Integrated assignment (Accounting 200 & Taxation 200)

Task A
The philosophy of Khoza Bazaar (Pty) Ltd is to offer competitive prices, good value and a
complete one-stop shopping experience. Their mission is to become the shopping destination of
choice for customers in the lower to middle economic sector. Their vision is to expand and open
more stores in Gauteng and other provinces within the next 3 years.

In order to fulfil their mission to provide competitive prices, they are expanding their product range
to provide House brand canned foods. They intend to manufacture these products themselves.

You are a newly qualified CA and have been appointed to the finance department of Khoza
Bazaar (Pty) Ltd as the assistant financial accountant. At a finance department meeting at the
beginning of 2022, Jackson Khoza introduced everyone to the mission and vision of the company.
At the meeting, he provided the following information regarding the manufacturing of canned
products:

● The company will start to manufacture two lines of canned products in the current reporting
period (2023) – canned mixed fruit and canned tomato and onions.
● Some raw materials are unavailable in South Africa and will have to be imported.
● Khoza Bazaar will have to lease a machine used in the canning process for the three
different lines.
● A section of the warehouse is not currently being utilised and will be converted into factory
space for the canning process.

The manufacturing of canned products, opening more stores, and expanding into Gauteng and
other provinces will require significant capital, and Khoza Bazaar is looking for innovative ways to
fund these visions.

At the meeting, you were also introduced to Fantastic Auditors, who will perform the following
engagements for Khoza Bazaar:
1) Mr Ernst Diko will perform the audit for the financial year ending 28 February 2023; and
2) Ms Olivia Cele will prepare the tax return for the financial year ending 28 February 2023.
Mr Ernst Diko and Ms Olivia Cele are both Chartered Accountants (South Africa) (CA(SA)s)
registered with the South African Institute of Chartered Accountants (SAICA) and Registered
Auditors (Ras) registered with the Independent Regulatory Board for Auditors (IRBA).

Mr Ernst Diko communicated the following regarding the fees to the management of Khoza
Bazaar:
“We will charge a contingency fee for both engagements, as preparing the tax return does
not create a threat to independence”.

After the meeting, Jackson Khoza asked you to assist him with the following matters.

Part A (Accounting)

1. Considering the expansion initiatives of Khoza Bazaar and the funding that will be needed,
suggest ways in which Khoza Bazaar can obtain surplus funds. In your response, consider
the impact each of your suggested ways will have on the financial statements in the short
and/or long term. (8)
2. Jackson Khoza is concerned that, as a leadership team, they might not be considering all
the necessary aspects regarding their idea to manufacture their own range of canned
products. He asks you to assist him by providing him with any considerations they must
consider before starting the manufacturing process. These considerations can include any
operational issues, financial issues or tax issues. (10)
Part B (Taxation)
1. For each of the funding methods you have suggested in Part A, number 1, list each of your
methods and briefly explain all the possible taxation effects and consequences. (8)
2. What is the meaning of “tax literacy”? (2)
3. State and motivate whether or not people making big business decisions should be tax
literate. (2)
4. Discuss, with reference to the ethical considerations in terms of the SAICA Code of
Professional Conduct and reasons, if you agree with Mr Ernst Diko’s comment that: “We
will charge a contingency fee for both engagements, as preparing the tax return does not
create a threat to independence”. (8)