Directorate: Curriculum FET

Grade 12 ACCOUNTING Term 1: Week 1

Topic: Companies - Unique Ledger Accounts

You already know about ... The lesson will enable you to understand
the….
● Grade 10 - Accounting cycle of Sole Traders:
Documents; Jounals; Post to relevant general ● Accounting cycle for companies: Journals; unique
ledger accounts (balance sheet section and Ledger accounts for companies; Trial Balance
nominal accounts section); Trial balance
● Transactions unique to companies:
● Grade 11 - Accounting cycle of Partnerships:
Issuing of shares at issue price | Buying back of shares |
Documents; Journals; Post to the unique ledger Income tax | Dividends | Directors fees |
accounts and final accounts for partnerships,
Audit fees
e.g.Current accounts (per partner); Appropriation
account (final account) ● Record transactions in the journals (refer to your text
book for examples, as this lesson will focus on ledger
accounts)

● Post to general ledger accounts

Use your TEXT BOOK to read about: Alternative digital resources:

● Accounting concepts unique to companies
Gr 12 Revision Pack
● Application of IFRS and GAAP https://wcedeportal.co.za/eresource/89841
Companies notes on Pg. 76
● Accounting cycle of a company
Gr 12 Accounting Revision poster:
Pay attention to .... Term 1: Companies (ENG)
o Basic concepts unique to companies, e.g. https://wcedeportal.co.za/eresource/109466
Companies Act, shareholders, directors, etc. Activities, Work book,
o Know the difference between authorised and issued Memos and video lessons
share capital Refer to Term 1 for this lesson
o Know how to calculate average share price
Lucem Gr 12 Teachers Guide Via Afrika Gr 12 Study Guide
(text and work book in one) https://wcedeportal.co.za/eresource/116301
https://wcedeportal.co.za/eresource/116321
(Pg.8 - 99)

2019 Telematics: Companies Study & Master Gr 12: Accounting -

GAAP Principles
https://wcedeportal.co.za/eresource/89916 https://wcedeportal.co.za/eresource/123111

PLEASE NOTE:

Cheques, as a form of payment will NOT be accepted by

businesses and banks after 31 December 2020.

The South African Reserve Bank (SARB), Financial Sector Conduct Authority (FSCA), Payments Association of South
Africa (PASA) and the Banking Association South Africa (BASA) jointly announced that the issuing and the acceptance
of cheques will cease on 31 December 2020 (source: Moneyweb.com)

Gr 12 Accounting Term 1, 2021 1

 Directorate: Curriculum FET

When you use past exam papers, please replace 'cheque' transactions with EFT
transactions. This applies to ALL Accounting topics where cheque payments and receipts
are applicable. Please ask your teacher for support, where necessary.

Gr 12 Accounting Term 1, 2021 2

BASIC CONCEPTS / BASELINE KNOWLEDGE
Concept Explanation
Authorised share capital The maximum number of shares a company are registered to sell.
Issued share capital The number of shares that have actually been sold to shareholders. Use
the number of issued shares to calculate dividends.
Issue price The price at which shares are issued ('sold') to the public.
Dividends That portion of the profits (after tax) which has been approved to be
shared amongst the shareholders (total dividends = interim + final).
Interim dividends Dividends paid to the shareholders during the year.
Final dividends Dividends declared (recommended) by the directors to the shareholders at
the end of the financial year.
Income tax A tax paid by the company to SARS on its annual profits.
Provisional tax Payments made to SARS during the year based on estimated profits (paid
every six months).
Tax assessment This is issued by SARS to confirm the amount of income tax which the
company has to pay for the financial year, based on actual profits.
Retained income A portion of the profits after tax that are not paid out to the shareholders
but kept (retained) for future financial growth or expansion of the
company.
Shareholders for The amount still owing to shareholders for dividends declared but not yet
dividends paid.
Buy back of shares Issued shares that have been repurchased by the company from
shareholders. These shares are retired or cancelled.
(Refer to your notes or text book for the reasons for repurchasing shares)
Statement of This statement shows the profit or loss made from business operations
Comprehensive Income (income and expenses).
Another term for this statement is ‘Income Statement’.
Statement of Financial This statement reflects the value of assets, liabilities and the net worth
Position (owners’ equity of the company).
Another term for this statement is the ‘Balance sheet'.
Cash flow statement This statement shows the flow of cash in a company (money coming in
and money going out) and the decisions the directors made during the
year in terms of financing the company's activities.
Shareholders People who own shares in tthe company. They are the OWNERS of the
company.
Directors People who are appointed by the shareholders to run/ manage the
company on their behalf.
South African Revenue The government department to whom the company must pay income tax
Service (SARS) on the profits as well as the VAT collected on behalf of SARS from the
company's customers.

In Gr 12 Accounting we only focus on Public companies and Private companies

The Accounting cycle and ledger accounts are the same, but there are some obvious differences, especially with regards
to the establishment process, name of each type of company, the issuing of shares to the public, the number of
shareholders, etc..

Refer to your text book (or Business Studies notes) for the most obvious differences, advantages and
disadvantages of each type of company. This is valuable background knowledge to APPLY when you have to
comment on shareholders' and/or directors' decisions.

Gr 12 Accounting Term 1, 2021 3

 BASIC ACCOUNTING PRINCIPLES (RULES)

Dr ASSETS (A) Cr Dr LIABILITIES (L) Cr

Increase with a debit entry Decrease with a credit entry Decrease wit a debit entry Increase with a credit entry
-
+ - +

Dr OWNERS’ EQUITY (OE) Cr

Decreases with a debit entry Increases with a credit entry
- +

INCOME ACCOUNTS
Credited
(Income increases OE)
EXPENSE ACCOUNTS
Debited
(Expenses decrease OE)

THE ACCOUNTING CYCLE OF A COMPANY

You are here

Gr 12 Accounting Term 1, 2021 4

UNIQUE LEDGER ACCOUNTS OF COMPANIES
The trial balance of a company is very similar to that of a sole trader or partnership. However, there are
some unique features in the trial balance of a company, as indicated below.

ABC LIMITED
TRIAL BALANCE ON 28 February 2021
Debit Credit Special notes:
Balance Sheet accounts
section
Compare this to the Capital accounts of a partnership
– We only focus on ordinary shares although
Ordinary share capital 1 000 000 preference shares can also exist. This amount reflects
the Issued share capital
The profit that has been kept (retained) by the
Retained income 110 000
company and not distributed to shareholders – the
… R110 000 is the figure at the beginning of the year
because the nominal section for 2020 has not yet
… been closed off and the final profit not determined yet.
…
The amount owed to/by SARS for Income tax (may be
debit or credit balance). A credit balance is the
SARS (Income tax) 15 000 amount owed to SARS (current liabilities) and a debit
balance is the amount SARS owes to the company.
(current assets)
SARS (PAYE) 3 000 Another SARS account as learnt in Grade 11

SARS (VAT) 7 000 Another SARS account as learnt in Grade 11

…
The dividends at the year-end that have not yet been
Shareholders for dividends 120 000 paid to shareholders. This amount is the FINAL
dividends declared.

Nominal accounts section

…
Amounts paid to directors to manage/run the
Directors' fees 400 000 company
Amounts paid to the independent auditor for
Audit fees 70 000 auditing/checking the financial statements
The full amount of income tax for the year which is
Income tax 240 000 calculated on the Net profit before tax
The amount of profits that have been distributed/paid
Dividends on ordinary shares 225 000 to shareholders. This amount is the INTERIM
dividends declared and paid during the year.
…
XXX XXX

Gr 12 Accounting Term 1, 2021 5

ACTIVITY 1 CONCEPTS
Give ONE concept for each statement below by choosing a concept from the list below. Write only
the concept next to the question number (1.1.1 - 1.1.6) on the ANSWER SHEET.

operating profit; prepaid expense; working capital; issued share capital; financial asset;
directors’ report; cash and cash equivalents; accrued expense; authorised share capital;
audit report

1.1 The total difference between current assets and current liabilities.
1.2 The published explanation of a company's activities and future plans.
1.3 A fixed deposit which will not mature in the next financial year.
1.4 The telephone account that will only be paid in the next financial year.
1.5 It reflects the opinion on the reliability of the financial statements.
1.6 The total number of shares that is registered in the Memorandum of Incorporation.

ACTIVITY 1: ANSWER SHEET

1.1
1.2
1.3
1.4
1.5
1.6

ACTIVITY 2 LEDGER ACCOUNTS

The information below relates to Winelands Ltd for the year ended 28 February 2021.
The company was registered with an authorised share capital of 1 000 000 shares. 600 000 of these
shares were in issue on 1 March 2020, the beginning of the current financial year.
REQUIRED:
Prepare the following accounts in the General Ledger:
● Ordinary share capital

● Retained income

● SARS (income tax)

● Ordinary share dividends

● Appropriation account (final account)

NOTE: Close off all these accounts correctly at the end of the year.

INFORMATION:
A. Balances in the ledger on:
28 February 2021 28 February 2020
R R
Ordinary share capital ? 2 100 000
Retained income ? 737 100
SARS (income tax) 5 000 (dr) 8 500 (cr)

B. Income tax
● On 5 March 2020 the amount due to SARS was paid via EFT.

● Provisional income tax was paid to SARS for the year in two equal installments on 1

Gr 12 Accounting Term 1, 2021 6

 September 2020 and 24 February 2021 respectively.

● Income tax for the financial year amounted to 30% of the net profit before tax.

Gr 12 Accounting Term 1, 2021 7

 C. Shares
● On 31 August 2020 all the unissued shares were issued at 500 cents per share.

● On 30 November 2020 the directors repurchased 120 000 shares at 620 cents per share from
a retired shareholder. This shareholder originally purchased his shares on the JSE at various
times and at different prices over the past years.
D. Dividends

● On 31 August 2020 interim dividends of 25 cents per share were paid to share-holders. The
new shares do not qualify for the interim dividends. (see C above)

● A final dividend of 42 cents per share was declared on 28 February 2021. Only shareholders
on record will receive final dividends.
E. The company made a net profit before tax of R1 475 000 for the financial year.

ACTIVITY 2: ANSWER SHEET

GENERAL LEDGER OF WINELANDS LTD
ORDINARY SHARE CAPITAL (B1)

RETAINED INCOME (B2)

SARS (INCOME TAX) (B3)

Gr 12 Accounting Term 1, 2021 8

 ORDINARY SHARE DIVIDENDS

APPROPRIATION ACCOUNT
2021 2021
Feb 28 Feb 28

Solutions:

https://wcedeportal.co.za/eresource/180011

Gr 12 Accounting Term 1, 2021 9