ACCOUNTING
GRADE 12
SENIOR CERTIFICATE EXAMINATIONS
MEMORANDUM
MAY/JUNE 2017

MARKING GUIDELINES

1. Penalties for foreign items are applied only if the candidate is not losing 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 is earning 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 & 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
1.1 TRUE OR FALSE
1.1.1 True ✓
1.1.2 False 
1.1.3 False ✓ (3)
1.2 MIZZY BOUTIQUE
Use the table provided to indicate corrections that must be made to the Debtors' Control Account and the debtors' list.
Provide figures and a plus (+) or minus (–) sign for each correction.

(13)
-1 superfluous items (max -2) refer (b) and (c) only
No sign: assume positive; Brackets: assume negative; Tick is for figure & sign
1.3 GLENDALE TRADERS
1.3.1 Explain how a debtors' age analysis can assist with internal control over debtors.
Any ONE valid point. ✓✓ One mark for incomplete / unclear answer

• Gives an indication of debtors whose accounts are overdue.
• The analysis will give a clear idea of reliable debtor.
• Assist the business to review credit limits allowed to debtors.
• Assist the business when to refuse additional credit sales until accounts are paid.
  (2)

1.3.2 Calculate the percentage of total debts exceeding the credit terms.
16 640 two marks
14 560 ✓+ 2 080 ✓ x 100 = 40%  one part correct; must be calculated as a %
       41 600✓
2 marks 1 mark 1 method mark
OR 35% + 5% = 40%
(4)
1.3.3 Explain ONE problem (with figures) relating to EACH of the following debtors:

(4)
1.3.4 Explain TWO problems (with figures) relating to debtor D Gouws.
TWO valid points (with figures). Problems ✓✓ Figures ✓✓

• Exceeding credit terms / slow payer (5 448/13 450) 40,5% of his account is more than 30 days
• The business allowed him to buy R4 100 more goods even though he does not pay on time.
  (4)

TOTAL MARKS: 30

QUESTION 2
2.1 VAT
2.1.1

1. Input VAT✓ 
2. Credit ✓
3. Increase ✓
4. Salaries ✓
   (4)

2.1.2

(10)
X in both columns (mark wrong); If figure placed in other columns, award marks for figures
If workings are shown for VAT amount without answer, award 1 mark only
2.2 INVENTORY VALUATION
2.2.1 Give a reason why the business uses the weighted average method to value the stock of tyres.
Any valid explanation ✓✓ One mark for incomplete / unclear answer
The products are very similar
The quantities are high
There is not a great variation of the nature of the product
There is not a great variation of the price of the product
It is an easy system to use and is appropriate for tyres
(2)
2.2.2 Calculate: Value of closing stock on 28 February 2017
931 500 six marks
927 550 three marks
847 800 two marks 796 450 three marks
(2 685 x 40) (79 x 300)
27 650✓ + 820 150 ✓+ 107 400 ✓✓ – 23 700✓✓ x 280 ✓
                       2 700 ✓✓
(94 + 2 685 – 79)
Eight marks,  One mark
= 345       x        280
= 96 600 ✓ one part correct; must be multiplied by units
(10)
2.2.3 Calculate: Cost of sales
(27 650 + 820 150 – 23 700 + 107 400)
931 500 ✓ – 96 600 ✓
see 2.2.2
= 834 900 ✓ one part correct
(3)
Calculate: Gross profit
968 000 ✓ – 834 900 ✓ = 133 100  one part correct
see above
(3)
Calculate: Average stock-holding period (in days)
62 125 three marks
see 2.2.2
½ ✓ (27 650 ✓ + 96 600 ✓) x 365 = 27,2 ✓ days one part correct
             834 900 ✓ see above accept 27 days
Use of numerator & denominator must be correct
(5)
2.2.4 Should the owner be satisfied with the stock-holding period calculated above? Explain. Quote figures. NOTE: The stock-holding period for 2016 was 70 days.
Yes / No ✓ depends on calculation above; if no calculation no mark; also must not contradict explanation below
e.g. 800 days definitely No; 27 days Yes or No
Trend/Explanation ✓ and figure ✓

• The stock holding period decreased to 27 days / by 43 days see 2.2.3
  Responses for one mark:
• Improve sales – cash flow✓
• Prevents stock piling✓
• Stocking the latest products✓
  (3)

TOTAL MARKS:40

QUESTION 3
3.1
3.1.1 factory overhead cost ✓ Accept factory or overhead 
3.1.2 fixed cost ✓
3.1.3 selling and distribution cost ✓ Accept selling or distribution
3.1.4 minimum ✓(4)
3.2
3.2.1 Factory Overhead Cost Note

(14)
3.2.2 Production Cost Statement for the year ended 28 February 2017

Incorrect placement: award marks but -1 for each item misplaced (-2 max) (10)
3.2.3 Infinity Hats are considering importing raw materials at a lower price than they are currently paying.
Provide TWO points they should consider before deciding.
TWO valid points ✓✓✓✓

• Exchange rate fluctuations
• Import duties changing in future
• Time lags for imports & returns
• The quality of raw material
• Possibility of job losses
• Support for local businesses / effect on the economy
• Transport costs
  (4)

3.3 SANYATI BAKERY
Mark as per Memo i.e. mark problem & solution independently
3.3.1

3.3.2 Provide workings to show that the break-even point of 158 298 units for the doughnuts in 2016 was correctly calculated.
     372 000     ✓ = 158 298
12,00 ✓– 9,65 ✓
2,35 two marks
Must be denominator; not answer
(3)
3.3.3 Explain why Damon should be concerned over the break-even point of doughnuts. Quote figures.
Explanation ✓✓ Figure ✓
Must refer to BEP & production; One mark for incomplete / unclear explanation

• BEP increased from 78 316 to 158 298 (by 79 982) while production decreased.
• BEP increased considerably, while producing 40 000 units fewer which led to a lower profit.
• In 2015 made a profit on 201 684 units: in 2016 only on 81 702 units

Response for 1 mark:
Decrease in net profit R836 000 / Increase in BEP / Decrease in production
(3)
3.3.4

Related Items

(6)
TOTAL MARKS:50

QUESTION 4
4.1
4.1.1 D ✓
4.1.2 C ✓
4.1.3 A ✓
4.1.4 B ✓
4
4.2 MTOMBENI LTD
4.2.1 Calculate: Carrying value of the vehicle sold on 30 November 2016
100 500 three marks
190 000 ✓ – (72 000 ✓ + 28 500 ✓✓) = 89 500 ✓ one part correct
(5)
Calculate: Total depreciation on equipment on 28 February 2017
New:
32 000 ✓ x 6/12 ✓ x 10% = 1 600 ✓ one part correct but not for 10%
Old:
133 000 two marks
= (218 000 ✓– 85 000✓) x 10% = 13 300 ✓ one part correct but not for 10%
(250 000 – 32 000) one mark
Total = 14 900 ✓ one part correct
(7)
4.2.2 MTOMBENI LTD
Income Statement (Statement of Comprehensive Income) for the year ended 28 February 2017: *one part correct

Foreign items -1 max -2 ** Award marks to workings if item misplaced; -1 for placement; max -2
All other misplaced items marked as incorrect
(54)
TOTAL MARKS:70

QUESTION 5
5.1
5.1.1 Liquidity ✓
5.1.2 Gearing ✓
5.1.3 Net working capital ✓
5.1.4 Limited liability ✓
(4)
5.2 MIHKA LTD
5.2.1 ORDINARY SHARE CAPITAL
Authorised Share Capital
800 000 ordinary shares
Issued Share Capital

(6)
Ignore brackets *Check balancing figure (ClosBal + BuyBack – OpBal) for method mark
RETAINED INCOME

(9)
5.2.2

(9)
*one part correct; lose method mark on answer if incorrect use of brackets
5.2.3 Amounts in the Cash Flow Statement:
Calculate: Change in fixed deposit
300 000 ✓✓ Inflow ✓
(3)
Calculate: Proceeds on disposal of equipment
5 828 000 ✓ + 360 400 ✓ – 1 495 000 ✓ – 4 905 800 ✓ = 212 400 ✓
one part correct
OR:
– 5 828 000 – 360 400 + 1 495 000 + 4 905 800 = –212 400
Inflow ✓
(6)
5.2.4
Calculate: Mark-up percentage on cost
           1 890 000               ✓ x 100 = 45% ✓ one part correct;
6 090 000 ✓ – 1 890 000 ✓ correct use of numerator & denominator
4 200 000 two marks
(4)
Calculate: Debt-equity ratio
1 000 000 ✓ : (4 752 000 ✓ + 637 000✓)
5 389 000 two marks
0,2 : 1✓ one part correct; must be x:1 accept 0,19:1
(4)
Calculate: Net asset value (in cents)
see above
5 389 000 ✓ x 100 = 817 or 816,5 cents ✓ one part correct; accept 816
660 000 ✓   see 5.2.1 correct use of numerator & denominator
Do not accept Rand sign
(3)
5.2.5 The financial director was questioned about the decision to increase the loan. Explain what he should say to justify this decision. Quote TWO financial indicators (with figures).
Financial indicators: ✓✓ trend with figures ✓✓
Debt-equity ratio increased (from 0,1 : 1) to 0,2 : 1 / by 0,1 : 1 see 5.2.4
Return on average capital employed (ROTCE) increased from 21,3% to 21,8%.
Explanation

• Although the debt-equity ratio increased, the company is low risk / low gearing. ✓
• The ROTCE has also increased – earning far above the interest rate of 12,5% (positive gearing). ✓

Do not accept increase in risk as an explanation (counts against the decision)
(6)
5.2.6 Ashraf, a new shareholder, bought 70 000 shares on 31 August 2016. He expected the company to distribute at least 80% of its earnings as it did in 2015.
Ashraf is unhappy with the dividend pay-out policy for 2016. Provide a calculation to support his opinion.
65 ✓/131 ✓ x 100 = 49,6% ✓ accept 49,61% or 50% one part correct
Response for two marks:
DPS was 65c while EPS was 131c
(3)
Explain TWO points to support the company's decision regarding dividends for 2016.
Explanation✓✓✓✓ One mark for incomplete / unclear answer

• The company decided to retain more of the EPS this year
• The NAV would increase thereby positively affecting the market price of the shares
• The company retained funds to expand the company in future (extensions to the building)
• Improve the cash situation/eliminated the bank overdraft from 2015
• Improvements could lead to greater profitability in the future
• The ROSHE has also increased – possibly better dividends in the long run.
• Shareholders would benefit from a capital gain on shares
• Cheaper than borrowing money (avoid interest)
  (4)

5.2.7 Comment on the re-purchase price paid for the 40 000 shares on 30 December 2016. Provide TWO financial indicators (with figures) in your comment.
Two indicators with figures
✓ NAV is 817 cents see 5.2.4
✓ Market price is 848 cents
Comment✓✓ One mark for incomplete / unclear answer

• The shareholder has benefitted as he may have received less had he sold his shares on the stock exchange.
• The directors may have to be investigated to determine why they disadvantaged the company.
• The price is fair because in line with the current market price.
• The price was set at a level to encourage the disgruntled shareholder to sell his shares.
  Complete comment would include an opinion e.g. fair / unfair
  (4)

TOTAL MARKS:65

QUESTION 6
6.1 Comment on the control of EACH item and give ONE point of advice in each case.

(4)
6.2 Identify TWO items incorrectly entered in the Cash Budget.
Any TWO items ✓✓ Ignore superfluous items
Possible responses:

• Office furniture bought on credit
• Depreciation
• Credit sales
• Deliveries free of charge
• Delivery expenses on credit
  (2)

6.3 CREDITORS' PAYMENT SCHEDULE

(9)
6.4

6.5 Piet wants to save on costs by not offering a free delivery service. Is this a good idea? Explain.
Yes/No  mark independently
Any one possible response ✓✓ One mark for incomplete / unclear answer

• Whether his competitors are offering the service or not
• What the reaction from his customers will be should he withdraw the service (i.e. will they go to other suppliers?)
• The possibility of charging customers for the delivery service
• The possibility of finding a cheaper delivery service
• The possibility of using his own vehicles instead of subcontracting / extra costs of providing his own service (e.g. depreciation of vehicle, petrol)
• Could have been the reason for the increase in sales
  (3)

6.6 Explain ONE advantage and ONE disadvantage of each option.
Note that figures are not required; Alternative valid answers possible

(6)
TOTAL MARKS:45

TOTAL:300