ACCOUNTING
GRADE 12 
NSC EXAMS
PAST PAPERS AND MEMOS
NOVEMBER 2018

INSTRUCTIONS AND INFORMATION
Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions.
2. A special ANSWER BOOK is provided in which to answer ALL the questions.
3. Show ALL workings to achieve part-marks.
4. You may use a non-programmable calculator.
5. You may use a dark pencil or blue/black ink to answer the questions.
6. Where applicable, show ALL calculations to ONE decimal point.
7. Write neatly and legibly.

8. Use the table below as a guide when answering the question paper. Try NOT to deviate from it.

QUESTIONS 

QUESTION 1: MANUFACTURING (40 marks; 25 minutes)
1.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK.
1.1.1 Bad debts are an administration cost.
1.1.2 Indirect labour is a factory overhead cost.
1.1.3 Rent expense is a fixed cost. (3)
1.2 KRIGE SHIRTS
The business manufactures shirts. The financial year-end is 31 July 2018.
REQUIRED:
1.2.1 Refer to Information C. Calculate direct labour cost. (9)
1.2.2 Production Cost Statement for the year ended 31 July 2018 (12)
INFORMATION:

1.                         
   

   Work-in-progress stock balance	31 JULY 2018	1 AUGUST 2017
   	?	R35 570

2. Raw materials issued to factory: R528 300
3. Direct labour:
   

   Number of factory workers	4
   Normal time expected per worker per year	1 960 hours
   Normal time rate	R90 per hour
   Bonuses to workers:  12% of normal wages
   NOTE:   One worker worked only 1 680 hours and received a reduced bonus of R12 146.

4. Factory overheads were calculated at R360 880 for the year. However,this excludes insurance of R48 750 paid for the period 1 August 2017 to 31 August 2018. Insurance must be allocated to the factory, administration and sales in the ratio 4 : 3 : 2.
5. Production for the year: 17 500 shirts at a cost of R95 per shirt

1.3 GEMMA'S MANUFACTURERS
This business manufactures security gates. The financial year-end is 31 August 2018.
REQUIRED:
1.3.1 Calculate the break-even point for the year ended 31 August 2018. (5)
1.3.2 Compare and comment on the break-even point and the production level achieved over the last two years. Quote figures. (6)
1.3.3 Give TWO reasons for the increase in direct material cost. Suggest ONE way to control this cost. (5)
INFORMATION FOR YEAR ENDED 31 AUGUST:

A. 

B. Additional information: 

QUESTION 2: VAT AND CREDITORS' RECONCILIATION (35 marks, 20 minutes)
2.1 VAT 
Samson Traders is registered for VAT. The VAT rate is 15%. 
REQUIRED: 
2.1.1 Calculate the figures indicated by (a) to (d) in the table below. (10) 
2.1.2 You are the internal auditor. The sole owner, Samson, used  a business cheque to buy a new car for R460 000 including VAT.  
This car is kept at home for his wife's use. Samson says the vehicle   must be recorded as a business asset and R60 000 must be  recorded as a VAT input in the business' books.  
Explain what you would say to Samson. Provide TWO points. (4)
INFORMATION: 

* This includes zero-rated goods that should have been sold for R5 500. The  bookkeeper has incorrectly included VAT of R825 on these goods. This must  be corrected.  
2.2 CREDITORS' RECONCILIATION 
Claire Traders buys goods on credit from Mariti Suppliers. 
REQUIRED: 

2.2.1 Use the table provided to indicate changes to the: 

• Creditors' Ledger Account in the books of Claire Traders 
• Creditors' Reconciliation Statement on 31 July 2018 (13) 

2.2.2 The internal auditor insists that direct payments (EFTs) must be  used to pay suppliers. Explain: 

• ONE reason to support his decision (2) 
• ONE internal procedure to ensure control over this system (2) 

2.2.3 Refer to Invoice 301. It was discovered that the store manager,  Vernon, had signed a fictitious order form and took the goods for  himself when they arrived. Besides dismissing Vernon, provide: 

• ONE suggestion for action to be taken against him 
• ONE suggestion to prevent this problem in future (4)

INFORMATION: 
A. Creditors' Ledger of Claire Traders 
MARITI SUPPLIERS (CL5) 

B. Statement of account from Mariti Suppliers  

C. Differences noted: 

1. The incorrect entry for Debit Note 674 in the Creditor's Ledger  Account of Mariti Suppliers relates to the correct Credit Note 741  on the statement.
2. Invoice 282 was incorrectly reflected in the account of Mariti  Suppliers in the Creditors' Ledger. The goods were purchased  from Genesis Suppliers. 
3. Invoice 360 was incorrectly recorded on the statement from Mariti  Suppliers.
4. Mariti Suppliers also purchased goods on credit from Claire  Traders. Claire Traders has transferred a debit balance from the  Debtors' Ledger (Journal Voucher 570). Mariti Suppliers will offset  this on the next statement. 
5. The transaction on 24 July 2018 is for merchandise returned to  Mariti Suppliers.
6. The statement reflects transactions up to 25 July 2018. 

QUESTION 3: FINANCIAL STATEMENTS AND AUDIT REPORT (75 marks; 45 minutes) 
3.1 Indicate where EACH of the following items would be placed in the financial  statements by choosing a term from the list below. Write only the answer next  to the question numbers (3.1.1 to 3.1.4) in the ANSWER BOOK. 

3.1.1 Trade and other receivables 
3.1.2 Adjustments of provision for bad debts (decrease) 
3.1.3 Fixed deposit maturing in three years' time  
3.1.4 Trading stock deficit (4)

3.2 TEMBISO LTD 
You are provided with information for the financial year ended  28 February 2018. 
REQUIRED: 
Complete the following for the year ended 28 February 2018: 
3.2.1 Income Statement (Statement of Comprehensive Income) (28)
3.2.2 Notes to the Balance Sheet (Statement of Financial Position) for: 

• Ordinary share capital (7) 
• Retained income (7) 

3.2.3 Equity and Liabilities section of the Balance Sheet (16)
INFORMATION: 
A. Balances/Totals on 28 February:

B. Adjustments and additional information: 

1. Sale of goods:
   The company maintains a mark-up of 40% on cost. Note that old  goods costing R96 000 (included in cost of sales) were sold at  10% below cost price. 
2. Audit fees:
   75% of the annual fees have been paid.
3. Directors' fees:
   The company has three directors who earn the same fee. One  director was paid two months in advance. 
4. Rental:
   A storeroom was rented from 1 June 2017 at R11 200 per month. Rent increased by 7,5% on 1 December 2017. Provide for  outstanding rent.
5. Loan: LSO Bank
   • Fixed monthly repayments, including interest, are R31 600.
   • Capitalised interest amounted to R242 500 for the year ended  28 February 2018.
   • Interest for the next financial year is expected to be R162 000.
   • Part of the loan will be repaid within the next financial year. 
6. Income tax for 2018:
   • R31 300 is still due to SARS. 
   • The correct net profit after tax is R959 400.
7. Share capital and dividends: 

Authorised share capital: 1 600 000 ordinary shares

3.3 AUDIT REPORT 
Extracts from the audit report of Tembiso Ltd are provided. 
INFORMATION: 

REQUIRED: 
3.3.1 Refer to points 1 to 3. 
Why did the auditors mention these points? Give ONE explanation  for EACH point. (5) 
3.3.2 Refer to points 4 and 5. 
Explain TWO examples of: 

• Ethical responsibilities 
• Audit evidence (8) [75]

QUESTION 4: CASH FLOW STATEMENT AND INTERPRETATION (70 marks; 40 minutes) 
You are provided with information about Vooma Limited for the past two financial years  ended 30 June. The company is situated in KZN and trades in racing bikes. 
REQUIRED: 
NOTE: Provide figures or financial indicators (ratios or percentages) and comparisons with the previous year to support comments or explanations. 
4.1 Calculate the following for 2018: 
4.1.1 % operating expenses on sales  (2)
4.1.2 Acid-test ratio (4) 
4.1.3 % return on shareholders' equity (4) 
4.2 Calculate the following figures that will appear in the 2018 Cash Flow  Statement: 
4.2.1 Change in investments (2)
4.2.2 Income tax paid   (4) 
4.2.3 Fixed assets sold (at carrying value)  (5) 
4.3 Cash flow and financing activities:  
4.3.1 Explain why the directors are satisfied with the improvement in cash  and cash equivalents since 1 July 2016. (3) 
4.3.2 Decisions and gearing in 2018: 

Related Items

• Identify THREE decisions that the directors made to pay for land   and buildings. (6) 
• Explain how these decisions affected:
  • Capital employed 
  • Financial gearing (Quote TWO indicators.)  (6) 

4.3.3 From the Cash Flow Statement identify ONE decision made by the  directors in 2017 that they did NOT make in 2018, besides the  points mentioned above. Give a possible reason for the decision  in 2017. (3)
4.4 Dividends, returns and shareholding for the 2018 financial year: 

• On 1 July 2017 there were 800 000 shares in issue. 
• On 31 December 2017 interim dividends were paid. 
• On 1 January 2018, 200 000 shares were issued to existing shareholders. 
• On 30 June 2018 final dividends of 75 cents per share were declared on  all shares, but have not yet been paid. 

4.4.1 Calculate for the 2018 financial year: 

• Total interim dividends paid (3) 
• Interim dividends per share (3) 

4.4.2 Calculate total dividends earned by Dudu Mkhize for the 2018  financial year. Her shareholding is:  (5) 

4.4.3 On 1 January 2018 each shareholder was offered two shares for  every five shares owned. Dudu did not buy enough shares to  become the majority shareholder.  Calculate the minimum number of additional shares that Dudu  should have bought. (3) 
4.5 The directors decided to buy land and buildings in two other provinces in 2018  to solve the problem of low sales that they had previously had in KZN. 
4.5.1 Explain: 

• Why it was necessary to purchase properties in other provinces  instead of in KZN (2) 
• Whether the decision to purchase these properties had the  desired effect on sales  (3) 
• Another strategy they used to solve the problem of low sales (3) 

4.5.2 The CEO, Ben Palo, wants to communicate other good news to the  shareholders at the AGM. Give advice on what he should say about  the following topics: 

• Earnings per share (3) 
• % return earned  (3) 
• Share price on the JSE (3)

INFORMATION FOR THE YEAR ENDED 30 JUNE: 
A. FIGURES IDENTIFIED FROM INCOME STATEMENT: 

B. EXTRACT FROM BALANCE SHEET ON 30 JUNE

C. CASH FLOW STATEMENT: 

D. FINANCIAL INDICATORS: 

QUESTION 5: INVENTORY VALUATION AND FIXED ASSETS  
(45 marks; 30 minutes) 
5.1 Choose a method in COLUMN B that matches the description in COLUMN A.  Write only the letters (A–E) next to the question numbers (5.1.1 to 5.1.4) in the  ANSWER BOOK. 

(See QUESTION 5.2 on the next page.)

5.2 PACKER'S SUITCASE SHOP  
Charles Packer sells travel suitcases. The year-end is 30 June 2018. 
REQUIRED: 
5.2.1 Calculate the value of the closing stock on 30 June 2018 using the  first-in-first-out (FIFO) method. (5) 
5.2.2 Charles suspects that suitcases have been stolen. Provide a  calculation to support his concern. (5) 
5.2.3 Charles is concerned about the volume of stock on hand. 

• Calculate for how long his closing stock is expected to last. (6)
• State ONE problem with keeping too much stock on hand and  

ONE problem with keeping insufficient stock on hand. (4)
INFORMATION: 

• Stock balances: 

• Purchases, returns and carriage: 

• Sales: 3 050 travel suitcases were sold at R4 200 each.

5.3 MINDEW LIMITED 
The financial year-end is 31 May 2018.  
REQUIRED: 
5.3.1 Calculate the missing figures indicated by (i) to (v) in the table  below. (17) 
5.3.2 Explain how the internal auditor should check that movable fixed  assets were not stolen. (2) 
5.3.3 Land and buildings were bought five years ago for R6 m. Property prices have increased by 20% since then. The directors want to  increase the value of this asset and reflect a profit of R1 200 000 in  the financial statements. 
As an independent auditor, what advice would you give? Provide  ONE point. (2)
INFORMATION FOR YEAR-END 31 MAY 2018: 
A. 

B. Land and buildings: 
Grant Construction was paid R882 000 for building new offices  (R610 000) and repairing windows (R272 000).
C. Computers:  

• The three computers were all bought on the same day at R36 000 each. 
• Depreciation is 33⅓% on cost.  
• These computers are expected to last another two years. 

D. Equipment: 

• Additional equipment was purchased on 1 February 2018.  
• Depreciation is 10% p.a. on cost. 

E. Vehicles: 

• Depreciation is 20% p.a. on carrying value. 
• A vehicle was sold for cash at carrying value on 31 December 2017.  The Fixed Assets Register reflected the following: 

QUESTION 6: CASH BUDGETS (35 marks; 20 minutes) 
Donald May owns Breezy Traders that sell air-conditioner units. The budget period  ends on 31 October 2018. 
REQUIRED: 
6.1 Complete the Debtors' Collection Schedule for October 2018. (7) 
6.2 Calculate the amounts indicated by (i) to (iii) in the extract from the Cash  Budget. (9) 
6.3 Calculate the % increase in salaries of sales assistants for October 2018.  Explain whether they should be satisfied with this increase. (5) 
6.4 Refer to Information E. 
A new competitor moved into the area during September 2018. Donald was  not aware of the competitor and did not take any action during September. 
6.4.1 Explain the effect of the new competitor on any TWO items in the  budget for September. Provide figures. (4) 
6.4.2 Identify TWO changes Donald implemented in October in response  to the new competitor. Quote figures. Give ONE reason for EACH  change. (6) 
6.4.3 Explain why Donald feels that his decisions were successful.  Provide TWO points (with figures). (4) 
INFORMATION:  
A. Cash sales comprise 60% of total sales. Mark-up is 75% on cost. 
B. Debtors pay as follows: 

• 20% in the month of sales and receive 5% discount 
• 55% in the month following the month of sales 
• 22% two months after the month of sales 

C. Stock sold is replaced in the month of sales. 50% of purchases are on credit.  Creditors are paid in the month following the month of purchases. 
D. Extract from Cash Budget 

*NOTE: Rent income will increase by 9% in October 2018. 
E. BUDGETED AND ACTUAL FIGURES FOR SEPTEMBER AND OCTOBER 

TOTAL: 300