GRADE 12 ACCOUNTING

LAST PUSH – EXAM

PREPARATION WITH MR N
STATEMENT OF COMPREHENSIVE
INCOME

NOTES AND PRACTICE ACTIVITY

TIPS TO HELP YOU PASS

 Practice with many activities
 Don’t just practice once, but practice
everyday
 Ask your instructor to mark your work
when youre done practicing.
 Manage your time, its very scare.
STATEMENT OF COMPREHENSIVE
Statement of Comprehensive Income/Income statement is form of financial
statement that is prepared at the end of the financial year to determine the net profit
or loss of the business,
The following are included in the statement of comprehensive income:
 Incomes for the year
 Expenses for the year
What to consider when preparing statement of comprehensive income:
 Only income and expenses for the year: Take in consideration application
the GAAP principle called Matching principles
 Matching principle explains that Income and Expenses should match
their correct financial year/period.
 Income earned but not yet received should be recorded as part of the
income for that year because the total profit for the year has to be
accounted for, regardless of the income being received or not. The
same will apply to expense that have been incurred and but not yet
paid.
 Income received but not yet earned should not be recorded as it not
the income for the financial year. Also the Expense that is paid in
advance and not yet incurred should not be recorded too.
 ACCRUALS AND DIFFERALS SHOULD BE CONSIDERED TO AVOID
OVERSATING/ UNDERSTATING OF THE INCOME, EXPENSES AND
PROFIT

ACCRUALS AND DEFFERELAS

 Accrued income : Income earned but not yet received
 Accrued expense : Expense incurred but not yet paid
 Income received in advance : Income received but not yet earned
 Prepaid expense : Expense paid but not yet incurred

Three Basic simple steps for preparing STATEMENT OF COMREHESIVE INCOME

STEP 1. OPEN A BRACKET
STEP 2. PLUG/ RECORD THE AMOUNT FROM TRIAL BALANCE
STEP 3. CHECK IF THERE IS ANY INFORMATION/ ADJUSTMENT THAT
AFFECTS THE ITEM YOU WANT TO ADJUST
KEY WORDS TREATMENT
Expense not yet Add it
recorded
Income not yet recorded Add it
Expense and Income Add it
Outstanding/due
Expense not yet paid Add it
Income not yet received Add it
Income received in Subtract it
advance
Expense paid in advance Subtract it
Wrong entry Multiply by 2
Add/subract
Invoice issued but not Add to sales, Add to
yet recorded/ no entry cost of sales and
Subtract to Trading
stock
Credit note/ Debtor Subtract to sales,
returned goods, not yet Subtract to cost of sales
recorded or no entry and Add to trading stock
Name of Business
Statement of Comprehensive Income for the year ended 2023
Note Amount
Sales (Amount from TB-Debtors allowance +/-
Adjust)
Cost of Sales ( Amount from TB +/- Adjust) (************)
Gross Profit = Net Sales- Cost of sales
Other Operating Income
Rent income (Amount from TB +/- Adjust)
Commission income (Amount from TB +/- Adjust)
Discount received (Amount from TB +/- Adjust)
Bad debt recovered (Amount from TB +/- Adjust)
Trading stock surplus
Provision for bad debts adj. (decrease)
Insurance Claim
Gross Operating Income (Gross Profit + Other
operating Income)
Operating Expense ( )
Salaries and Wages Only Gross amount ( Amount
from TB +/- Adjust)| Sometimes include
constributions
Employer contributions ( Amount from TB +/-
Adjust)
Water and Electricity ( Amount from TB +/- Adjust)
Directors fees ( Amount from TB +/- Adjust)
Advertising ( Amount from TB +/- Adjust)
Bad debts ( Amount from TB +/- Adjust)
Depreciation(Check for info relating fixed assets old
and new fixed assets using the prescribed methods
(Cost / Diminishing balance method (Book value)
Trading stock deficit (( Amount from TB +/- Adjust –
On hand)
Stationary Expense ( Amount from TB +/- Adjust -
on hand)
Packing material ( Amount from TB +/- Adjust - on
hand)
Provision for bad debts adj.(increased)
Repairs and Maintenance
Operating profit (Gross operating Income –
Operating Expense)
Interest income (Add incomes that are in the form 1
of interest such as interest on fixed deposit,
Interest on favourable bank balance & Interest
overdue debtors
Profit before interest expense ( Operating Profit +
Interest income)
Interest expenses (Add expense that are in the 2 ( )
form of interest such as interest on loan, Interest
on bank overdraft & Interest overdue creditors
Profit before tax ( PBI – Interest Expense)-
(always 100% )
Income tax ( Profit before tax * Income tax %)
Net Profit after tax (NPBT- Income tax) – less than
100%
ADDITONAL NOTES TO GUIDE ON CALCULATIONS
1. DEPRECIATION
 To calculate the annual depreciation the methods used to calculated
depreciation should be applied correctly and changes(movement) to the
Fixed assets (Vehicle and Equipment) during the year should be taken into
consideration when calculating annual depreciation.
 The total Depreciation for the year will be what we call SON (SOLD
ASSET ,OLD ASSET and NEW ASSET. Depreciation of sold, new and old
fixed assets should be calculate separately.
 New Fixed asset- When calculating depreciation of new fixed asset- start
from the date the asset was present in the business to the end of the
financial year. This is only applicable if the fixed asset was purchased
during the year. Calculate on cost irrespective of the method or
depreciation being used.
USING COST METHOD
SOLD OLD NEW
Identify the cost ofFind the cost of the existing (old) fixed Use a timeline to
the disposed fixed asset, by subtracting the cost of count the number
asset disposed asset (if not recorded) and of months the
additional fixed asset (if recorded) asset was available
Use a timeline to If cost at the beg is given in the business
count the number Cost of old= Cost at beg- cost of
of months the asset disposed
was available in the If cost at end is given
business Cost of old= Cost at end- Cost of new
Formular 𝑪𝒐𝒔𝒕 × Formular 𝑪𝒐𝒔𝒕 × 𝑹𝒂𝒕𝒆 Formular 𝑪𝒐𝒔𝒕 ×
𝒙 𝒙
𝑹𝒂𝒕𝒆 × 𝑹𝒂𝒕𝒆 ×
𝟏𝟐 𝟏𝟐
If new Vehicle/ Equipment was
recorded
Formular:
(𝑻𝒓𝒊𝒂𝒍 𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝒂𝒎𝒐𝒖𝒏𝒕 −
𝑪𝒐𝒔𝒕 𝒐𝒇 𝒏𝒆𝒘 𝒂𝒔𝒔𝒆𝒕 𝒓𝒆𝒄𝒐𝒓𝒅𝒆𝒅 ×
𝑹𝒂𝒕𝒆)
 DIMINISHING BALANCE METHOD/CV/ BOOK VALUE
SOLD OLD NEW
Use a timeline to Take into consideration the Use a timeline to
count the number of additional fixed asset that was count the number of
months the asset purchased and recorded and months the asset was
was available in the other adjustment that available in the
business increase/ decrease the fixed business
asset account

Formular If new Vehicle/ Equipment was Formular 𝑪𝒐𝒔𝒕 ×

𝒙
𝑪𝒐𝒔𝒕 𝒂𝒕 𝒃𝒆𝒈 recorded 𝑹𝒂𝒕𝒆 ×
𝟏𝟐
− 𝑨𝒄𝒄 𝒅𝒆𝒑 𝒂𝒕 𝒃𝒆𝒈) Formular:
𝒙 Cost of Old at beg = Trial
× 𝑹𝒂𝒕𝒆) ×
𝟏𝟐 Balance amount – Cost of New
asset

In a case where a fixed asset is

disposed separate costs and
Accums from each other

Cost of old: Cost at beg- cost

of disposed
Accum dep. Of old = Accum
dep. at beg – Acc of disposed
fixed asset

𝑪𝒐𝒔𝒕 𝒂𝒕 𝒃𝒆𝒈 − 𝑨𝒄𝒄 𝒅𝒆𝒑 𝒂𝒕 𝒃𝒆𝒈)

× 𝑹𝒂𝒕𝒆)

APPLICATION OF R1.
 Take note that the R1 rule will apply in cases where depreciation amount for
the year is the same or more than the CV amount of the fixed asset in
beginning of the year.
 Test this when the cost method/straight line method is used
 If you notice that depreciation amount for the year is greater than or equal to
CV amount in the beginning of the year the ACTUAL DEPRECIATION
AMOUNT SHOULD BE: CV at beg – R1
 The R1 is the Residual value- the value of an asset after it has been fully
depreciated. When the asset has exceeded useful life and it is held by the
business it should have CV/ or Book Value of R1
PRE-LESSON ACTIVITY (TO BE COMPLETED BEFORE CLASS)

SHANKS LTD
The information below relates to Shanks LTD a listed company. Their financial year
ended on 31 December 2023. They apply a mark of 60% on cost and the business
uses perpetual inventory system and FIFO method to value their inventory.

REQUIRED
1. Complete the statement of comprehensive income for the year ended 31
December 2023

A. PRE-ADJUSTMENT TRIAL BALANCE ON 31 DECEMBER 2023

STATEMENT OF FINANCIAL POSITION SECTION AMOUNT

(BALANCE SHEET ACCOUNTS SECTION)
Land and Buildings 2 000 000
Vehicles 720 000
Equipment 350 000
Accumulated depreciation on vehicles 330 000
Accumulated depreciation on equipment 125 000
Fixed deposit (Mad Bank @12%) 220 000
Loan (Star Bank) 370 000
Debtors control 110 000
Provision for bad debts 5 600
Trading stock 160 000
STATEMENT OF COMPREHENSIVE INCOME
SECTION (NORMINAL ACCOUNTS SECTION)
Sales 4 500 000
Cost of Sales ?
Debtors’ allowances 10 000
Rent Income 135 000
Bad debts recovered 12 000
Consumable stores 26 000
Directors’ fees 720 000
Audit fees 80 000
Advertising 65 000
Water and electricity 60 000
Insurance 28 800
Bank Charges 3 771
Bad debts 2 500
Interest on fixed deposit 25 250
 B. ADDITIONAL INFORMATION
 Credit sales of R60 000 to Debtor, L Lufuno on 25 December 2023. The cost
price of price of these goods was R37 500. This was not recorded.
 Debtor, X Jin returned unwanted goods, Credit note of R5 000 was issued
and no entry was made in the books of the business.
 The records of the business revealed that total trade discounts of R300 000
was allowed on some invoices issued for the year.
 Rent income includes rent for January 2024. The rent has been increased by
R1 000 per month from 1 September 2023.
 R2 000 received from a debtor who was previously written off was not
recorded.
 The records showed that a debtor with a balance of R1 200. Only 40 cents on
the rand must be written off while the remaining was received and recorded.
 Provision for bad debts must be decreased by R1500
 Physical stock taking on trading stock revealed the following o hand

20 December 100 units @R1 500 R150 000

31 December 60 units @R1 100 R66 000
Stock on hand 93 units ?

 Water and Electricity account for December 2023 has been received but not
yet paid, R13 000.
 Insurance was paid for the period January 2023 to February 2024. The
insurance contracted indicated that insurance increased by 10% p.a on the 1
November each year.
 The company had three directors when the year started and during the year
two additional directors were appointed on 30 November 2023 and their
December fees are still outstanding.
 Depreciation must be accounted for as follows:
On Vehicles at 15% per annum on cost
On Equipment at 20% per annum on diminishing balance method.
*Note an old vehicle had a cost of R280 000 and Accumulated depreciation of
R255 000 on 1 January 2023.
 Loan statement from Star Bank showed the following
Balance on 1 January 2023 450 000
Interest on loan (Capitalized) ?
Repayment (including interest) 80 000
Balance 0n 31 December 2023 400 000
*Interest is capitalized and all the repayments have been made and recorded.
 Income tax for the year is calculated at 28%