GRADE 12 ACCOUNTING SEPTEMBER 2018 MEMORANDUM

Transcription

1 NATIONAL SENIOR CERTIFICATE GRADE 12 ACCOUNTING SEPTEMBER 2018 MEMORANDUM MARKS: 300 MARKING PRINCIPLES: 1. Penalties for foreign items are applied only if the candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item). No double penalty applied. 2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning marks on the figures for that item. 3. Full marks for correct answer. If answer incorrect, mark the workings provided. 4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark for the working for that figure (not the method mark for the answer). Note: if figures are stipulated in memo for components of workings, these do not carry the method mark for final answer as well. 5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award the mark. If no + or sign or bracket is provided, assume that the figure is positive. 6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. 7. This memorandum is not for public distribution, as certain items might imply incorrect treatment. The adjustments made are due to nuances in certain questions. 8. Where penalties are applied, the marks for that section of the question cannot be a final negative. 9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer and at least one part must be correct before awarding the mark. 10. Operation means 'check operation'. 'One part correct' means operation and one part correct. Note; check operation must be +, -, x,, or per memo. 11. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. Indicate with a. 12. Be aware of candidates who provide valid alternatives beyond the marking guideline. 13. Codes: f = foreign item; p = placement/presentation. This memorandum consists of 22 pages.

2 Accounting 2 Limpopo DoE/September 2018 QUESTION 1 RECONCILIATIONS 1.1 BANK RECONCILIATION Calculate the correct balance of the Bank Account on 28 February = one part correct Foreign entries: 1 (max 1) Be aware of foreign entries incorrectly duplicated in journals and/or reconciliation Prepare the Bank Reconciliation Statement on 28 February Bank reconciliation statement on 28 February 2018 Debit Credit Credit balance according to the bank statement Balancing figure, one part correct Credit outstanding deposits ( ) Debit outstanding cheques: Nr Nr Nr Debit balance according to bank account Both columns equal Foreign entries: 1 (max 1) Be aware of foreign entries incorrectly duplicated in journals and/or reconciliation. 8

3 Accounting 3 Limpopo DoE/September Refer to information A. The owner asked the bookkeeper, Ray Duncan, why the deposit of R2 050 was not yet deposited. Ray said that she was very busy at that time and could not deposit the money. She kept it in her drawer and forgot about it. She brought it to the owner and said that she will deposit it as soon as possible. What control measures can the owner put in place to avoid this situation in the future? Provide TWO measures. Separation of duties deposits must be recorded by one person and deposited by another Use a drop safe which is picked up by the bank Check outstanding deposits weekly Any acceptable answer Refer to Information E. When the financial statements will be drawn up on 28 February 2018, an adjustment has to be made for cheque no where R780 has to be added to Bank and to Creditors control. Explain why this adjustment has to be made and why the R780 has to be added to Trade and other Payables. 2 The cheque is post dated for the coming year. The cheque will not be paid this year, therefore the entry in the cash payments journal did actually not decrease the bank balance It is shown as a creditor because the business must be aware that this payment must be provided for as the recipient of the cheque can bank the cheque any given time from the date on the cheque. 4

4 Accounting 4 Limpopo DoE/September CREDITORS RECONCILIATION Creditor s No. Ledger of Tyrone Suppliers Statement from Richard Traders Balance (or one mark, one mark) Total column totals added, including the opening balances 9. TOTAL MARKS 35

5 Accounting 5 Limpopo DoE/September 2018 QUESTION 2 COST ACCOUNTING 2.1 SEW NEW CURTAINS Production cost statement for the year ended 31 March 2018 Direct material Direct labour (2 marks) ( ) Prime cost Factory overhead cost Transfer from note Total cost of production Work in process (beginning of the year) Work in process (end of the year) Balancing figure, must be deducted Total cost of production of complete products x 100/ (72 000) Factory overhead cost Indirect labour ( ) * Indirect material ( ) * Insurance ( ) * Rent ( ) Depreciation * * one part correct 16

6 Accounting 6 Limpopo DoE/September Provide a calculation to prove how the Direct Material Cost were calculated as R x 60% ( ) = GLASS AND CO Explain why it is important to calculate the Breakeven Point. Any acceptable, relevant answer. So that the owner/manager knows how much products must be produced in order to cover all costs Why is the production staff s wages seen as a variable cost, but the factory cleaner s wages is a fixed cost? 1 Production staff is paid per unit/hour, so their labour cost would change as production levels change. The factory cleaner is paid a salary regardless of the amount of units produced. (Any acceptable answer) Calculate the following: (a) Factory overhead per unit 2 (b) = R7, Total Fixed Cost =

7 Accounting 7 Limpopo DoE/September 2018 (c) Variable cost per unit = / = R4,80 34 (20, ,00) + 11,20 + 4,80 = 50 one part correct Calculate the Breakeven Point (See b) (See c) = Should Glass and Co. be satisfied with their current production of units? Explain. Compare BEF with level of production Figure They produce more units than what is required to break even. 6 TOTAL MARKS 50

8 Accounting 8 Limpopo DoE/September 2018 QUESTION 3 COMPANIES FIXED ASSETS, BALANCE SHEET AND NOTES 3.1 COMPANY CONCEPTS Directors Internal auditor External auditor Shareholder FIXED ASSETS GIANTS LTD Vehicles: One of the two vehicles was sold for R on 31 December Calculate the profit or loss made from selling this asset. Calculation: (2 or nothing)_ = Or Asset disposal Vehicles Acc depr Profit on AD * Bank Equipment: (a) Calculate the cost price of equipment purchased. 5 (b) = Calculate the depreciation on equipment for the year 30 June (Do not use the 10% mentioned in no c.) =

9 Accounting 9 Limpopo DoE/September 2018 (c) If depreciation is calculated at 10% per year on the cost price, determine the date on which the new equipment was bought. Old: x 10% = , Thus R5 000 of the R depreciation remaining for the new equipment New: x 10% x months /12 = x months /12 = months = 10 Bought 10 months ago on 1 September 2017 (d) Equipment consists of small tools used in a workshop. The owner is concerned because these tools have to be replaced on a regular basis. Name TWO control measures that can be put into place to avoid this. 4 Tools are packed away in designated slots every evening or weekend Each workers is responsible for his own set of tools (signs for it Regular physical counting of equipment Workers are searched before they leave the premises Any acceptable answer 2

10 Accounting 10 Limpopo DoE/September HAROLD LTD Notes to the financial statements on 28 February 2018 Ordinary share capital Beginning of the year Shares issued during the year at R5,24 each (R / = R5,24) Check operation ( ) Repurchase of shares at R3,10 each check average: / total shares (balancing figure) ( ) Repurchased must be deducted, one part correct Retained income Balance beginning of the year Net profit after tax ( ) Repurchase of shares ( x R2,30 ) ( ), one part correct Ordinary share dividends one part correct ( ) Paid Declared ( x 0,33 ) one part correct Balance end of the year

11 Accounting 11 Limpopo DoE/September BALANCE SHEET ON 28 FEBRUARY 2018 ASSETS Non-Current Assets balancing figure Fixed assets ( ) Fixed deposit: Rush Bank balancing figure Current Assets CL x Trading stock CL x 0,5 or CA (CL x 1,5) Trade and other debtors one part correct ( ) Cash and cash equivalents balancing figure TOTAL ASSETS transfer from TE&L EQUITY AND LIABILITIES Ordinary shareholder s equity check operation Ordinary share capital Retained income from the note Non-Current Liabilities Loan from director one part correct ( ) Current Liabilities If the candidate has the correct total CL, award full marks for the whole section Trade and other payables ( ) Shareholders for dividends transfer from Ret Inc SARS (Income Tax) ( ) Shortterm portion of loan transfer from NCL TOTAL EQUITY AND LIABILITIES for misplaced items, no maximum, award marks for the item, then 1 1 for foreign items, max 2 TOTAL MARKS 30 70

12 Accounting 12 Limpopo DoE/September 2018 QUESTION 4 CASH FLOW STATEMENT, RATIO ANALYSIS 4.1 CONCEPTS What does the acronym IFRS stand for and why should financial statements adhere to its stipulations? International Financial Reporting Standards Reason So that financial statements provide the same information in the same format internationally To indicate that the financial statements adhere to specified standards and procedures determined by international bodies Give the name or acronym for any professional body (except IFRS from 4.1.1) within the accounting sector and provide TWO reasons what the purpose of such a professional body is. 3 Body Reasons (part marks for partial answers) SAIPA/SAICA/SAIPA, etc. They set the qualification standards Provides/manages internships/articles Gives advice to accountants They set up the code of conduct and disciplinary procedures for accounts Take disciplinary action against accountants when necessary Any other acceptable answer Why is it important for a company to have a Code of Conduct? By using a code of conduct, guidance is given on how to handle clients, colleagues and other partakers in the business. It develops/organises the business operations by developing the participants behaviour etc. It guides the ethical standards and internal control measurements that will be in place during the activities of the company Any acceptable answer 5 2

13 Accounting 13 Limpopo DoE/September Note for Reconciliation of net profit before tax and cash generated from operations on 28 February 2018 Net profit before tax Adjustments for: Depreciation Interest expense Operating profit before changes in working capital one part correct Changes in working capital one part correct Increase in stock ( ) (7 000) Increase in debtors ( ) ( ) Decrease in creditors ( ) (12 400) Cash generated from operating activities one part correct Cash flow statement for the year ended 28 February Cash flow from operating activities * Cash generated from operating activities * Dividends paid ( ) Interest paid ( ) #* ( ) Tax paid ( ) #* ( ) Cash flow from investing activities ( ) Purchase of fixed assets ( ) Earnings from non-current assets sold Cash flow from financing activities * Repayment of loan ( Proceeds from shares issued ) Net change in cash and cash equivalents * ( ) Cash and cash equivalents beginning of the year Cash and cash equivalents end of the year * * One part correct, correct use of brackets to earn the mark on final answer # Signs may be reversed; apply consistently, mark one line only to benefit candidate If a working is shown as a final answer, award working mark only if brackets correctly applied for this item. If workings not shown but figure is correct without brackets, award marks to cover workings and penalise on answer. If item is incorrectly placed, award no marks for details or figures.

14 Accounting 14 Limpopo DoE/September Calculate the following: (a) Price of new shares issued on 1 March = R11, (b) Dividends per share (DPS) on 28 February x 100 = 88 c answer must be in c, one part correct (c) Return on shareholder s equity (ROSHE) on 28 February x 100 ½ ( ) = x = 11,61% must be a % sign, one part correct Explain whether Kefilwe, a shareholder in Vericon Ltd, should be satisfied with the return on his investment? Quote TWO financial indicators with figures to support your answer. 5 Explanation The percentage received in investing in the company is more than the interest on fixed deposit ratio named trend and figure ratio named trend and figure DPS improved, was 75c per share, now 88c per share ROSHE improved, was 9,3%, now 11,61% EPS improved, was 125c per share, now 150c per share 5

15 Accounting 15 Limpopo DoE/September Kefilwe is interested in purchasing more shares in Vericon Ltd. He contacts you and seeks advice. Do you think it is a wise decision? Explain your answer and quote two ratios/figures (other than those mentioned in ) Explanation: Must compare NAV and market price Ratio figure Ratio figure NAV increased from R8,60 to R9,14 Market value decreased from R21,50 to R20, it is the right time to buy OR No Ratio figure Ratio figure NAV is R9,14 but is sold for R20 Market value is decreasing, R21,50 to R20. Wait for it to decrease more Vericon Ltd. wants to expand their business and buy a warehouse situated close to their current property. This warehouse will cost them R1,8 million. According to your opinion, what is the best way to finance this transaction? Quote TWO financial indicators with figures to motivate your answer. Loan Explanation figure Explanation figure Debt/equity including new loan: : ,42 : 1 ROTCE increased from 15,3% to 19,6%. Current loan is 15% whilst earning 19,6%. Dividends are already 88c per share, more shares will lead to a decrease in DPS / Market value already decreasing. TOTAL MARKS 5 65

16 Accounting 16 Limpopo DoE/September 2018 QUESTION 5 VAT & INVENTORY VALUATIONS 5.1. VAT CONCEPTS Exempt Zero Exempt WINSTON TRADERS Calculate the amount that would be entered next to Debtors Control on the credit side of the VAT Output account. Total sales = x 25 / 75 = x 15% = Calculate the VAT amount owed to SARS on 28 February 2018 after the VAT Input and VAT Output accounts were closed off. 3 ( see 5.2.1) ( ) ( ) = In which section of the Balance Sheet will you record the amount calculated in 5.2.3? 5 Trade and other payables 1

17 Accounting 17 Limpopo DoE/September INVENTORY VALUATION Explain to the owner the difference between the First In First Out method and the Weighted average method. Also provide ONE reason why the weighted average method would be better suited for his product. Difference: With FIFO items are priced are kept separate With weighted average an average price is calculated with each purpose Reason: The crates are small items which does not differ greatly in price Calculate the value of closing stock by using the FIFO method units x R0 240 units x R14,60 = R units x R14,50 = R R3 939 one part correct Calculate the value of closing stock by using the weighted average method ( ) + ( ) (620 60) + ( ) = = 14,61 x 280 = R4 090, The owner suspects that some of the stock was stolen, but there is no proof. 10 (a) Calculate the number of units that cannot be accounted for. ( ) = 10 4

18 Accounting 18 Limpopo DoE/September 2018 (b) Provide any TWO internal control measures that can be implemented in order to prevent this loss in the future. Part marks for incomplete answers Check all stock receipts against the invoice confirming the transaction Limit the access to the stock room The person collecting the stock from the storeroom should not be the person who handles the sale Any acceptable internal control measure of stock The owner wants to charge an additional fee of R4,00 per crate for delivering the crates to his customers. Do you agree with his decision? Motivate your answer by providing ONE point. 4 Comparison of the competitor s price and the new price after increase with figures R4,00 per crate would increase his sales price to R22, which would then be higher that his competitor s price. (part marks for an incomplete answer) 3 TOTAL MARKS 40

19 Accounting 19 Limpopo DoE/September 2018 QUESTION 6 PROBLEM SOLVING AND BUDGET 6.1 PROBLEM SOLVING Franco Traders increased both the salaries of directors and other employees in March. Do you think that the increases were reasonable? Explain your answer and provide supporting figures. Explanation: Compare the increase of workers and directors with the inflation rate The workers will receive an increase of R420 per worker/r8 400 for 20 workers (4% increase) The directors will receive an increase of R per director/r for 2 directors (30% increase) The worker s union representative has scheduled a meeting with the directors and management staff. They want to discuss the given figures with the directors and management staff. They are grateful for certain aspects but others raise concern. Apart from salaries, provide TWO points which they could see as positive points and TWO points of concern. Quote figures in all of your explanations. Positive: Improved security (R2 000 increased to R25 000) Training for workers (R6 000 increased to R26 000) Negative: Transport costs were cut from R to R7 000 Training is in addition to normal week hours, and over weekends, without payment (any one reason) 8

20 Accounting 20 Limpopo DoE/September BUDGET Explain the importance of comparing the actual figures to the budgeted figures in the cash budget. To determine of the items/costs were managed well and within the set limits (Any acceptable answer) Calculate the values marked (A) (F). 1 Calculatins A x 95% = B x 100 / 160 = C / 2 = D E (see D) = F x 100 / 115 =

21 Accounting 21 Limpopo DoE/September Refer to the figures for Cash received from debtors. Are the debtors adhering to the credit terms of the business? Provide figures to support your answer.. Explanation: Comparison of budgeted e and actual Figures They should have paid R and only paid R The workers are receiving a salary increase in November Considering this, as well as the fact that no new workers were employed during July and August 2018, what could possibly be a reason for the change in each of the actual figures for those two months? 3 Reason July Workers worked overtime August Less workers came to work / Workers were on a strike (Any acceptable answers for both scenarios) The owner feels that the business pays less money by renting equipment than purchasing the equipment. Do you agree with her opinion? Provide TWO points to support your answer. 2 Yes/No Explanation Yes No Only hires equipment when necessary Does not have to pay maintenance on equipment Any other reasonable answer By purchasing their own equipment they will save money as the equipment will last longer than what the repayment period The equipment can be rented out to earn an additional income (if it is not in use in the business at that time) Any other reasonable answer 5

22 Accounting 22 Limpopo DoE/September The business still faces a cash flow problem in August, even though a loan was obtained in July and the receipts from debtors improved. Excluding these two items, identify TWO other items, (other than the renting of equipment in 6.2.5), with figures, that needs attention. Also provide advice how these items can be managed. Item Figure Advice Item Figure Advice Creditors or (b) Or Buy less on credit, attempt more cash sales in order to qualify for a cash discount. Drawings or or Urge owner to decrease drawings so that the business can recover the cash flow Salaries and wages to or to Pay workers a fixed salary; employ workers for a fixed term The owner bought the vehicle from the business for her son. The usual driver and the finance officer were unhappy with this. Prove each person s point by explaining ONE reason for each. 6 Concern Driver Finance officer He was supposed to have first option to buy the vehicle and now he can t go against the owner of the business. The business received R less (R R ) than what they would have received if the vehicle was sold to the driver. 2 TOTAL MARKS 40 TOTAL: 300 marks