NOVEMBER 2013 EXAMINATION DATE: 5 NOVEMBER 2013 DURATION: 2 HOURS PASS MARK: 40% (DBM-03)

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1 BUSBUS17 NOVEMBER 2013 EXAMINATION DATE: 5 NOVEMBER 2013 TIME: 09H00 11H00 TOTAL: 100 MARKS DURATION: 2 HOURS PASS MARK: 40% (DBM-03) BUSINESS ACCOUNTING THIS EXAMINATION PAPER CONSISTS OF 4 SECTIONS: SECTION A: CONSISTS OF: (i) 10 MULTIPLE-CHOICE QUESTIONS (10 MARKS) (ii) 5 TRUE OR FALSE QUESTIONS (10 MARKS) (iii) 10 MATCHING-STATEMENT QUESTIONS (10 MARKS) ANSWER ALL THE QUESTIONS SECTION B: SECTION C: SECTION D: CONSISTS OF 3 SHORT QUESTIONS ANSWER ALL THE QUESTIONS CONSISTS OF 3 LONG ANSWER QUESTIONS ANSWER ALL THE QUESTIONS CONSISTS OF 2 INTERPRETATIVE QUESTIONS ANSWER ONE OF THE QUESTIONS (10 MARKS) (40 MARKS) (20 MARKS) INSTRUCTIONS: 1. Read the following instructions carefully before answering the paper, as failure to act upon them will result in a loss of marks. 2. Write your answers in your answer book, which is provided in the exam. 3. Ensure that your name and student number are clearly indicated on your answer book. 4. Write your answers in either blue or black ink in your answer book. 5. Read each question very carefully before you answer it and number your answers exactly as the questions are numbered. 6. Begin with the question for which you think you will get the best marks. 7. Note the mark allocations for each question give enough facts to earn the marks allocated. Don't waste time by giving more information than required. 8. You are welcome to use diagrams to illustrate your answers. 9. Please write neatly we cannot mark illegible handwriting. 10. Any student caught cheating will have his or her examination paper and notes confiscated. The College will take disciplinary measures to protect the integrity of these examinations. 11. If there is something wrong with or missing from your exam paper or your answer book, please inform your invigilator immediately. If you do not inform your invigilator about a problem, the College will not be able to rectify it afterwards, and your marks cannot be adjusted to allow for the problem. 12. This paper may be removed from the examination hall after the examination has taken place. NOTE: YOU MAY USE A NON-PROGRAMMABLE CALCULATOR. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 1 OF 14

2 SECTION A (30 MARKS) ANSWER ALL THE QUESTIONS (i) MULTIPLE-CHOICE QUESTIONS Choose the correct option for each of the following. Write only the question number and your chosen answer. For instance, if you think that the correct answer for number 1 is (a), then write it as 1. (a). 1. The trial balance is a list of account balances taken from the general ledger. Which of the following is true about these balances? (a) (b) (c) (d) Asset, expense and liability accounts have debit balances while income or revenue accounts have credit balances. Asset and expense accounts have debit balances while liability and income or revenue accounts have credit balances. Asset and expense accounts have credit balances while liability and income or revenue accounts have debit balances. None of the above. 2. The selling price of product X is R250 and the mark-up percentage is 25% on cost. Determine the cost price for product X. (a) (b) (c) (d) R100 R125 R300 R At 28 February 2013 the balances on the Debtors Control Account and Provision for Bad Debts Account of AB Traders amount to R and R3 000 respectively. If Provision for Discount on Debtors Account equals 2,5%, calculate the amount credited to Provision for Discount on Debtors. (a) R1 500 (b) R1 575 (c) R1 425 (d) R In the accounting of VAT, we distinguish between Input VAT and Output VAT. Which of the following statements is true? (a) (b) (c) (d) Input VAT is the tax that business charged on the supply of goods or services while Output VAT is the tax paid by business on goods or services acquired by it. Input VAT and Output VAT is 14% paid to the Receiver of Revenue. Input VAT and Output VAT is the amount on the tax invoice that every tax vendor records in the Cash Payment Journal. Input VAT is the tax paid by business on goods or services acquired by it, while Output VAT is the tax that business charged on the supply of goods or services. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 2 OF 14

3 5. Mr Gideon bought goods for R100, before VAT. VAT is charged at 14% and he received a 2,5% discount for prompt payment. How much did he pay for his goods? (a) R114 (b) R115 (c) R111,15 (d) R112,85 6. A motor vehicle purchased by HK Traders several years ago for R6 000 was sold on 31 December 2012 for a cash price of R On that date the accumulated depreciation amounted to R HK Traders realised: (a) (b) (c) (d) R200 loss on the sale of the asset. R4 800 loss on the sale of the asset. R200 profit on the sale of the asset. R4 800 profit on the sale of the asset. 7. Calculate the creditors settlement period if the creditors at the year-end amount to R32 150, and the credit purchases for the year amount to R (a) (b) (c) (d) 34 days 64 days 90 days 94 days 8. Calculate the Owners Equity if Non-current Assets total R24 000, Current Assets R35 200, Non-current Liability R and Current Liability R (a) R (b) R (c) R (d) R The following information relates to Questions 9 and 10. The cost price of machine M0 on 1 January 2008, is R The life span of the asset is estimated to be 4 years producing an estimated units. The estimated scrap value at the end of the fourth year is R Calculate the annual depreciation amount using the straight line method. (a) R4 475 (b) R4 500 (c) R4 175 (d) R Calculate the depreciation per unit using the product unit method. (a) R0,42 (b) R0,40 (c) R0,32 (d) R0,30 [10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 3 OF 14

4 (ii) TRUE OR FALSE QUESTIONS Indicate whether the following statements are True or False. Motivate all your answers. 1. Capital expenditure is any expenditure that increases the earning capacity of a business and such benefit is prolonged beyond the accounting period in which the expenditure occurs. 2. Partnerships consisting of more than 20 people is legal in South Africa in terms of the Companies Act 61 of 1973, if formed for the purpose of making profits. 3. Depreciation is the systematic distribution of the cost of a fixed asset over its useful life so that the cost of using the asset is appropriately matched to the income generated by that use. 4. In the manufacturing process, the unavoidable losses called production losses are debited to the Manufacturing account and credited on the Income Statement. 5. The financial year-end for companies and close corporations is 28 February, which is called the fiscal year, while for sole proprietors and partnerships it can be any month of the calendar year. [5 2 = 10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 4 OF 14

5 (iii) MATCHING-STATEMENT QUESTIONS Match the statements in Column B to the terms in Column A. Write down the answers only, for example 1. (a). Column A Column B 1. going concern concept (a) revenue and profits should not be anticipated, but should be recognised and included in the Income Statement only once they have been earned or realised 2. capital (b) a fixed percentage of the net book value is written off in each accounting period 3. intangible assets (c) direct material costs + direct labour costs 4. prudent concept (d) financial statements are prepared on the assumption that the enterprise will continue to operate in the foreseeable future 5. conversion costs (e) expenses in maintaining existing non-current assets in an efficient state and normal expenses of carrying on business 6. net liquid funds (f) the period allocation of the costs of an intangible asset over its life span 7. revenue expenditure (g) owner's or partners' contribution to entity, in form of cash, transfer of assets, or provision of services 8. reducing balance method (h) direct labour costs + manufacturing overheads 9. prime costs (i) cash at bank and in hand and the equivalent of cash (investments) less bank overdrafts and other borrowings repayable within one year of the accounting date 10. amortisation (j) goodwill, patents and trademarks [10] [30] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 5 OF 14

6 SECTION B: SHORT QUESTIONS (10 MARKS) ANSWER ALL THE QUESTIONS QUESTION 1 According to Statement AC 000, there are certain assumptions that form the basis of financial statements. Identify these assumptions. [2] QUESTION 2 Name any two methods of inventory valuation. [2] QUESTION 3 A furniture store has a standard mark-up of 50% on cost for lounge suites. During a particular month, it sold 20 lounge suites for R1 500 each. The price represents a mark down of 20% on the normal selling price. Ignore VAT. (a) i. Calculate the normal selling price per lounge suite. (1) ii. Calculate the cost price per lounge suite. (2) (b) Compute the gross profit for the month. (3) [6] [10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 6 OF 14

7 SECTION C: LONG ANSWER QUESTIONS (40 MARKS) ANSWER ALL THE QUESTIONS QUESTION 1 The bookkeeper of Gid Ltd supplied the following information to you: R Balance per Debtors Control Account Total of list of debtors balances The followings errors have to be rectified: 1. Sales and debtors columns in the sales journal are undercast by R Sales invoice no.112 issued to H. Hyde was not posted from the sales journal, R The debtors list was overcast by R Sales invoice no. 115, issued to J. Jelly was not recorded in the sales journal R450. You are required to: (a) Create a Debtors Control Account to rectify the errors. (5) (b) Reconcile the list of balances to the Debtors Control Account. (5) [10] QUESTION 2 K. Xele and P. Stone are trading as partners. They share profits and losses in the same ratio as their respective capitals that are as follows: K. Xele Capital R P. Stone Capital R K. Xele and P. Stone are entitled to 8% interest on their respective capitals, which is charged against profits. After charging the above interests, K. Xele is entitled to a bonus of 10% on the balance of the profits. After charging K. Xele's bonus, P. Stone is entitled to a bonus of 7,5% on the balance of the profits. K. Xele and P. Stone's drawings during the year were R and R9 000 respectively. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 7 OF 14

8 The credit balances on the Current Accounts of the partners at 1 January 2012 were as follows: K. Xele R1 310 P. Stone R1 280 The profit for the year ended 31 December 2012, before interest and bonus payments, was R You are required to: Prepare the Current Accounts of K. Xele and P. Stone. [10] QUESTION 3 AB Traders has given you the following extract of the Income Statement and Balance Sheet for the year ended 31 December: Assume 80% of sales are on credit. R Sales Cost of sales ( ) Gross profit Other income Other expenses ( ) Interest on loan (6 000) Profit for the period Capital Non-current loan Current liabilities Total liabilities Non-current assets Cost Accumulated Depreciation Book value Investment Current assets Total assets Opening inventory Closing inventory Debtors DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 8 OF 14

9 You are required to: Calculate the following ratios. (a) Return on capital employed (2) (b) Gross profit percentage (2) (c) Net profit percentage (2) (d) Expense ratio (2) (e) Non-current asset turnover ratio (2) (f) Debtors collection period (2) (g) Inventory turnover ratio (2) (h) Return on equity (2) (i) Current ratio (2) (j) Acid-test ratio (1) (k) Solvency ratio (1) [20] [40] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 9 OF 14

10 SECTION D: INTERPRETATIVE QUESTIONS (20 MARKS) ANSWER ONE OF THE QUESTIONS QUESTION 1 XYZ Ltd has made the following information available to you: XYZ Balance Sheet on 30 June 2011 Notes R R ASSETS NON-CURRENT ASSETS Property, equipment and vehicles CURRENT ASSETS Stock Trade and other debtors Cash and cash equivalent EQUITY AND LIABILITIES CAPITAL AND RESERVES Issued share capital Reserves NON-CURRENT LIABILITIES Interest bearing liabilities CURRENT LIABILITIES Trade and other creditors Notes: 1. Gross Carrying Amount Accumulated Depreciation Net Carrying Amount Property, equipment and vehicles Land and buildings Equipment Vehicles DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 10 OF 14

11 XYZ Ltd Trial Balance 30 June 2012 Debit Credit R R Share capital Unappropriated Income Superbond loan Land and buildings Vehicles Equipment Stock Debtors Rates paid in advance 773 Creditors Audit fee Auditors- Accrued expense Telephone Accrued expense 180 Sale of motor scooter Proceeds Vehicle- Depreciation Provision Equipment-Depreciation Provision Vehicle Depreciation Equipment- Depreciation Sales Purchases Rates Wages Salaries Telephone Stationery 738 Bank charges 473 Interest on loan Directors' fees Income tax Dividends paid Bank In addition to the Balance Sheet and Trial Balance, you are given the following data: Rates paid in advance amount to R773. There are accrued expenses for the audit fee and the telephone account as detailed in the Trial Balance. All other items of expenditure have been paid in cash except for purchases. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 11 OF 14

12 The sale of the motor scooter was a cash sale. It cost R5 000 and its book value at the date of sale was R Sales of goods include credit sales. Stock at 30 June 2012 was valued at R You are required to: (a) Prepare the Trading, Income and Appropriation Statements for the year ended 30 June (10) (b) Prepare the Cash Flow Statement for the year ended 30 June (10) [20] OR DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 12 OF 14

13 QUESTION 2 The following information is taken from the close of a month's trading period of CL Trade: R R R Capital: ordinary shares of R Wages: Clay-getting Maintenance Boiler house Making Burning Drying and setting Debtors Creditors Coal: Used for firing kilns Used for boiler Income Statement Land and buildings Salaries office Salaries yard personnel Sales Stock at beginning of period Works general expenses 960 Royalties Power and lighting office 376 Power and lighting yard 240 Repair to kilns Rates and insurance office 368 Rates and insurance yard 240 Repair to machines 664 Delivery expenses Depreciation: Kilns 672 Plant and machinery Discounts Bad debts 304 Telephone and telegrams 584 Printing and stationery 680 Kilns Plant and machinery Cash Notes: 1. The opening stock, valued at R2 696, consisted of bricks. The production during the period, after allowing spoilage was bricks were sold during the period. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 13 OF 14

14 2. The yard's own employees constructed a kiln during the period. Included in maintenance wages is R1 120 paid for work done on the new kiln bricks were also taken from the periods' production to build the new kiln. 3. The closing stock was wholly made up of bricks produced during the period. 4. Delivery expenses of R5 680 included R4 720 which has been re-charged to customers and is included in the total sales. You are required to: (a) i. Prepare the Manufacturing and Trading Accounts. (8) ii. Prepare the Income Statement. (5) (b) Prepare the Balance Sheet for the period. (7) [20] [20] Section A: 30 marks Section B: 10 marks Section C: 40 marks Section D: 20 marks TOTAL: 100 MARKS DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 14 OF 14

FINANCIAL ACCOUNTING 3

FINBUS4 NOVEMBER 2013 EXAMINATION DATE: 7 NOVEMBER 2013 TIME: 09H00 13H00 TOTAL: 100 MARKS DURATION: 4 HOURS PASS MARK: 40% (BUS-AC3) FINANCIAL ACCOUNTING 3 THIS EXAMINATION PAPER CONSISTS OF 4 QUESTIONS: