ACCOUNTING
GRADE 12
NATIONAL SENIOR CERTIFICATE
MEMORANDUM
JUNE 2018

MARKING PRINCIPLES

  1. Penalties for foreign items are applied only if the candidate has not lost marks elsewhere in the question for that item (no foreign item penalty for misplaced item). No double penalty applied.
  2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate has earned marks on the figures for that item.
  3. Full marks for correct answer. If the answer is 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).
  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 before awarding the mark.
  10. ‘Operation’ means ‘Check operation’. ‘One part correct’ means ‘Operation and one part correct’.
    Note: Check operation means must be +, –, x or ÷ as per memo, but some items can be + or – such as provision for bad debts adjustment / sale of asset.
    Note: Where appropriate, use of numerator and denominator must be correctly applied to earn marks.
  11. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect at least in part. In such cases, do not award the method mark. Indicate by way of 
  12. Be aware that some candidates provide valid alternatives beyond the memorandum.
  13. Codes: f = foreign item; p = placement/presentation.

QUESTION 1: INVENTORY VALUATION
1.1 CONCEPTS
1.1.1 First in first out (FIFO) ✓
1.1.2 Periodic inventory system ✓
1.1.3 Specific identification ✓
1.1.4 Perpetual inventory system ✓(4)
1.2.1 Calculate the following for schoolbags on 30 April 2018:

  • The value of the closing stock
    120 – 12
    108 ✓✓* x 150 = 16 200 ✓*
    125 – 108
    17 ✓✓* x 145 ✓= 2 465 ✓* Total: 18 665 ✓* *one part correct(8)
  • Cost of sales:
    (12 x 150)
    15 340 + 52 310 – 1 800 – 18 665 = 47 185
    ✓✓✓✓✓ above✓ one part correct(6)

1.2.2 Calculate the following for stationery cases on 30 April 2018:

  • The number of units missing
    Units sold: 15 550/50 = 311
    92 ✓ + 395 ✓ – 48 ✓ – 111✓ – 311 ✓✓ = 17 units ✓ One part correct(7)
  • The value of the closing stock
    48 x 35 two marks or nothing
    2 760 ✓ + 14 135 ✓ + 1 467 ✓ – 1 680 ✓✓ x 111 ✓ = 4 218 ✓ One part correct
                       439 ✓✓ One part correct
    92 + 395 – 48(9)

1.2.3 Suggest TWO internal control measures that the business can use to reduce the incidence of missing stock.
TWO valid suggestions✓✓✓✓

  • Tighten physical security
  • Have regular/random stock control
  • Install security tags on products / scanning devices

For one mark:
Cameras/CCTV/Division of duties(4)
1.2.4 Refer to information C:
The business decided to sell computer bags from 1 February 2018.

  1. Calculate the value of the closing stock using the specific identification method.
        30 – 16         20 – 12      10 – 2
    (14 x R450) + (8 x 540) + (8 x 600)
    R6 300 R4 320 R4 800 = R15 420
    ✓✓✓✓✓✓✓  one part correct(7)
  2. Was the idea of introducing the computer bags successful or not? Explain. Quote figures.
    Yes / No ✓
    Explanation ✓✓ figures ✓✓
    • Sales volume is low, may need more advertising; R25 500 (30 x 850).
    • Only 30 units sold of a possible 60 (50%)
    • Closing stock units is high; 30 of 60 (50%)
    • R15 420 tied up in stock see (i) above.(5)

[50]

QUESTION 2: RECONCILIATIONS
2.1 TRUE or FALSE
2.1.1 False ✓
2.1.2 False ✓
2.1.3 True ✓
2.1.4 True ✓(4)
2.2 CREDITORS’ RECONCILIATION

  CHANGES TO THE CREDITORS’ LEDGER  CHANGES TO THE STATEMENT BALANCE 
BALANCE   11 570  8 300
 a  930 ✓  930 ✓
 b (640) ✓✓
320 + 320 one mark each
 
 c   (2 700) ✓✓
8 530 – 5 830
 d  450 ✓✓  
 e    2 000 ✓
 f    3 840 ✓
 g  60 ✓  
  12 370 ✓* 12 370

*For both totals; inspect; need not be the same.
One mark for the amount and one mark for the increase or decrease
-1 for foreign entry on each line, provided a mark has been earned. (12)
2.3 AGE ANALYSIS

PROBLEM (WITH EVIDENCE) ✓✓✓✓✓✓ SUGGESTION ✓✓✓

Debtors not abiding by credit terms

  • Hendry, Williams and Dianna have accounts more than 30 days;
  • R2 750 is more than 30 days overdue. 
Charge interest; do not allow further purchases. 
Hendry has exceeded his credit limit.
3 550 balance; limit is 3 200. 
Programme till to detect clients’ balances; get them to pay the access when going over. 
Williams (R500) and Hendry (750) are allowed to buy goods even though they do not abide by the terms (internal control problem)  Restrict future purchases; request some payment before additional purchases 

Accept either names or amounts as evidence
(9)
[25]

QUESTION 3: FIXED ASSETS AND INCOME STATEMENT
3.1 CONCEPTS
3.1.1 Income statement (Statement of Comprehensive Income) ✓
3.1.2 Cash Flow Statement ✓
3.1.3 Independent / External Auditors’ Report ✓
3.1.4 Balance Sheet (Statement of Financial Position) ✓ (4)
3.2 FOUCHE LTD
3.2.1

CALCULATE: DEPRECIATION
VEHICLES:
Sold: 175 000 ✓ x 15% x 10/12 ✓ = 21 875 ✓*
Old: (620 000 – 175 000) x 15% = 66 750 ✓✓*
               445 000
EQUIPMENT:
62 000 ✓ x 10% x 6/12 ✓ = 3 100 ✓*
(482 000 – 62 000 ✓ – 246 000 ✓) x 10% = 17 400 ✓* 
TOTAL
21 875
66 750
3 100
17 400    
109 125 ✓*
* One part correct

(12)
3.2.1 GENERAL LEDGER OF FOUCHE LTD ASSET DISPOSAL ACCOUNT

2018
Mar 
Vehicles   175 000 ✓ 2018
Mar 
1 Accumulated depreciation on vehicles ✓
(78 750 ✓ + 21 875)
✓ (see above ) 
100 625 ✓
             Bank ✓  50 000 ✓
             Loss on sale of asset ✓
Balancing figure could be Dr
 24 375 ✓
       175 000        175 000

(9)
3.2.2 INCOME STATEMENT FOR THE YEAR ENDED 30 APRIL 2018

Sales
9 786 540 ✓ – 87 540 ✓
9 699 000 
Cost of sales  (5 699 000)
Gross profit  4 000 000 
Other income  80 000 
Rent income
88 500 ✓ – 23 250 ✓✓
65 250 
Provision for bad debts adj.
9 800 – 8 400 
1 400 
Bad debts recovered  13 350 
Gross income  4 080 000 
Operating expenses
Gross income minus operating profit
(1 752 240)
Depreciation
See 3.2.1
109 125
Loss on sale of asset
See 3.2.1
24 375
Trading stock deficit
765 000 – 752 400
12 600
Packing material
32 800 ✓ – 3 800 ✓
29 000
Audit fees
43 200 ✓ + 14 400 ✓✓
57 600
Directors’ fees
539 200 ✓ – 33 700 ✓✓
505 500
Bad debts
9 660 ✓ + 4 340 ✓✓
14 000
Salaries and wages 575 400
Municipal services 303 400
Sundry expenses
Balancing figure
121 240
Operating profit
24% of sales
2 327 760
Interest income
Balancing figure
67 540
Profit before interest expense
operation added
2 395 300
Interest expense (76 300)
Net profit before income tax
742 080 x 100/32
2 319 000
Income tax (742 080)
Net profit after income tax
operation subtracted
1 576 920

(45)
[70]

QUESTION 4: BALANCE SHEET AND AUDIT REPORT
4.1.1 ORDINARY SHARE CAPITAL

720 000✓✓ Ordinary shares on 1 March 2017  4 022 000 ✓
200 000 ✓ Shares issued at R6,80 each  1 360 000 ✓
(100 000) ✓ Shares re-purchased (ASP: 5,85 ✓✓)  (585 000) ✓* 
820 000 ✓*  Closing balance (28 February 2018)  4 797 000 ✓* 

(11)
*one part correct
4.1.2 RETAINED INCOME

Opening balance  413 220 
Net profit after income tax (535 000 – 160 500)  374 500 
Funds used for shares re-purchased (100 000✓ x 1,15 ✓)
R7,00 – ASP see 4.1.1 
(115 000) 
Ordinary share dividends  (341 000) 
Interim dividends (920 000 ✓ x 13 cents ✓)  119 600 
Final dividends (820 000 ✓ x 27 cents ✓)  221 400 
Closing balance  331 720

(14)
4.1.3 TRADE AND OTHER PAYABLES

Creditors control  219 400 
Accrued expenses  16 490 
Income received in advance  8 880 
SARS: income tax  12 730 
Shareholders for dividends See 4.1.2  221 400 
Short term loan (20% of 946 500) or see Balance Sheet  189 300 
  668 200 

(9)
4.2 BALANCE SHEET AS AT 28 FEBRUARY 2018

NON-CURRENT ASSETS TA - CA  5 783 600 
Fixed assets (carrying value) balancing figure  5 613 600 
Fixed deposit (230 000 ✓ – 60 000 ✓)  170 000 
CURRENT ASSETS  828 000 
Inventories  442 700 
Trade and other receivables
(305 240 ✓ + 12 560 ✓) 
317 800 
Cash and cash equivalents
(7 500 ✓ + 60 000 ✓ see fixed deposit) 
67 500 
TOTAL ASSETS TE + L  6 611 600 
EQUITY AND LIABILITIES  
SHAREHOLDERS EQUITY 5 128 720
Ordinary share capital 4.1.1 4 797 000
Retained income 4.1.2 331 720
NON-CURRENT LIABILITIES 757 200
Loan: Fraser Bank or see 4.1.3
(1 020 000 ✓ – 204 000 ✓ + 130 500 ✓ – 189 300 ✓)
757 200
CURRENT LIABILITIES 725 680
Trade and other payable 4.1.3 668 200
Bank overdraft 57 480
TOTAL EQUITY AND LIABILITIES 6 611 600

(25)
4.3  AUDIT REPORT
4.3.1 Briefly explain the role of an independent auditor.
ONE valid explanation ✓✓

  • Express an unbiased opinion on the financial statements of a company.
  • Examine the books of a company in terms of auditing standards and express an opinion on the fair presentation of information.
  • Protect the interest of shareholders by objectively examining the accounting records and presenting their findings in an audit report.(2)

4.3.2 What type of audit did the company receive? Explain.
Qualified ✓
Reason ✓✓ must mention the exception.

  • The marketing expenses could not be verified.
  • Did not mention “fairly represent” in all respects.
  • They were satisfied, except for the marketing expense which had no documentation as evidence.(3)

4.3.3 Briefly explain why the independent auditor was not willing to follow the request of the CEO. Give ONE point.
Explanation ✓✓

  • He would be going against the standards and ethics of his profession.
  • It is unethical, amounts to fraudulent behaviour – aimed to deceive.
  • He has a code of conduct to uphold.(2)

Provide TWO possible consequences for the auditor if he agrees to this request.
Any TWO consequences ✓✓✓✓

  • He could lose his licence to operate as an auditor.
  • He will face disciplinary action, which could result in him being dismissed.
  • He will tarnish the reputation of his company (bad public image).
  • The audit firm would lose business.(4)

QUESTION 5: CASH FLOW STATEMENT AND INTERPRETATION
5.1 MATCHING
5.1.1 B ✓
5.1.2 D ✓
5.1.3 A ✓
5.1.4 C ✓ (4)
5.2.1 Calculate only the missing figures indicated by (a) to (e) in the Cash Flow Statement on 31 December 2017.

  WORKINGS  ANSWER 
 a  Dividends paid
2 700 000 x 0,33
485 100 ✓ + 891 000 ✓✓
1 376 100 ✓
one part correct 
 b Proceeds on sale of fixed assets
350 000 ✓– 247 500 ✓
102 500 ✓
one part correct
 c Fixed assets purchased
5 953 000 + 102 500 + 214 500 – 5 692 500
✓✓✓✓
See (b) above 
577 500 ✓
one part correct 
 d Net change in cash and cash equivalents
542 250✓ – 631 750 ✓ + 385 500 ✓
296 000 ✓
one part correct 
 e Cash equivalents: end of year
296 000 ✓ – 198 000 ✓
See (d) above
98 000 ✓
one part correct

(19)
5.2.2 Calculate the % operating expenses on sales on 31 December 2017.
2 015 720 ✓ x 100
8 764 000 ✓      1
= 23% ✓ one part correct(3)
Calculate the solvency ratio on 31 December 2017.
6 673 000 + 600 000 + 758 000 758 000 + 600 000
8 031 000 ✓✓* : 1 358 000 ✓✓*
= 5,9 : 1 ✓* *one part correct (5)
Calculate the debt/equity ratio on 31 December 2017.
600 000 ✓ : 6 673 000 ✓
= 0,1 : 1 ✓ one part correct(3)
5.2.3 Comment on the operating efficiency of the company for the year ended 31 December 2017. Quote TWO financial indicators (with figures) to support your comments.
TWO relevant financial indicators ✓✓ figures ✓✓
Comment ✓✓
See 5.2.2

  • Operating expenses on sales increased from 18% to 23% indicating less control over expenses or wastage.
  • Operating profit on sales decreased from 14% to 11,3% indicating a decline in the profitability of the business.
  • Net profit after tax on sales decreased from 26,8% to 21,3% indicating lower overall profitability.(6)

5.2.4 Should the shareholders be happy with their returns and dividends for the year ended 31 December 2017? Explain. Quote THREE financial indicators (with figures) to support your comments.
Yes / No ✓
Name THREE relevant financial indicators ✓✓✓ figures with trend ✓✓✓
Explanation ✓✓

  • EPS decreased from 85 to 78 cents per share.
  • DPS decreased from 60 to 53 cents per share.
  • ROSHE decreased from 37% to 35,5%.

Explanation for No:
These indicators represent a decline and shareholders would not be happy. They would be concerned that the dividends and earnings decreased this year.
Explanation for Yes:
Although these indicators represent a decline, the ROSHE still exceeds the return on alternative investments and the EPS and DPS are both reasonable.(9)
5.2.5 The CEO feels that it would be a good idea to increase the loans next year. Quote TWO financial indicators (actual ratios or percentages) to support his opinion.
Financial indicators ✓✓ figures ✓✓ Valid explanation ✓✓

  • The interest rate is 13% p.a. and the return on capital employed was 44,2% in 2016, thus the returns are geared upwards (47%).
  • Debt-equity ratio improved from 0,2 to 0,1 : 1. This is very favourable for banks to approve additional loans. Low gearing / low risk.(6)

[55}

QUESTION 6: VAT AND PROBLEM-SOLVING
6.1
6.1.1 Input VAT ✓
6.1.2 More than R1 000 000 ✓
6.1.3 Every two months ✓
6.1.4 SARS✓(4)
6.2 PLEASURE PATIOS
6.2.1 Calculate the amount payable to/receivable from the tax office for VAT on 30 April 2018. Indicate receivable/payable.
8 300 + 48 030 – 44 175 + 21 360 – 24 360 – 945 – 390 + 270
✓✓✓✓✓✓✓✓✓✓✓
= 8 090 ✓ payable ✓
one part correct
Or:
Output: 48 030 + 21 360 + 270 = 69 660
Input: 44 175 + 24 360 + 945 + 390 = 69 870
8 300 + 69 660 – 69 870 = 8 090
Accept all the alternative presentations, including ledger account, signs reversed etc.
Mark to give the maximum benefit to candidates.(13)
6.2.2 Provide TWO benefits of doing taxes through e-filing.
Any TWO points ✓✓

  • Time saving – done at your convenience.
  • Done in the comfort of one’s own business or home / safe and secure.
  • No opening and closing times to stress about.
  • No queues – time and money wasted.
  • On-line help available / call centres.(2)

Give ONE point of advice to Phillip.
Any ONE advice ✓

  • Protect password / PIN.
  • Double check information before sending or making payments.
  • Update computer software regularly to be up to date or current.
  • Only deal with reputable clients.(1)

6.3 PROBLEM-SOLVING
6.3.1 Identify ONE problem in Shop 1 and ONE problem in Shop 2. Quote figures. In EACH case, give ONE point of advice.

PROBLEM ✓✓ FIGURES ✓✓ SOLUTION ✓✓

SHOP 1:

  • High mark-up % (85%) may be contributing to low sales volume.
  • High stock holding period (165 days) 
  • Reduce the mark-up % to clear stock.
  • Sell old stock at a clearance sale.
  • Offer discounts for bulk purchases. 

SHOP 2:

  • Low sales volume R160 000 compared to the other shops.
  • Not much money spent on advertising, R6 400 (4% of sales).
  • Only open 5 days per week.
  • Only has 2 assistants.
  • High returns – R24 000 (15% of sales) 
  • Intensify the advertising to promote sales, open on at least 1 more day.
  • Employ additional assistants if you wish to extend shopping hours.
  • Stock better quality goods. 

(6)
6.3.2 Explain TWO good decisions that Veli has made in respect of Shop 3. Quote figures.
Decision ✓✓ figures ✓✓

  • Open 7 days a week – resulted in more sales (760 000).
  • Advertising amounts to 7% of sales (R53 200) – and therefore better sales.
  • High rent of R95 000 – suggests that this shop is at an up-market place which would attract a different class of clients.(4)

TOTAL: 300

Last modified on Tuesday, 17 August 2021 11:17