ACCOUNTING GRADE 10 NOVEMBER 2015

Transcription

1 ACCOUNTING GRADE 10 NOVEMBER 2015 MARKS: 300 TIME: 3 HOURS THIS QUESTION PAPER CONSISTS OF 13 PAGES INCLUDING THE COVER PAGE AND AN ANSWER BOOK OF 14 PAGES. 1

2 INSTRUCTIONS AND INFORMATION Read the following instructions carefully and follow them precisely. 1. Answer ALL questions 2. A special ANSWER BOOK is provided in which to answer all questions 3. Workings must be shown in order to achieve part-marks. 4. Non-programmable calculators may be used. 5. You may use a dark pencil or blue/black ink to answer the questions Use the information below as guideline when answering the questions. QUESTION 1 : 36 MARKS (22 minutes) TOPIC OF THE QUESTION THIS QUESTION INTERGRATES WITH: Financial accounting Accounting equation Concepts, GAAP, source documents Accounting concepts QUESTION 2 : 29 MARKS(17 minutes) TOPIC OF THE QUESTION THIS QUESTION INTERGRATES WITH: Financial accounting General Journal Concepts, GAAP, source documents Subsidiary journals QUESTION 3 : 53 MARKS(32 minutes) TOPIC OF THE QUESTION THIS QUESTION INTERGRATES WITH: Financial accounting Bookkeeping systems Concepts, GAAP, source documents Inventory Internal control QUESTION 4 : 44 MARKS(26 minutes) TOPIC OF THE QUESTION THIS QUESTION INTERGRATES WITH: Financial accounting Salaries and wages journal Concepts, GAAP, source documents QUESTION 5 : 87 MARKS(52 minutes) TOPIC OF THE QUESTION THIS QUESTION INTERGRATES WITH: Financial accounting Financial statements Balance sheet and notes QUESTION 6 : 18 MARKS(11 minutes) TOPIC OF THE QUESTION THIS QUESTION INTERGRATES WITH: Financial accounting Financial statements Analysis and interpretation Costing and VAT QUESTION 7 : 33 MARKS (20 minutes) THIS QUESTION INTERGRATES WITH: Financial accounting Concepts, Ethics 2

3 QUESTION 1 (36 MARKS: 22 MINUTES) Accounting equation and concepts 1.1 Analyse the following transactions using the table below by showing Account debited, Account credited and the effect on the accounting equation (A = O + L). Assume that the bank balance is favourable for all transactions. Use the example to guide you. Example: Paid the telephone account by cheque no.147, R700 NO. ACCOUNT DEBITED ACCOUNT CREDITED A O L e.g. Telephone Bank TRANSACTIONS: 1. Sold goods on account to S.Mnini, a debtor for R960 (mark up 60% on cost). 2. Purchased merchandise on credit from Voda Wholesalers for R Charged debtor, M.Mahlangu, interest at 10% p.a. for three months on his overdue account, R Received R550 from debtor S.Mnini. 5. Paid Municipality for lights and water by cheque, R850. [ Fill in the missing words or amounts a. Expenses decrease owners equity on the side. b. Goods sold on credit to customer are recorded in the Journal. c. is the source document used when trading stock is bought for cash. d. R100, 00 is 10% of. e. The GAAP principle used when only material items are shown in the financial statements is called. f. All money received by the business is recorded in the Journal. [12] 3

4 QUESTION 2 (29 MARKS: 17 MINUTES) General Journal Vukas Bakers has the following transactions for March 2015.The owner is unsure as to which entries must be entered into the General Journal. Use the given transactions to complete the General Journal in the books of Vukas Bakers. Narrations may be omitted. Transaction for March B.Thompson has not paid his account of R1 200 for over three months. It has been decided to charge him interest of 12% per month. 7. L.Welman returned stock costing R500. This has been incorrectly recorded in R.Welman s account. The error needs to be corrected. 14. A debtor, S.Tyson, who had been previously written off, paid his account of R The bank returned a cheque for R470 received from A.Wolfe in settlement of his account of R500. The cheque was marked R/D insufficient funds. 22. The owner took stock costing R400 home for personal use. 29. Repairs costing R2 000 was incorrectly debited to the Equipment account. 31. S.Naidoo has been declared bankrupt. She owes R900 to Vukas Bakers. She was able to pay 30 cents in each rand and the remaining amount to be written off. QUESTION 3 (53 MARKS: 32MINUTES) Bookkeeping systems, inventory and debtors 3.1 FORMAL AND INDIGENOUS BOOKKEEPING SYSTEMS Required Study the statements in the table below. Decide which statements apply to FORMAL BUSINESS and which apply to INFORMAL BUSINESS. Indicate with a CROSS (X) in the relevant column. STATEMENT 1. Has to register with Government departments 2. Cannot function without a trading license 3. Business premises can be moved from one place to another without notice 4. Must be registered with SARS for tax purposes. FORMAL BUSINESS INFORMAL BUSINESS 4

5 5. Not aware of whether a profit or loss is made, just look at cash available 6. Records of source documents, transactions are sometimes kept in note books just to remind the owner. 7. Always aware of whether the business has made a profit or not. 8. Adheres to principles of GAAP. 9. Records of source documents and books are kept safe and must always be available. 10. Format of recording depends on the person running the business. 3.2 INVENTORY [10] You are provided with the Trading Stock account taken from the Ledger of Lebogang Traders. REQUIRED: Study the account and then answer the questions that follow. INFORMATION: 2015 July General Ledger of Lebogang Traders Trading Stock 01 Balance b/d Creditors control (c) 500 July 31 Bank CPJ 8 770? GJ 400 Creditors control (a) Cost of sales CRJ Cost of sales (b) 200 Cost of sales (d) Balance c/d Aug 1 Balance b/d Indicate the names of the journals associated with the letters (a), (b), (c) and (d).in the folio column. (4) Give one possible explanation for the entry of R400 (1) Give one possible explanation for the entry of R200 (1) What is the value of merchandise sold for cash if the business uses a mark-up of 50% on cost? (4) 5

6 3.2.5 Give one possible way in which the business can verify the closing balance on 31 July 2015 of R (1) Read the following extract and answer the questions that follow: Mylene, an employee of the business, has offered to maintain the computers of the business at a reduced charge. Mylene has excellent technical knowledge of computers from her previous job. She buys parts required to fix computers from a local supplier at discounted prices. Mylene takes the replaced parts and uses them in a small repair business that she runs from her home. She also sometimes brings parts from her business to use in fixing the business computers, the cost of which she includes in her fee. a) In your opinion, is Mylene committing a crime? Give two reasons for your answer. (5) b) What internal control measures can the management of the business implement to monitor the maintenance of the computers by Mylene? Name two. (4) 3.3 DEBTORS CONTROL You are provided with information from the books of Itumeleng Furnishers REQUIRED: DEBTORS CONTROL for June 2015 Show workings in brackets to earn part marks. Also show folio references for Journals. INFORMATION 1. The debtors list on 1 June 2015 reflected a balance of R Furniture was sold as follows: For cash R On credit R Receipts totaling R were issued to debtors on settlements of their accounts. This included R660 received from the insolvent estate of M.Shilowa. His estate paid 60 cents in a rand and the balance is to be written off. Total cash discount of R2 040 was granted to the debtors. 4. Total goods returned: To suppliers R2 500 By debtors.r Cheques issued to suppliers on settlement of their accounts. R The bank statement received on 25 June reflected the following: Direct transfer by a debtor, T Lekota, R5 660; and Dishonored cheque R540 (this cheque was originally received from a debtor, P Motsepe, in settlement of his account of R610). 6

7 7. A debtor C Ramaphosa is to be charged interest for 4 months at 12% per annum on his overdue account of R The Petty cash Journal reflects R350 paid to KK Deliveries in respect of delivery expenses paid on behalf of a debtor. [23] QUESTION 4 (44 MARKS: 26 MINUTES) Wages and salaries The following information in respect of an employee, Joyce Banda, was extracted from the records of Romans Pizza Traders for the week ended 25 October 2015: Basic weekly wage 45 R40 per hour Overtime rate 1.5 times the normal rate Hours worked as per clock card 56 DEDUCTIONS: Pension fund 8% of normal earnings Medical aid fund R150 per week SARS (PAYE) 19% of gross earnings EMPLOYER S CONTRIBUTIONS: Pension fund R1, 50 for every R1 contributed by the employee Medical aid fund...r1, 50 for every R1 contributed by the employee 1 What is Joyce Banda s Gross wage at the end of the week? 7 2 How much did Romans Pizza Traders contribute towards Joyce Banda s pension fund? 5 3 Calculate how much Joyce Banda will be taking home this week. 5 4 How much did Joyce Banda cost the company this week? 4 5 What does the abbreviation SARS stand for? 1 6 Do you think is it neceesary for people to pay tax? Give two reasons. 3 7 Briefly explain the differences between a salary and a wage. 2 8 Explain what you understand by the difference between deductions and contributions. 2 7

8 9. Analyse the transaction below in the following table. (15) e.g.: Capital contributed by the owner, R No. Journal General Journal Effect on the accounting equation Account debit Account credit A OE L e.g CRJ Bank Capital a. Joyce Banda s net wage for a week. b. The employer s contribution to pension fund. c. Joyce Banda s deduction for SARS (PAYE) [44] QUESTION 5 (87 MARKS: 52 MINUTES) CONCEPTS, BALANCE SHEET AND NOTES 5.1 Match the concepts in Column A with explanations in Column B 1. Accounting A A business that has one owner. 2. Sole trader B Debts or obligations of a business. 3. Assets C Assets will be recorded at original cost price 4. Liabilities D Financial results are represented in a conservative manner. 5. Historical cost E Possessions or resources of a business 6. Principle of prudence F Recording and processing financial transactions and communicating this information to make informed decisions [12] 8

9 5.2 Prepare the Balance Sheet of Shiva Traders as at 28 February [19] 5.3 The following notes to the financial statements 1. Fixed assets (16) 2. Inventory (4) 3. Trade and other receivables (8) 4. Cash and cash equivalents (8) 5. Owner s equity (4) 6. Trade and other payables (16) INFORMATION Extract from the Income Statement as at 28 February 2015 Depreciation (Equipment) 600 Depreciation (Vehicle) Net profit for the year

10 Post-closing Trial Balance as at 28 February 2015 Debit Credit Balance sheet accounts section Capital Drawings Mortgage Loan:GT Bank Land and Buildings at cost Equipment Vehicles Accumulated Depreciation on Equipment Accumulated Depreciation on Vehicles Fixed deposit:ab Bank Trading stock Debtors control Deposit for electricity 280 Bank Petty cash 450 Cash float 880 Creditors control Accrued income 850 Accrued Expenses Prepaid expenses 310 Deferred income/income received in advance 770 Savings account at AB Bank 500 Consumable stores on hand 450 Pension fund Medical aid fund Creditors for salaries

11 Additional information 1. The owner, V. Shiva, increased his capital on 1 December 2014 by contributing an additional R into the current banking account of the business. This entry has been properly recorded. 2. The following transactions have already been recorded in the books of the business: A new computer, R3 200, was purchased on 1 November A delivery vehicle, R64 000, was bought on 1 January The mortgage loan from GT Bank is repayable in installments of R on 1 October each year. 4. The fixed deposit at AB Bank comprises of the following: R8 000 (maturing date 31 December 2015) R4 000 (maturing date 15 November 2016) QUESTION 6 (18 MARKS: 11 MINUTES) ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS REQUIRED: 6.1 Calculate the following profitability percentages for Hluzi Toy Shop for the financial year ended 31 December Round all answers to one decimal digit Gross Profit on sales Gross Profit on cost of sales Net profit on sales Operating expenses on sale Operating profit on sales Compare your answers for 6.1.1, and with the ratios given for 3 the previous financial year. Comment on whether the business is better off in 2014 or in

12 INFORMATION Hluzi Toy Shop EXTRACT FROM INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2014 Sales Cost of sales (95 000) Gross profit Other operating income Gross operating income Operating expenses (80 000) Operating profit Interest income Net profit for the year Hluzi Toy Shop PROFITABILITY RATIOS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 QUESTION 7 Gross Profit on sales 50% Gross Profit on cost of sales 100% Net profit on sales 18% (33 MARKS: 20 MINUTES) [18] 7.1 COSTING CONCEPTS AND VAT Match the words (phrases) in Column A with the best definition (or explanation) in Column B. COLUMN A COLUMN B A. Direct cost 1. Materials that become an integral part of the finished product. B. Overheads 2. Costs that have to be paid regardless of how many goods and services are produced C. Indirect labour 3. Material that is relatively insignificant to the end of products. D. Variable costs 4. The calculation, allocation and control of the costs involved in producing a good or service E. Indirect material 5. Labour that is employed directly in processing the product 12

13 F. Costing 6. Costs that are directly related to and easily traced to the making of a product. G. Direct labour 7. Costs that cannot easily be accurately calculated and traced to the production of a product. H. Fixed costs 8. Costs that the business must pay for general running of the factory, but which are difficult to allocate to a specific product produced I. Indirect cost 9. Costs that change depending on how many products or services are produced. J. Direct material 10. Labour that is not directly involved in the production of the product. [20] 7.2 VALUE ADDED TAX What is the difference between output VAT and input VAT? At what rate is VAT currently being charged in South Africa? Is the current rate of VAT being charged on all goods in South Africa? Explain B. Mbete regularly buys goods from Hilda Stores. The owner has offered Mbete 4 a special price of R6 000 including VAT instead of normal price of R7 400 provided he pays cash and does not request a document. Mbete is tempted, as this seems a good offer. Advise him as to whether he should accept the offer. Briefly explain. TOTAL:

14 ACCOUNTING GRADE 10 NOVEMBER 2015 ANSWER BOOK LEARNER: CLASS:. SCHOOL:. QUESTION MARKS INITIALS MOD. MARKS TOTAL THIS ANSWER BOOK CONSISTS OF 14 PAGES INCLUDING THE COVER PAGE. Page 1 of 14

15 QUESTION 1 (36 Marks: 22 Minutes) 1.1 NO. ACCOUNT DEBITED ACCOUNT CREDITED A O L e.g. Telephone Bank a. b. c. d. e. f. 12 Page 2 of 14

16 QUESTION 2 (29 Marks: 17 Minutes) GENERAL JOURNAL OF VUKAS BAKERS MARCH 2015 Day Details Fol Debit Credit Debtors control Creditors control Debit Credit Debit Credit 29 Page 3 of 14

17 QUESTION 3 (53 Marks: 32 Minutes) 3.1 FORMAL AND INDIGENOUS BOOKKEEPING SYSTEMS. Indicate with a CROSS (X) in the relevant column. STATEMENT 1. Has to register with Government departments 2. Cannot function without a trading license 3. Business premises can be moved from one place to another without notice 4. Must be registered with SARS for tax purposes. 5. Not aware of whether a profit or loss is made, just look at cash available 6. Records of source documents and transactions are kept in note books just to remind the owner. 7. Always aware of whether the business has made a profit or not. 8. Adheres to principles of GAAP. 9. Records of source documents and books are kept safe and must always be available. 10. Format of recording depends on the person running the business. FORMAL BUSINESS INFORMAL BUSINESS 10 Page 4 of 14

18 3.2 INVENTORY (a) (b) (c) (d) a) b) 20 Page 5 of 14

19 3.3 GENERAL LEDGER OF ITUMELENG FURNISHERS DEBTORS CONTROL ACCOUNT 23 QUESTION 4 (44 Marks: 26 Minutes) WAGES AND SALARIES 1. Basic = Overtime = Goss income = SARS stand for: Page 6 of 14

20 6. Two reasons for paying tax 7. Salary: Wages : 8. Deductions : Contributions: 9. No. Journal General Journal Effect on the accounting equation Account debit Account credit A OE L e.g CRJ Bank Capital a. b. c. 44 Page 7 of 14

21 QUESTION 5 (87 Marks: 52 Minutes) 5.1 CONCEPTS Page 8 of 14

22 5.2 BALANCE SHEET AND NOTES Balance Sheet of Shiva Traders as at 28 February ASSETS Non-Current assets/ Tangible assets 1 notes Financial assets Current assets Total assets EQUITIES AND LIABILITIES Owners equity 5 Non-Current liabilities Current liabilities Total equity and liabilities 6 19 Page 9 of 14

23 5.3 Notes to the financial statements 1. Fixed assets/tangible Assets (16marks) Land & building Equipment Vehicles Cost Accumulated depreciation (28 February 2014) Carrying value (28 February 2014) Movements Additions at cost Disposals at carrying value Depreciation Carrying value (28 February 2015) Cost Accumulated depreciation (28 February 2015) Inventory (4marks) 3. Trade and other receivables (8marks) Page 10 of 14

24 4. Cash and cash equivalents (8marks) 8 5. Owner s equity (4marks) Capital balance on 28 February 2014 Additional capital contributed/capital withdrawn Net profit for the year Drawings Capital balance on 28 February Trade and other payables (16marks) 16 Page 11 of 14

25 QUESTION 6 (18 Marks: 11 Minutes) ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Gross Profit on sales[3] Gross Profit on cost of sales [3] Net profit on sales[3] Operating expenses on sales[3] Operating profit on sales[3] Page 12 of 14

26 6.1.6 Compare your answers for 6.1.1, and with the ratios given for the previous financial year. Comment on whether the business is better off in 2014 or in 2013[3] Gross Profit on sales Gross Profit on cost of sales 18 Net profit on sales QUESTION 7 (33 Marks: 20 Minutes) 7.1 COSTING CONCEPTS AND VAT Match the words (phrases) in Column A with the best definition (or explanation) in Column B. A. B. C. D. E. F. G. H. I. J. 20 Page 13 of 14

27 7.2 VALUE ADDED TAX What is the difference between output VAT and input VAT? (4) At what rate is VAT currently being charged in South Africa? (2) Is the current rate of VAT being charged on all goods in South Africa? Explain (3) B.Mbete regularly buys goods from Hilda Stores. The owner has offered Mbete a special price of R6 000 including VAT instead of normal price of R7 400 provided he pays cash and does not request a document. Mbete is tempted, as this seems a good offer. Advise him as to whether he should accept the offer. Briefly explain. (4) 13 TOTAL: 300 Page 14 of 14

28 ACCOUNTING GRADE 10 NOVEMBER 2015 MEMORANDUM MARKS: 300 TIME: 3 HOURS MARKING PRINCIPLES: Full marks for correct answer. If answer incorrect, mark the workings provided. 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 Where indicated, part-marks may be awarded to differentiate between differing qualities of answers from candidates. Where method marks are awarded for operation, the marker must inspect the reasonableness of the answer before awarding the mark. THIS MEMORANDUM CONSISTS OF 11 PAGES INCLUDING THE COVER PAGE. Page 1 of 11

29 QUESTION NO. ACCOUNT ACCOUNT A O L DEBITED CREDITED e.g. Telephone Bank Debtors Sales Control/S.Mnini Cost of sales Trading stock Trading Stock Creditors Control/Voda Wholesalers 3. Debtors Control/ Interest on overdue M.Mahlangu account 4. Bank Debtors Control/S.Mnini Water and electricity Bank [24] 1.2 a. debit b. Debtors c. Cheque counterfoil d. R1 000 e. materiality f. cash receipt [12] Page 2 of 11

30 QUESTION 2 GENERAL JOURNAL OF VUKAS BAKERS MARCH 2015 Day Details Fol Debit Credit Debtors control Creditors control 3 B.Thompson Debit Credit Debit Credit Interest charged 36 7 R.Welman L.Welman A.Wolfe Discount Allowed Drawings 400 Trading stock Repairs Equipment Bad debts 630 S.Naidoo [29] Page 3 of 11

31 QUESTION FORMAL AND INDIGENOUS BOOKKEEPING SYSTEMS Indicate with a CROSS (X) in the relevant column. STATEMENT FORMAL BUSINESS INFORMAL BUSINESS 1. Has to register with Government departments X 2. Cannot function without a trading license X 3. Business premises can be moved from one place to another without notice X 4. Must be registered with SARS for tax purposes. X 5. Not aware of whether a profit or loss is made, just look at cash available X 6. Records of source documents and transactions are kept in note books just X to remind the owner. 7. Always aware of whether the business has made a profit or not. X 8. Adheres to principles of GAAP. X 9. Records of source documents and books are kept safe and must always be available. 10. Format of recording depends on the person running the business. X X [10] 3. INVENTORY (a) CJ (b)daj (c) CAJ (d) DJ Drawings of merchandise/trading stock deficit/correction of error/donations Merchandise returned by debtors x 150 /100 = Compare it with the physical stock count Page 4 of 11

32 3.1.6 a) No. She has the relevant skill and has offered her services to the business. Her repair work will not be interfering with the work hours required by the business. Accept any reasonable answer b) Ensure that Mylene only repair the computers that are broken. Get a guarantee period from Mylene Accept any reasonable answer [20] June DEBTORS CONTROL ACCOUNT 01 Balance b/d June 30 Bank 30 sales DJ ( ) CRJ Bank (RD) CPJ 540 Discount allowed CRJ Petty Cash PCJ 350 Debtors DAJ Sundry a/c ( ) allowances GJ 178 Sundry a/c GJ 440 Balance c/d # July 1 Balance b/d # # Check operations [23] Page 5 of 11

33 QUESTION 4 WAGES AND SALARIES 1. Basic = 45 x 40 = R1 800 Overtime = 11 x 60 = R660 Goss wage = R R(1 800 x 8% = 144 ) x 1.5 = R R( ) = R R( ) = R SARS stand for South African Revenue Services 6. Yes Two reasons for paying tax To enable the government to provide social services To enable the government to provide economic services Any relevant answer 7. Salary is paid by cheque or transferred monthly Wages is paid in cash weekly Any relevant answer 8. Deductions are subtracted from the employee s salary Contributions are benefits over and above the salary that the employer contributes Any relevant answer 9. No. Journal General Journal Effect on the accounting equation Account debit Account credit A OE L e.g. CRJ Bank Capital a. WJ Wages Creditors for 0 ( ) # # wages b. WJ Pension contribution Pension fund # +216 # c. WJ Wages SARS(PAYE) 0 # # # see b question no 3 Page 6 of 11

34 QUESTION 5 BALANCE SHEET AND NOTES 5.1 CONCEPTS 1. F 2. A 3. E 4. B 5. C 6. D [12] 5.2 BALANCE SHEET AND NOTES (19marks) Balance Sheet of Shiva Traders as at 28 February ASSETS notes Non-current assets Fixed assets/tangible assets Financial assets Fixed deposit:ab Bank ( ) Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets EQUITIES AND LIABILITIES Owners equity Non-current liabilities Long Bank ( ) Current liabilities Trade and other payables Total equity and liabilities Page 7 of 11

35 5.3 The following notes to the financial statements 1. Fixed assets/tangible Assets (16marks) Land & building Equipment s Vehicles Cost Accumulated depreciation (28 February 2014) Carrying value (28 February 2014) Movements - (2 000) (19 976) Additions at cost Disposals at carrying value Depreciation - (600) (3 024) Carrying value (28 February 2015) Cost Accumulated depreciation (28 February 2015) - (2 600) (23 000) 2. Inventory (4marks) Trading stock Consumable stores on hand Trade and other receivables (8marks) Debtors control Deposit for electricity Accrued income Prepaid expense Page 8 of 11

36 4 Cash and cash equivalents (8marks) Petty cash 450 Cash float 880 Savings account at AB Bank 500 Current portion of fixed deposit Owner s equity (4marks) Capital balance on 28 February Additional capital contributed Net profit for the year Drawings (22 000) Capital balance on 28 February Trade and other payables(16marks) Creditors control Bank overdraft Pension fund Medical aid fund Creditors for salaries Current portion of loan Accrued expense Deferred income/income received in advance Page 9 of 11

37 QUESTION 6 (18marks) ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS Gross Profit on sales[3] = x = 52,5% Gross Profit on cost of sales [3] = x = 110,5% Net profit on sales[3] = x = 16% Operating expenses on sales[3] = x =40% Operating profit on sales[3] = x =15% Compare your answers for 6.1.1, and with the ratios given for the previous financial year. Comment on whether the business is better off in 2014 or in 2013[3] Gross Profit on sales There is an increase in the gross profit on sales, so a better profit margin was achieved. Gross Profit on cost of sales There is an increase in the gross profit on cost of sales and the target mark-up of 100% was exceeded Net profit on sales There is a decrease in the net profit on sales. Any relevant answer. Page 10 of 11

38 QUESTION 7 (33marks) 7.1 COSTING CONCEPTS AND VAT (20marks) Match the words (phrases) in Column A with the best definition (or explanation) in Column B. A. 6 B. 8 C. 10 D. 9 E. 3 F. 4 G. 5 H. 2 I. 7 J VALUE ADDED TAX (13marks) What is the difference between output VAT and input VAT? output VAT is calculated on sales input VAT is calculated on purchases At what rate is VAT currently being charged in South Africa? 14% Is the current rate of VAT being charged on all goods in South Africa? Explain. No. There are also goods that are zero rated and goods that are exempt from VAT B.Mbete regularly buys goods from Hilda Stores. The owner has offered Mbete a special price of R6 000 including VAT instead of normal price of R7 400 provided he pays cash and does not request a document. Mbete is tempted, as this seems a good offer. Advise him as to whether he should accept the offer. Briefly explain. He should not accept the offer especially where no documents are given. This is illegal and leads to fraud Accept any reasonable answer TOTAL 300 Page 11 of 11