales 1 600 000 1 400 000 Operating expenses 554 400 480 000 Operating profit 360 000 350 000 Net profit 350 000 320 000 FINANCIAL INDICATORS 2018 2017 Current ratio 1,3:1 2:1 Acid-test ratio 4 1,3: Debtors average collection period 75 days 30 days Creditors average payment period 28 days 45 days Return on partners equity 2 42% Debt equity ratio @ 0,4:1 Solvency ratio 34:1 2,8:1 Operating profit on sales 15% 16.1% Operating expenses on sales 23,1% 22,1% Net profit on sales 2 14,8% 40 QUESTION 5: CASH BUDGET (40 marks; 24 minutes) You are provided with information relating to UFO Furniture Stores owned by A. Alien. REQUIRED: 5.1. Identify TWO items incorrectly entered in the Cash Budget. (Refer to Information F) (2) 5.2. Complete the Creditors’ Payment Schedule. (10) 5.3 Identify/Calculate the missing figures (A) to (G). (21) 5.4 On31 September 2018, A. Alien identified figures below. Comment on the control of each item and give one point of advice in each case. (4) September 2018 Budgeted Actual Variance Telephone 1 000 3 800 - 2 800 Staff training 2 500 800 + 1 700 5.5 A. Alien wants to save on costs by not offering a free delivery service. Is this a good idea? Explain. (3)

Accounting Grade11 15 “November 2018 INFORMATION: A. Sales, purchases of stock and cost of sales: e Total Sales: Actual Budgeted August R120 000 September R135 000 October : R150 000 November R180 000 e 40% of all sales are cash. « The mark-up is 50% on cost. e Stock is replaced on a monthly basis e 20% of all purchases are cash. B. Creditors’ payment: It is expected that creditors will be paid as follows: e 75% are paid in the month of purchases to receive a 5% discount. e 15% are paid in the month after purchases. ¢ 10% are paid in the second month after purchases. c. Delivery expenses: A. Alien pays Speedy Deliveries to deliver goods to customers free of charge. He budgets a fixed percentage of monthly sales for this expense. D. Salaries and wages: Employees receive an increase of 7,5% from 1 November 2018. E. Loan: Part of the loan will be repaid on 1 November 2018. Interest of 15% p.a. is paid monthly and is not capitalised.

F. Accounting Grade11 16 “/November 2018 Extract from Cash Budget for October and November 2018: RECEIPTS October November Cash sale 60 000 (A) Collection from debtors 78 300 89 550 Commission income 6 000 5 000 Rent income 7 500 7 750 PAYMENTS | Cash purchase of stock (B) : Payments to creditors 74 200 Delivery expenses of goods to customers g 000 Salaries and wages (D) 38 700 Stationery 3 200 3 500 Telephone 1.000 1.000 Office furniture bought on credit 40 000 0 Training of staff 2 500 2 500 Advertising 1.500 1 800 Depreciation 12 500 12 500 Loan repayment (E) Interest on loan 2 100 1 500 Sundry expenses 3 300 3 400 G. Cash drawings by owner Vehicle expenses 0 800 After finalising the budget, the following was identified: October November Cash deficit for the month (19 450 (G) Cash at the beginning of the month | 35 500 Cash at the end of the month (F) (7 300) 40

Accounting Grade 1 17 * 5/November 2018 QUESTION 6: INVENTORY SYSTEMS AND VAT (40 marks; 24 minutes) 6.1 PERIODIC INVENTORY SYSTEM You are provided with information relating to Riteon Stationery Shop for the month October 2018. He uses the periodic inventory system. REQUIRED: 6.1.1 Prepare the Purchases account for October 2018. 6.1.2 Calculate the Cost of sales for the month of October 2018. 6.1.3 Calculate the mark-up% achieved in October 2018. 6.14 The owner was expecting to achieve a mark-up of 60% on cost during the month of October 2018. He suspects that the cashier has stolen some of the cash received from cash sales. Briefly explain one internal control measure that can be implemented to prevent theft of cash. INFORMATION: A. Trading stock was valued as follows: e R122 000 on 1 October 2018 e R135 500 on 31 October 2018 B. Total of source documents for the month: ° Invoices received from the suppliers of stationery, R 423 500 e Credit notes received for defective stationery returned to suppliers, R 35 000 C. Carriage paid to Northstar Deliveries during the month: ¢ on goods delivered to Riteon Stationery Shap, R 25 000 e on goods delivered to customers, R 15 000 D. Customs duty amounted to R 21 750 E. One supplier, Krayon Paper, admitted that an error had been made on an invoice for goods delivered during the month. The invoice stated that a 5% trade discount had been granted. The amount of the invoice, R39 900, is included in the figure mentioned in INFORMATION B above. Krayon Paper has agreed that a 15% trade discount should have been granted. They issued a credit note for the appropriate amount. F. The owner took goods costing R 1 200 for personal use. G. Goods were sold during the year for R 649 506.

Accounting Grade11 18 ‘November 2018 6.2. VAT CALCULATIONS You are provided with information relating to Ndledla Traders for their two month VAT period ended 30 September 2018. The standard VAT rate of 15 % is applicable. The owner of the business is Vusi Ndledla. REQUIRED: 6.2.1 Calculate the VAT amount that is either payable or receivable from SARS on (11) 31 September 2018. Indicate whether this amount is receivable or payable. 6.2.2 As the internal auditor, you noticed that Vusi has not been submitting the VAT due to SARS on the regular due date. On enquiry, Vusi stated that the business was experiencing a cash flow problem and he used the money to pay for business expenses. What advice would you offer Vusi concerning this practice? (4) State two points. INFORMATION: A. Amount payable to SARS on 1 August 2018, R 45 200 B. Amounts from the journals for the two-month period ending 30 September 2018: EXCLUDING | INCLUDING VAT VAT VAT Sales 4.251 000 1 438 650 2 Credit purchases of stock 2 600 990 ? Stock returned to suppliers 10 500 12075 1 575 Stock returned by debtors 17 480 ? 2622 Goods taken by the owner for ? 7 130 930 personal use Bad debts written off 9 520 2 1 428 40 TOTAL: 300

basic education Department: Basic Education REPUBLIC OF SOUTH AFRICA ACCOUNTING FINAL EXAMINATION: 2018 ANSWER BOOK GREENBURY SECONDARY SCHOOL i" GRADE: 14 F ‘se. gee = o” NAME OF LEARNER: GRADE: 11 TOTAL MARK MODERATED | MODERATOR QUESTION MARKS OBTAINED MARK INITIAL 1 30 2 50 3 100 4 40 5 40 6 40 TOTAL 300 CHECKER DATE This answer book consists of 16 pages.

Accounting 2 >CASINov2018 Answer Book QUESTION 1: RECONCILIATIONS 1.1. BANK RECONCILIATION CASH JOURNALS BANK ACCOUNT BANK RECONCILIATION STATEMENT NO NO ENTRY Account Details Amount | Amount | Amount | Amount | (X) Debited | Credited | Debited | Credited Eg. | Bank charges R200 A. B. c. D. E. F. G. H. I 1.2.1. CREDITORS' RECONCILIATION CREDITORS’ LEDGER | STATEMENT RECEIVED OF STYLISH STORES FROM FASHION TRADERS Balance R10 300 R14 770 A B c D E F Final Balance

Accounting 8 Nov2018 Answer Book 1.2.2 The internal auditor wants to improve the internal control of stock and creditors. Provide TWO control measures that he may consider. TOTAL MARKS 30

Accounting 4 > Answer Book QUESTION 2: MANUFACTURING 2.1 2.2.1 CONCEPTS Se © (Nov2018 Write only the word/s next to the question number. 2.131 2.1.2 oe 3 2.2. PANDA CLOTHING Calculate the Direct Materials cost. 10 2.2.2 Calculate the Factory Overhead cost. Wages (factory cleaner) Salary (factory foreman) 19

Accounting 5 i /Nov2018 Answer Book 2.2.3 Work in Process Stock account 2017 Mar |1 |Balance b/d 81 000 2.3. MISTRY MANUFACTURERS 2.3.1 Calculate the break-even point for the year ended 28 February 2018.

Accounting 6 3/Nov2018 Answer Book 2.3.2 [Why is the owner happy with the break-even point? Explain using figures. 2.3.3 The owner has been importing hard wood from Brazil. He wants to change to a local supplier who is supplying locally grown, sustainable timber which is slightly of lower quality. Do you agree/disagree with his decision. Give a reason for your answer. TOTAL MARKS 50 QUESTION 3: PARTNERSHIP FINANCIAL STATEMENTS 3.1. CONCEPTS Write only the word/s next to the question number. 3.1.1 3.1.2 3.1.3

Accounting 3.2.1 YING-YANG TRADERS INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018 7 Answer Book /Nov2018 Sales Cost of Sales Gross Profit Other Operating Income Gross Operating Income Operating Expenses Water and Electricity 25 350 Depreciation 78 350 Operating Profit Interest Income Profit before Interest Expense Interest Expense NET PROFIT FOR THE YEAR 45

Accounting 8 Answer Book w+ , fNov2018 3.3.1 NO. WORKINGS AMOUNT (a) | Additions to buildings (b) | Total depreciation on equipment (c) | Disposal of equipment at carrying value 15

Accounting 9 Answer Book 3.3.2 PARADISE TRADERS BALANCE SHEET ON 28 FEBRUARY 2018 /Nov2018 ASSETS NON-CURRENT ASSETS Tangible/Fixed Assets at carrying value 3 881 000 Financial Assets: CURRENT ASSETS Inventories 61 750 TOTAL ASSETS EQUITY AND LIABILITIES Partners’ Equity Capital Current accounts NON-CURRENT LIABILITIES CURRENT LIABILITIES Trade and other payables TOTAL EQUITY AND LIABILITIES TOTAL MARKS 100 37

Accounting 10 "oo 6S'Nov2018 Answer Book QUESTION 4: ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS 4.1.1 Calculate the acid test ratio. 4.1.2 | Calculate the return on partners’ equity (average). 4.1.3 [Calculate the debt-equity ratio. 4.1.4 Calculate the percentage net profit on sales.

Accounting 11 uNov2018 Answer Book 4.2.1 Partner Adon is of the opinion that the business is in an unsatisfactory liquidity position. Quote THREE financial indicators with figures in support of his opinion. INDICATOR 1: INDICATOR 2: INDICATOR 3: 4.2.2 Suggest TWO ways in which the business can improve its liquidity position. SUGGESTION 1: SUGGESTION 2: 4.3, The business might need extra funds in the future. What must the partners consider before they take a further loan. Explain your reason by quoting ONE relevant financial indicator together with figures to support your answer.

Accounting 12 «© & {Nov2018 Answer Book 4.4. Z. Zak, the store manager feels that she deserves a performance bonus for the efficient running and overall profitability of the business. Do you agree? (YES/NO). Provide TWO reasons, quoting appropriate indicators/figures. Opinion: Reason 1: Reason 2: 4.5. The partners have been approached by Mr. Zen, a manufacturer and supplier of counterfeit goods. ADEZ Stores will be able to buy fake stocks of most items sold at prices that are less than half the prices currently being paid. What advice would you give the partners regarding accepting Mr. Zen as a new supplier. Provide ONE reason for your answer. Advice: Reason: TOTAL MARKS 40 QUESTION 5: CASH BUDGET 5.1. Identify TWO items incorrectly entered in the Cash Budget.

Nov2018 10 Accounting 13 Answer Book 5.2 CREDITORS’ PAYMENT SCHEDULE MONTH CREDIT OCTOBER NOVEMBER PURCHASES August R64 000 6 400 September R72 000 10 800 October 57 000 November R96 000 74 200 5.3 10 CALCULATION AMOUNT Cash sales (A) Cash purchases of stock (B) Delivery expenses (C) Salaries and wages (D) Repayment of loan (E) Cash at end of month (F) Cash deficit for the month (G) 21

Accounting 14 5.4 §.5 Answer Book ©. 4ov2018 Comment on the control of each item and give one point of advice in each case, COMMENT ADVICE Telephone Staff training A. Alien wants to save on costs by not offering a free delivery service. Is this a good idea? Explain TOTAL MARKS 40

Accounting 15 28 e* ‘Nov2018 Answer Book QUESTION 6: INVENTORY SYSTEMS AND VAT 6.1 PERIODIC INVENTORY SYSTEM 6.1.1 Purchases account 6.1.2 | Calculate the cost of sales for the month of October 2018. a8 Calculate the actual mark-up % on cost achieved for the month.

Accounting 16 .'Nov2018 6.1.4 6.2 6.2.1 6.2.2. Answer Book The owner was expecting to achieve a mark- up of 60% on cost. He suspects that the cashier has stolen some of the cash received from cash sales. Briefly explain one internal control measure that can be implemented to prevent theft of cash. VAT CALCULATIONS Calculate the VAT amount that is either payable or receivable from SARS on 30 September 2018. Indicate whether this amount is receivable or payable. (You may complete a VAT Control Account.) Receivable/ Payable: 1 As the internal auditor, you noticed that Vusi has not been submitting the VAT due to SARS on the regular due date. On enquiry, Vusi stated that the business was experiencing a cash flow problem and he used the money to pay for business expenses. What advice would you offer Vusi concerning this practice? State two points. TOTAL MARKS 40

PHOENIX CIRCUIT ACCOUNTING SOCIETY (PCAS) HELPING ACCOUNTING EDUCATORS EXCEL GRADE 11 ACCOUNTING NOVEMBER 2018 MARKING GUIDELINES QUESTION LEARNER’S MODERATED MARK MARK to PR jt [pe j= TOTAL

Accounting 2 PCAS/Nov2018 Answer Book QUESTION 1: RECONCILIATIONS 1.1. BANK RECONCILIATION CASH JOURNALS BANK ACCOUNT BANK RECONCILIATION STATEMENT NO NO ENTRY Account Details Amount | Amount | Amount | Amount (X) Debited | Credited | Debited | Credited &g. | Bank charges R200 A. 20 000” B. | Interest income/nterest 180V on current account“ C. | Loan: Flexi Bank 5 000 D. 4 400” E. | Drawings” (175 — 157) 18V F. x G. | Advertising” 300” H. Xx 1 (7 505-2 2D} . 5 300v'¥ ~1 for foreign entries (maximum -2) foreign entries are extra entries per line where marks are scored. 1.2.1 CREDITORS' RECONCILIATION CREDITORS’ LEDGER | STATEMENT RECEIVED OF STYLISH STORES FROM FASHION TRADERS _ Balance | R10 300° R14770 a — on B - 70vv Cc +3 500v D - 54007 E CECE) a (cc | a |_..._ +2 000vv . F - 5 000vyv Final Balance 12730 12 730M* * Any ONE part correct; Totals do not have to agree ~1 for foreign entries (maximum -2) Sign and amount must be correct to award marks; If no sign, assume positive /Accept breckets as a negative figure

3 PCAS/Nov2018 Accounting Answer Book 1.22 [The internal auditor wants to improve the internal control of stock and creditors. Provide TWO control measures that he may consider. Any TWO valid control measures ¥¥“” Vw « Division and rotation of duties for checks and balances e Clear procedures for ordering, documenting, receiving and dispatching of goods. e Maintaining all dacumentation and ensuring that the relevant people receive and deal with them timeously. »* Random and regular stock check against records to detect losses and/or fraud/ theft. e Update stock records against sales so that stock piling does not occur. TOTAL MARKS 30

Accounting 4 PCAS/Nov2018 Answer Book QUESTION 2: MANUFACTURING 2.1 CONCEPTS Write only the word/s next to the question number. 2.1.1 | fixed v 2.1.2 | selling and distribution v 2.1.3 | minimum v 3 2.2, PANDA CLOTHING 2.2.1 Calculate the Direct Materials cost. (8 000 x 15,5) * 72 000" + 850 000Y + 53 000Y +127 SO0Y + 124 D00vY + 18 600“ MI - 54 000v =R1191 100M * method mark can only be awarded if figureis 15% of credit purchases not recorded 10 2.2.2 Calculate the Factory Overhead cost. Wages (factory cleaner) (3 000 x 12) v¥ 36 000 Salary (factory foreman) v 142.000 Indirect materials (7 000v + 43 000v ~ 3 800“) M 46200 One'part'correct Factory rent (320 000 x 80/100) vy 256000 Sundry expenses (17 400 x 80/100) vv 13.920 Insurance (42 000 x 4/6) v¥ 28.000 Water and electricity vy 21000 Motor vehicle expenses (25 200V x 8/2v x 5/9v’) M 56000 4100 800 two marks One: part: correct M 599120 19

5 PCAS/Nov2018 Accounting Answer Book 2.2.3 Work in Process Stock account 2017 i 2018 | |Finished Goods | Mar 1 |Balance ibid 81 000 Feb :28 | Stock ‘Gs | 2572220 2018 | | : Feb 28 {Direct Materialcost : M1191 100 Balance ield |v 62 000 H Direct Labour cost | |(835 000v 36 o00v - 36 000") @ 763000 Factory Overhead H cost 1GJ |} §99 120 i 2634220 [ler 2634220 i | Balance b/d 62 000 ! i 1 § 2.3. MISTRY MANUFACTURERS 2.3.1 Calculate the break-even point for the year ended 28 February 2018. 300 000” 360Y - 240” = 1 250 unitsi operation one part correct

Accounting 6 PCAS/Nov2018 Answer Book 2.3.2 [Why is the owner happy with the break-even point? Explain using figures. The business is making and selling 5 000v tables which is 3 750 units above the break-even point of 1 250 units.v OR The business is selling 3 750v units mere than the break-even point of 4 250 units.v 2.3.3 The owner has heen importing hard wood from Brazil. He wants to change to a local supplier who is supplying locally grown, sustainable timber which is slightly of lower quality. Do you agree/disagree with his decision. Give a reason for your answer. Yes ¥ » Supporting the lacal economy” ¥ » Creating jobs in our country » Using sustainable timber will not damage the natural forests OR Now « Quality of the preduct will not be the same.v” e Customer may not be made aware of the cheaper quality material. « He may not charge a lower price. TOTAL MARKS 50 QUESTION 3: PARTNERSHIP FINANCIAL STATEMENTS 34 CONCEPTS Write only the word/s next to the question number. 3.4.1 | net working capitalv 3.1.2 | Income Statementv 3.1.3 | current assetv

Accounting ? Answer Book 3.2.1 YING-YANG TRADERS PCAS/Nov2018 INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2018 Bad debts recovered Sales (2 000 000 v ~ 200 009 v) Che partcored | EZ 1 800000 Cost of Sales . Award 2 marks (1 600,000 x 100/480) y@ (1 000 000) Gross Profit One pa covet COS mux tesusincea 6 | 8.00 000 ‘Other Operating Income ———SSCSC(pecaton ane patcomet |< 21 010 Rent income (22 225 v —- 1575 vv) ¥ 20 650 v 360 Gross Operating Income Operation 7 | 821 Q10 Operating Expenses Operation | MI (425010) Water and Electricity 25 350 Depreciation 78 350 ‘Advertising (62 545 v ~36 000 vv) , y 26 545 Repairs (6 720 v + 8 580 v) v 14 300 Salaries and wages (128 450 v + 6 000 ae v 136 450 Sundry expenses Ary igire less th | @ 70305 Bad debts (380 v + 600 v) . v 960 ‘Employers’ contribution (a2 000 + S20v + BOW ) : bic ca cance | “a 42 600 Loss| due to water damage/burst pipe (38 0G0 ¥ ~ 34.000 v) © v 4 000 Trading stock defi cit oO 95 | —_ "23 3 400 Operating Profit Check Salesx 0,22 | vi 396 000 Interest Income ; “ 13 180 Profit before interest oe “epudih 4) 409 180 Interest Expense v (9 180) NET PROFIT FOR THE YEAR 7 |v (400000) Misplaced items -1 {max -2)"Eoreign items -1 (max -2) 45

Accounting 8 PCAS/Nov2018 Answer Book 3.3.1 NO. WORKINGS AMOUNT (a) | Additions to buildings 1500000 “+129000v + 683 000 v 4 OR 2 312000 % 3.881 000 — 1 142 900 — 426 100 one part correct (b) | Total depreciation on equipment Old: 1 340 000 “ x 10% = 134 000 4 one part correct 156 500 rea} one part correct New: 300 GO00M x 10% x 9/12” = 22 500 © one part coréct 6 {c) | Disposal of equipment at carrying value 44 000Y - 11 000” - 4 400v 28 600 4 one part éorrect OR 4028 000" +300 000” — 156 500” —1 142 900 See (b) above 15

Accounting 9 Answer Bock 3.3.2 PARADISE TRADERS BALANCE SHEET ON 28 FEBRUARY 2018 PCAS/Nov2018 ASSETS NON-CURRENT ASSETS operation | M4 281 OOO Tangible/Fixed Assets at carrying value 3 881 000 Financial Assets: Fixed Deposit: Alpha Bank (600 000 — 200000v) =e patcore | 400.000 CURRENT ASSETS operation | ZI = 358 550 Inventories 61 750 Trade & other ‘receivables(s0 0 ocov—2 ~2500V 414. 850+ 8 ooov + 16 48 8 000v) Pa) 88 350 Cash & cash equivalents (200 000M +6 000 v +2 450 ”) ra 208 450 | TOTAL ASSETS — gee Total equity and liabitties | M4 281 000 EQUITY AND LIABILITIES Partners’ Equity operation | HW 4 228 050 Capital (1 500 000 ~ 7 517 ca A en “Gre conet | M 3077000 Current accounts (1 750 000 “ — 593 960 “) one part cornet | = 1 151 050 NON-CURRENT LIABILITIES. 288 000 Mortgage Loan: Omega Bank (336 000 v — 48 000 “v) ‘owoat coma | HZ 288.000 CURRENT LIABILITIES Aviard tult marks if al! items inctuded in T&oP | WZ 123 500 Trade and other payab! Ov + 14000 ¥ #12300 Y) ira 60 500 ‘Bank overdraft - a Ty 15.000 Current portion of loan seeloan | ¥ 48 000 TOTAL EQUITY ‘AND LIABILITIES oo eae | M 4639550 Misplaced items -1 (max-:2) Foreign items -1 (max -2) Presentation/ncorrect details Amax'22) 100

Accounting 10 PCAS/Nov2018 Answer Book QUESTION 4: ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: 4.1.1 [Calculate the acid test ratio. 160 COO“ - 100000” : 120000” =05:1 4 41.2 [Calculate the return on partners’ equity (average). 350000 v AY (600000 Y + 160000“ + 250000 v +20000~) =579% 41.3 [Calculate the debt-equity ratic. 200000 w : ( 600000“ + 160000” ) =03:1 4M

Accounting 11 PCAS/Nov2018 Answer Book 414 Calculate the percentage net profit on sales. 350 000 x 100” 2400000 “ =146% 4.21 Partner Adon is of the opinion that the business is in an unsatisfactory liquidity position. Quote THREE financial indicators with figures in support of his Opinion. INDICATOR 1: Acid test ratio decreased from 1,3:1to0,5:1. vv INDICATOR 2: Debtors collection period increased from 30 days to 75 days. vv INDICATOR 3: Creditors payment period decreased from 45 days to 28 days. Vv“ 4.2.2 Suggest TWO ways in which the business can improve its liquidity position. SUGGESTION14: vv e sell off slow moving stock SUGGESTION 2: vv ¢ improve collection from debtors (discounts, charge interest) ¢ pay creditors as per terms Accept other valid alternatives

12 PCAS/Nov2018 Accounting x fiook nswer Boo Ao. The business might need extra funds in the future. What must the partners consider before they take a further loan. Explain your reason by quoting ONE relevant financial indicator together with figures to support your answer. They must consider the level of financial risk Debt equity ratio of 0,3 : 1 indicates low financial risk vv 4A. Z. Zak, the store manager feels that she deserves a performance bonus for the efficient running and overall profitability of the business. Do you agree? (YES/NO). Provide TWO reasons, quoting appropriate indicators/figures. Opinion: No Reason 4: Operating profit on sales decreased from 16,1 % to15% ¥v Reason 2: Net profit on sales decreased from 14,8 % to 14,6%. vv Accept operating expenses on sales increased from 22,1 % to 23,1 %. 45. The partners have been approached by Mr. Zen, a manufacturer and supplier of counterfeit goods. ADEZ Stores will be able to buy fake stocks of most items sold at prices that are less than half the prices currently being paid. What advice would you give the partners regarding accepting Mr. Zen as a new supplier. Provide ONE reason for your answer. Advice: Do not accept the offer Reason: e [llegal to sell counterfeit goods““ e Will lose customers Accept other valid reasons TOTAL MARKS | 40

Accounting QUESTION 5: CASH BUDGET 13 Answer Book PCAS/Nov2018 5.4. identify TWO items incorrectly entered in the Cash Budget. Office furniture bought on credit” Depreciation” 5.2 CREDITORS’ PAYMENT SCHEDULE MONTH CREDIT OCTOBER NOVEMBER PURCHASES August R64 000 6 400 September R72 000 10 800 ¥¥7 200 October ¥~¥ R80 000 57 060 ¥v¥12000 November R96 000 : ¥v¥68 400 74 200 Via 67 600

Accounting 14 5.3 Answer Book PCAS/Nov2018 : CALCULATION AMOUNT : Cash sales (A) R180000x 40% Rv2000 i vv ; If correct workings are shown without answer, award 1 mark only Cash purchases of stock R20 000 4 (B} R100 000 two marks R150. 000M x 100/150” x 20%” one part correct i Delivery expenses (C) i 6% two marks ~9 000% 4150 000" x 180 000” "Salaries and wages (D) 38 700¥ x 100v 07,5 v 10 800 4 ‘one part correct 36.000 Z one part correct | Repayment of foan ; twomarks one mark 168 0O0Y ¥ — 120 000v my OR (2) G00 v x 10015v x 12v 1 OR | two marks one mark 7 200V vv x 100/15¥ “Cash af end of month 48 000 MI one part correct (F) 35 500 ¥ | Cash deficit for the month | vv (SG) 35500 +7 300 (42 800) ¥ | H correct workings’ aré'shown without answer‘award 1-mark only 21

Accounting 15 PCAS/Nov2018 Answer Book 5.4 Comment on the control of each item and give one point of advice in each case. COMMENTY ¥ ADVICEYY Telephone Over-spent Private calls should be Budget figure controlled / keep record too low of all calls / charge the staff for private calls / possibly increase budget Staff training Under-spent This is an essential expense / staff training improves the interaction with customers / this leads to efficiency and goodwill. 5.5 A. Alien wants to save on costs by not offering a free delivery service. Is this a good idea? Explain Yes /Now mark independently Any one possible responsev ¥ One mark for incomplete / unclear answer Whether his competitors are offering the service or not What the reaction from his customers will be should he withdraw the service (i.e. will they go to other suppliers?) e The possibility of charging customers for the delivery service The possibility of finding a cheaper delivery service The possibility of using his own vehicles instead of subcontracting / extra costs of providing his own service (e.g. depreciation of vehicle, petrol} * Could have been the reason for the increase in sales TOTAL MARKS

Accounting 16 Answer Book QUESTION 6: INVENTORY SYSTEMS AND VAT 6.1 PERIODIC INVENTORY SYSTEM PCAS/Nov2018 6.1.1 Purchases account | | Creditors Control/ 2017 | 2018 | | Allawancesv Oct /31 Creditors Contralv” GJ |“ 423500 Oct (31 (350004 4 200vv)/GJ | M39 200 | Drawings” Gly 4 200 t “Trading account” {GJ [EP 383 100 423 500 1 423 500 12 6.1.2 [Calculate the cost of sales for the month of October 2018. Opening stock 122 000 Purchases 383 100 4 Carriage on purchases 25000 ¥ Customs duty 21 750 v Cost of stock available for sale 551 850 Closing stock (135 500)” COST OF SALES 416 350V 1 7 oA Calculate the actual mark-up % on cost achieved for the month. v 4} 649 506 ~ 416 350 x 100 416 350M 4 = 56%M

Accounting 17 PCAS/Nov2018 6.1.4 6.2 6.2.1 Answer Book The owner was expecting to achieve a mark- up of 60% on cost. He suspects that the cashier has stolen some of the cash received from cash sales. Briefly explain one internal control measure that can be implemented to prevent theft of cash. Any valid answer “¥ e Division of duties where one person serves as a check on another * Daily deposits to be made at the bank and deposit slips to tally with CRT’s and receipts for the day 2 VAT CALCULATIONS Calculate the VAT amount that is either payable or receivable from SARS on 30 September 2018. Indicate whether this amount is receivable or payable. (You may complete a VAT Control Account.) 45 200+ 187 650-v’- 78 390Vv + 1575 v- 2622 +930" — 1 428% = 152 915M OR Balance at beginning = 42200” Output (187.650¥ “— 2 622v +930” —1428v) = 184.530 Input (78 390 Vv” - 1 5754) = (76 815) 162 915m Receivable/ Payable: Payable v 11

18 PCAS/Nov2018 Accounting Answer Book As the internal auditor, you noticed that Vusi has not been submitting the VAT due to SARS on the regular due date. On enquiry, Vusi stated that the business was experiencing acash 6.2.2. | flow problem and he used the money to pay for business expenses. What advice would you offer Vusi concerning this practice? State two points. Any TWO valid answersVv¥o Vw Vusi must keep accurate records of VAT and make timeous submissions to SARS for the following reasons : e {tis illegal business practice(fraud) / not prudent practice —- can be charged/sentenced ° The business is an agent of SARS — money is collected on behalf of SARS. ® The business will be liable for penalties/ines and charged with interest for late payments. TOTAL MARKS