2023 Accounting Grade 12 TEACHER GUIDE Final Push - 230920 - 165547

CURRICULUM GRADE 10 -12 DIRECTORATE
LAST MILE REVISION PROGRAMME
TEACHER GUIDE
GRADE 12
ACCOUNTING
2023
1
TABLE OF CONTENTS
A. STATEMENT OF COMPREHENSIVE INCOME
B. STATEMENT OF FINANCIAL POSITION
C. CASH FLOW STATEMENT
D. ANALYSIS AND INTERPRETATION OF FINANCIAL INFORMATION
E. CORPORATE GOVERNANCE AND AUDIT REPORT
AA. TANGIBLE ASSETS
BB. INVENTORY VALUATION
CC. COST ACCOUNTING
DD. RECONCILIATIONS (BANK RECONCILIATION, CREDITORS

RECONCILIATION, DEBTORS RECONCILIATION AND AGE ANALYSIS
EE. BUDGETING AND FORECASTING
FF. VALUE ADDED TAX
2
A. STATEMENT OF COMPREHENSIVE INCOME
ACTIVITY A1
INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2021
Sales 4 978 750
100
Cost of sales (4 978 750 + 148 000 =5 126 750 X 200) (2 563 375)
Gross profit 2 415 375
Other operating income 662 000
Commission income (456 000 + 32 000) 488 000
Rent income (159 500 + 18 500 - 4 000) OR 14 500 x 12 174 000
Gross operating income 3 077 375
Operating expenses (1 899 255)
Bad debts Balancing figure 35 995
Directors fee (840 000 + 60 000) 900 000
Loss due to fire (55 250 x 35/65) 29 750
Trading stock deficit (325 000 – 85 000 – 233 000) 7 000
Bank charges (19 600 +260) 19 860
Packing material (8 600 - 650) 7 950
Provision for bad debts adjustment (9 800 – 9 400) 400
Salaries and wages (700 000 + 15 000 – 60 000) 655 000
Pension fund contributions (82 500 + 1 500) 84 000
Medical aid contribution (54 000 + 800) 54 800
Repairs 18 500
Audit fees (48 000 + 38 000) 86 000
Operating profit 1 178 120
Interest income (2 500 + 180) 1 2 680
Net profit before interest expense 1 180 800
Interest expense (420 000 + 100 800 – 500 000) 2 (20 800)
Net profit before tax 1 160 000
Income tax (324 800)
Net profit after tax (324 800 x 72 )
28 835 200
3
ACTIVITY A2
FINANCIAL STATEMENTS & NOTES
2.1 Calculate the Net profit after tax
Incorrect Net Profit before Tax 1 022 404
Interest income (R59 100 – R53 850 = R5 250) 5 250
Repairs 80 000
Salaries 38 000
Bad debts (2 600 x 80c) (2 080)
UIF contributions 380
Depreciation (23 205 + 232 499) (255 704)
Interest expense (400 000 x 12% x 1/12) (4 000)
Provision for bad debts adjustment 1 750
Directors fee (66 000)
Net profit before tax (246 000 x 30

100 820 000
Income Tax (246 000)

70
Net Profit after tax (246 000 x30 ) 574 000
2.2.1 NOTE 5: TRADE AND OTHER RECEIVABLES

Trade debtors (267 600 -2 080 – 520) 265 000
Provision for bad debts (15 000 – 1 750) (13 250)
Net trade debtors 251 750
Accrued income (5 250) 5 250
Deposit for water and electricity (20 000 – 2 000) 18 000
SARS: Income Tax (290 000 – 246 000) 44 000
319 000
4
2.2.2 NOTE 6: CASH AND CASH EQUIVALENTS
28 120
Bank (265 250 + (38 000 – 9 500 -380) + 520 + 2 000 + 1 800 000) 2 095 890
Petty cash (5 000) 5 000
Savings account (300 000) 300 000
2 400 890
2.2.3 NOTE 7: ORDINARY SHARE CAPITAL
AUTHORISED
Number of authorised ordinary shares: 1 500 000 shares
ISSUED R
800 000 Ordinary shares at the beginning of the year

3 200 000
(3 040 000 + 1 600 000)
(40 000) ordinary shares repurchase at 400c per share (160 000)
300 000 ordinary shares issued at 600c during the year 1 800 000
1 060 000 ordinary shares at the end of the year 4 840 000
2.2.4 NOTE 8: RETAINED INCOME

Retained income in the beginning of the year 415 600
70 574 000
Net profit after tax (246 000 x30 )
Repurchase of shares (40 000 x 280c) (112 000)
Dividends on ordinary shares (520 000)
Interim dividends 140 000
Final dividends recommended (760 000 x 50c) 380 000
Retained income at the end of the year. 357 600
5
2.2.5 NOTE 9: TRADE AND OTHER PAYABLES
Creditors control 339 120
SARS: PAYE (22 500 – 9 500) 13 000
Unemployment Insurance Fund (7 760 – 760) 7 000
Accrued expense (See Income Statement) 66 000
Shareholders for dividends 380 000
Current portion of loan 42 000
847 120
ACTIVITY A3
3.1 FINANCIAL STATEMENTS
Statement of Comprehensive Income of Tradehold Ltd for the year ended 28 February 2021
Sales (1 120 000 x 100/8) 14 000 000
Cost of sales (Sales amount x 100/140) OR (14 000 000 – 4 000 000) (10 000 000)
Gross profit 40% of cost of sales 4 000 000
OTHER/OPERATING INCOME 110 000
GROSS OPERATING INCOME 4 110 000
OPERATING EXPENSES (2 990 000)

(4 110 000 – 1 120 000)
OPERATING PROFIT 1 120 000
Interest income 31 600
Net profit before interest expense 1 151 600
Interest expense (386 000 + 193 200 – 513 200) (66 000)
(781 632 + income tax)

Net profit before income tax 1 085 600
OR (781 632 x 100/72)
Income tax (781 632 x 28/72) (303 968)
NET PROFIT AFTER TAX 781 632
6
3.2 Notes to the Financial Statements
3.2.1 Ordinary share capital.
AUTHORISED
Number of authorised ordinary shares: 1 800 000 shares
ISSUED
800 000 Ordinary shares on 1 March 2020 at R4 each 3 200 000
200 000 Ordinary shares issued at R10 each 2 000 000
(50 000) Ordinary shares repurchased at R5,20 each (260 000)
950 000 Ordinary shares on 28 February 2021 4 940 000
3.2.2 Retained income.
Retained income in the beginning of the year 480 500
Net profit after tax 781 632
Repurchase of shares (50 000 x 80c) (40 000)
Dividends on ordinary shares (709 968)
Interim dividends 253 968
Final dividends recommended (950 000 x 48c) 456 000
Retained income at the end of the year. 512 164
7
3.3 STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2021
ASSETS
NON-CURRENT ASSETS 5 737 632
Fixed assets 5 537 632
Fixed deposit: Delta Bank (261 500 – 61 500) 200 000
CURRENT ASSETS 631 500
Inventory (325 670 + 27 550) 353 220
Trade and other receivables (128 000 - 5 120 + 18 300 + 5 600) 146 780
Cash and cash equivalents (370 000 –

131 500
300 000 + 61 500)
TOTAL ASSETS 6 369 132
EQUITY AND LIABILITIES
SHAREHOLDERS EQUITY 5 452 164
Ordinary share capital 4 940 000
Retained income 512 164
NON-CURRENT LIABILITIES 296 000
Loan: Sunshine Bank

296 000
(386 000 – 90 000) OR (320 000 + 66 000 – 90 000)
CURRENT LIABILITIES 620 968
Trade and other payables (1 000 + 48 000 + 2 250 + 500+ 250+ 9 000 + 13 968 74 968
TOTAL EQUITY AND LIABILITIES 6 369 132
8
ACTIVITY B1 (STATEMENT OF FINANCIAL POSITION)
1.1 Retained income note on 28 February 2022.
Balance on 1 March 2021 57 480
Net profit after tax (306 280 x 69/31) 681 720
Shares repurchased (40 000 x 1,25) (50 000)
Ordinary share (389 200)
Interim dividends (640 000 x 0,28 cents) 179 200
Final dividends 210 000
Balance on 28 February 2022 must subtract BBS & OSD 300 000
1.2 STATEMENT OF FINANCIAL POSITION ON 28 FEBRUARY 2022.

ASSETS
NON-CURRENT ASSETS 4 190 900
Fixed assets 3 940 900
Fixed deposit (415 000 – 165 000) 250 000
CURRENT ASSETS (CLx1,5) 1 332 300
Inventories 222 600
Trade and other receivables 1 022 300
Cash and cash equivalents
(212 400 + 165 000 - 290 000) 87 400
TOTAL ASSETS 5 523 200

Shareholders’ equity
(640 000 – 40 000) x 650 cents 3 900 000
Retained income 300 000
NON-CURRENT LIABILITIES 735 000
Loan (1 155 000 – 420 000) 735 000
Trade and other payables 231 920
SARS: Income tax (306 280 – 280 000) 26 280
TOTAL EQUITY AND LIABILITIES 5 523 200
9
Calculate
1 the number of shares that Paul must buy to gain control of the company.
.
400 000 – 252 000 = 148 000 + 1 or + 100
3
. Or
1408 000 – 252 000 = 156 000
Paul
1 wants to buy shares at the current Net asset value without advertising them to the
public.
. As an existing shareholder, why would you not be satisfied with this
arrangement?
3 Explain. Provide TWO points.
.
TWO valid points
2
▪ The issue of these shares must be transparent and legal (i.e., in terms of a decision taken by
the Board of Directors; it must not contravene the MOI, the Prospectus or the Companies
Act.
▪ It would be unethical for Paul to pay a price for the share that is below the Market price as
this would dilute the average share price (which could lead to a decline in market price).
It would be unfair and unethical for Paul to benefit in this way as he would be abusing his
position in the company (and other directors or shareholders would be disadvantaged).
Kelly
1 Ltd is planning to spend R500 000 on staff development and training over the next
two
. years. Explain where this amount should be shown in the published annual report,
and
4 provide a reason for your answer.
EXPLANATION REASON
In the Directors Report It has not yet been paid so it cannot
be shown in the Statement of
Comprehensive Income.
It is important for the directors to
create a good impression to the
readers of the financial report.
It will highlight the company’s
compliance with the King Code /
Emphasis on the triple bottom line
10
ACTIVITY C (CASH FLOW STATEMENT)
CASH FLOW STATEMENT
4.1 Reconciliation between profit before tax and cash generated from operations
540 000
100
Net profit before tax (388 800 x )
72
Adjustment in respect of:
Depreciation (1 514 400 + 755 400 – 145 000 – 1 917 500) 207 300
Interest expense 104 000
Operating profit before changes in working capital 851 300
Cash effect of changes in working capital 113 650
Increase in inventories (445 850 – 373 600) (72 250)
210 600
Decrease in trade and other receivables
(219 000 – 429 600)
(24 700)
Decrease in trade and other payables
[(180 600 + 7 700) – [205 000 + 8 000]
188 300 - 213 000
Cash generated from operations 964 950
4.2 Net change in cash and cash equivalents

Current liabilities: 180 600 + 7 700 + 275 000 + 7 200 = 470 500
Current assets: 470 500 x 1,5 = 705 750
705 750 – 445 850 – 219 000 = 40 900
Cash and cash equivalents Net Change 2021 2020
Bank 400 600 39 400 (361 200)

Petty cash 500 1 500 1 000
401 100 40 900 (360 200)
11
4.3 Prepare the Cash Flow Statement for the year ended 30 April 2021
CASH FLOW FROM OPERATING ACTIVITIES 280 500
Cash generated from operations 964 950
Interest paid (104 000)
Dividends paid (334 000 + 131 800) (465 800)
Tax paid (-29 350 + 151 200 – 7 200) (114 650)
CASH FLOW FROM INVESTING ACTIVITIES (310 400)
Decrease in fixed deposit (500 000 – 200 000) 300 000
Purchase of non-current asset (755 400)
Proceeds from sale of asset 145 000
CASH FLOW FROM FINANCING ACTIVITIES 431 000
Proceeds of shares issued (200 000 x R2,88) see workings 576 000
Repurchase of shares (50 000 x R5,70) see workings (285 000)
Proceeds from long-term loans 200 000
Repayment of long-term borrowings (164 000 – 110 000) or (800 000 + (60 000)
200 000 – 940 000) see workings
Net change in cash and cash equivalents 401 100
Cash and cash equivalents in the beginning of the year (360 200)
Cash and cash equivalents at the end of the year. 40 900
ACTIVITY A5
FIXED ASSETS, CASH FLOW STATEMENT ADAPTED GAUTENG PRELIM 2019
5.1 Calculate the missing figures indicated by (a) to (e) in the Fixed Asset Note below.
CALCULATIONS ANSWER
(a) R6 800 000 – R5 800 000 R1 000 000
(b) R840 000 + R960 000 R1 800 000
(c) R850 000 – R180 000 R670 000
(d) R150 000 – (R15 000 + R15 000) – R7 500 R112 500
12
R7 500 + R85 000 + R20 000
(e) Sold old / remaining new R112 500
R850 000 X 10% = R85 000
5.2 CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2021
CASH EFFECTS OF OPERATING ACTIVITIES (344 715)
Cash generated from operations (2 854 800– 198 615)

2 656 185
Interest paid (208 800)
Dividends paid
(676 500 + 1 458 000) (2 134 500)
Income Tax paid

(23 700- 713 250+ 31 950) (657 600)
CASH EFFECTS FROM INVESTING ACTIVITIES (187 500)
Fixed assets purchased (900 000 + 400 000) (1 300 000)
Proceeds on sale of fixed assets (112 500 + 1 000 000) 1 112 500
CASH EFFECTS FROM FINANCING ACTIVITIES 1 944 000
Proceeds from the sale of shares 1 800 000
Repurchase of shares
(720 000 X 5% X R16) (576 000)
40% X 300 000 = 120 000 + 600 000
Proceeds of loan (2 100 000 – 1 380 000) 720 000
Net change in cash and cash equivalents 1 411 785
Cash and cash equivalents at beginning of year 1 429 465
Cash and cash equivalents at end of year 2 841 250
13
5.4 The Cash Flow Statement reflects some important decisions taken by the Directors.
Apart from the loans, identify TWO good decisions. Explain the effect of these decisions on the company.
Quote figures.
DECISION EFFECT ON COMPANY
Increased the cash flow. / Used funds to buy other

Sale of land and building,
fixed assets.
R1 000 000 / Selling of fixed assets
R1 112 500
Increased the cash flow. / Used funds to buy

Issue of shares R1 800 000 /
assets.
120 000 shares
Purchase of fixed assets

900 000 + 400 000 = 1 300 000 Leads to capital growth (future productivity). / More
assets in the company. / Generates more income.
14
STATEMENT OF COMPREHENSIVE INCOME
Sales 9 355 250
Cost of sales (5 665 250)
Operating income 200 000
Commission income 4 560

Rent income (183 600 – 24 300) 159 300
Bad debt recovered 33 700
Provision for bad debt adjustment (85 840 – 83 400) 2 440

Operating expenses 3 315 000
Directors’ fees 1 124 000

Audit fees 83 000
Salaries and wages (1 381 500+11 525 +3 235 +990 +1980) 1 399 230
Security expenses (72 500 -13500) 59 000
depreciation (328 200+ 25 500 +4200) 357 900
loss on sale of asset 4 500
loss of stock due to damages 47 515
sundry expenses (257 585 – 17 730) 239 855
Operating profit 575 000

Interest income 76 250
Profit before interest expense 651 250

Interest expense (142 250)
Net profit before tax (356 300 x

𝟏𝟎𝟎
) 509 000
𝟕𝟎
𝟑𝟎
Income tax (356 300 x 𝟕𝟎 ) (152 700)
Net profit after tax 356 300
15
Calculate: Cost of stock damaged
Calculate: Total depreciation for the year

Workings Answer
Depreciation before adjustments 328 200
Depreciation on vehicle sold (

𝟏𝟕𝟎 𝟎𝟎𝟎 𝟐𝟎 𝟗
x𝟏𝟎𝟎 x 𝟏𝟐 ) 25 500
𝟏
Depreciation on alarm system (

𝟒𝟖𝟎𝟎𝟎 𝟏𝟓 𝟕
x 𝟏𝟎𝟎 x 𝟏𝟐 ) 4 200
𝟏
TOTAL DEPRECIATION 357 900
Workings Answer
𝟔 𝟓𝟕𝟗 𝟎𝟎𝟎
𝟗 𝟎𝟎𝟎
47 515
Or
731 x 65
Calculate: Profit/Loss on sale of fixed asset

Workings Answer
CV - SP
144500 – 140000 4 500
Loss
16
Extract of the Statement of Financial Position on 28 February 2022
R
ORDINARY SHEREHOLDERS EQUITY (1 150 000 x 6.75) 7 762 500
Retained income 1 092 500
NON- CURRENT LIABILITIES 1 025 075
Mortgage Loan (1 159 000 – 133 925) Or (1 159 000-121 750-

1 025 075
12 175)
Trade and other payables (428 000 + 24 300) 452 300
Shareholders for dividends (345 000 – 207 000) 138 000
SARS Income tax (130000 - 152 700) 22 700
current portion of loan 133 925
TOTAL EQUITY AND LIABILITIES

9 534 500
ACTIVITY 7
7.1
7.1.1 Solvency
7.1.2 Profitability
7.1.3 Gearing
7.2.1 REAINED INCOME NOTE ON 29 February 2022
Balance on 1 March 2021 516 000

Plus, Net profit after tax 908 400
less Fund used on repurchased (120 000 x 1.40) (168 000)
less Ordinary share Dividends (873 600)
Interim Dividends 710 400
Final dividends (1 360 000 x0.12) 163 200
Balance on 28 February 2022 382 800
17
Calculate: Income tax paid
Workings Answer
389 300 – 21 300 – 14 400 or (353 600)

21 300+14 400-389 300
Calculate: Funds used to repurchase shares
Workings (8.8 +1.40) = 10.2 Answer

120 000 x 10.20 or 1 056 000 + 168 000 (1 224 000)
Calculate: Net change in cash and other cash equivalents

Workings Answer
8000 – 133 000 = (125 000) 169 700

44 700 – 0 = 44 700 inflow
Calculate: Debt-equity ratio
Workings Answer
2 8886 000: 12 350 800 0.23: 1
Calculate: % return on capital employed

Workings Answer
𝟏 𝟐𝟗𝟕 𝟕𝟎𝟎 + 𝟑𝟖𝟐 𝟎𝟎𝟎
𝟏 11.32%
(𝟏𝟐 𝟑𝟓𝟎 𝟖𝟎𝟎 + 𝟏𝟎 𝟕𝟓𝟎 𝟎𝟎𝟎 + 𝟐 𝟖𝟖𝟔 𝟎𝟎𝟎 + 𝟑 𝟕𝟎𝟎 𝟎𝟎𝟎) 𝟐
Calculate: Dividends per share

Workings Answer
Interim + Final
𝟕𝟏𝟎𝟒𝟎𝟎
x
𝟏𝟎𝟎
=48 cents + 12 cents 60 cents
𝟏 𝟒𝟖𝟎 𝟎𝟎𝟎 𝟏
ACTIVITY 8
8.1 8.1.1 E
8.1.2 D
8.1.3 B
8.1.4 A
18
8.2 STARLIGHT LTD
8.2.1 Calculate: Value of the closing stock of light bulbs on 28 February 2023, using the
weighted-average method
WORKINGS ANSWER
3 921 500 two marks

(416 000 + 3 478 000) one mark
3 894 000 + 27 500 x 1 700
55 000 121 210
(8 000 + 47 000) one mark
8.2.2 Calculate: Profit or loss on disposal of vehicle

WORKINGS ANSWER
104 000 x [20% x 9/12]

91 500 – (104 000 – 15 600) 3 100
88 400 three marks
If SP > CV = Profit
or SP < CV = Loss
104 000 – 15 600 – 91 500
Calculate: Total depreciation for the year

WORKINGS ANSWER
Vehicles
15 600 + 145 200 = 160 800

(see above) 281 100
Equipment
774 000 x 15% 48 000 x [15% x 7/12]

116 100 + 4 200 = 120 300
19
8.2.3 Statement of Comprehensive Income for the year ended 28 February 2023
Sales 17 850 000
Other income 170 900
Commission income 85 900
Rent income (89 700 – 7 800) 81 900
Profit on sale of asset* * could be a loss see 1.2.2
3 100
check if SP > NCV

Operating expenses (4 894 900)
Salaries and wages balancing figure
2 218 100
could be a negative
Audit fees 155 200 + 38 800 194 000
Directors' fees 2 015 000 – 130 000 1 885 000
Sundry expenses 219 760
Bad debts 16 200 + 2 250
18 450
Depreciation see 1.2.2 281 100

Trading stock deficit 2 969 800 – (2 774 800 + 121 210)
73 790
Provision for bad debts adjustment must be an expense 4 700
Operating profit GOI - OE 2 926 000

Interest income balancing figure; accept if negative 34 000
Profit before interest expense 2 960 000
Interest expense 165 600 x 60% OR 165 600 – 66 240
(690 000 – 524 400) one mark OR (13 800 (99 360)
x 12) x 60%
Net profit before tax NPaT + Inc Tax 2 860 640
Income tax (858 140)
Net profit after tax 2 002 500
CURRENT ASSETS 7 605 150
Inventories 2 774 800 + 121 210
OR 2 969 800 – 73 790 2 896 010
Trade and other receivables

645 250– 2 250 – 25 720 + 130 000 + (875 000 – 858 140)
764 140
bad debts prov BD directors fees SARS: Income
tax
Cash and cash equivalents balancing figure 3 945 000

ORDINARY SHEREHOLDERS EQUITY (1 150 000 x 6.75) 7 762 500
Retained income 1 092 500
NON- CURRENT LIABILITIES 1 025 075
Mortgage Loan (1159 000 – 133 925) Or (1159 000-121 750-12175) 1 025 075
Trade and other payables (428 000 + 24 300) 452 300
Shareholders for dividends (345 000 – 207 000) 138 000
SARS Income tax (130000 - 152 700) 22 700
current portion of loan 133 925
TOTAL EQUITY AND LIABILITIES

9 534 500
ACTIVITY 9
9.1 RETAINED INCOME NOTE
Balance at beginning of year 237 400

Net profit after tax 1 526 000
(216 000)
Shares repurchased 180 000 x 1,20)
(917 800)
Ordinary share dividends
342 400
Interim dividends 1 070 000 x 32c
Final dividends 575 400
Balance at end of year

629 600
9.2 Calculate: Change in loan
WORKINGS ANSWER
7 200 000 – 6 348 000 852 000
Calculate: Proceeds from shares issued
WORKINGS ANSWER
(1 370 000 + 180 000 – 1 250 000) 3 420 000

300 000 x 11,40
OR
3 420 000
(13 959 500 – 12 312 500) + 1 773 000
9.3 15 200
CASH EFFECTS OF OPERATING ACTIVITIES
Cash generated from operations 2 340 300

(648 000)
Interest paid
Income tax paid
(719 700)
42 100 + 654 000 + 23 600
OR – 42 100 – 654 000 – 23 600
Dividends paid
(817 400)
475 000 + 342 400 OR – 475 000 – 342 400
9.4 Calculate: Current ratio
WORKINGS ANSWER
1 479 600: 822 000 1,8: 1
Calculate: Net asset value (NAV)

WORKINGS ANSWER
14 589 100 see 2.1

13 959 500 + 629 600 x 100 1 064,9 cents
1 370 000
Calculate: % return on total capital employed (ROTCE)

NOTE: The average capital employed is R20 343 500.
WORKINGS ANSWER
1 526 000 + 654 000 + 648 000 x 100*

13,9%
20 343 500
ACTIVITY D. ANALYSIS AND INTERPRETATION OF FINANCIAL INFORMATION

RATIO ANALYSIS AND INTERPRETATION OF FINANCIAL INFORMATION
ACTIVITY D1
1.1 Explain whether or not the company is managing their working capital efficiently.
Quote TWO financial indicators, with figures and trends.
Financial indicator figure and trend any ONE explanation
Any two indicators:
• Current ratio has decreased (from 1,3:1) to 0,9:1 / by 0,4 : 1
• Acid test ratio has decreased (from 0,6:1) to 0,3:1 / by 0,3 : 1
• Debtors average collection period increased (from 30,8 days) to 42,4 days / by 11,6 days.
Possible explanations for ONE mark:
The business will experience difficulty in meeting short term debts / does not have enough
liquid assets (cash) to cover current liabilities / debtors take too long to settle accounts / too
much stock on hand.
1.2 Calculate the total number of additional shares that Yolanda purchased.
CALCULATION ANSWER
(51% x 1 500 000) two marks
225 000
765 000 – 540 000
Do not accept 50% + 1 share or 50% + 100 shares
Give ONE possible reason why Yolanda was determined to become the majority
shareholder.
Any ONE valid reason must relate to influence over control
Expected responses e.g.
• She wants to have full control of the company.
• She wants to influence all decisions of the company in the future.
• She wants to address the issue of incompetent directors /influence new appointments
who can contribute to the growth of the company
• She feels she can kick-start a turn-around of the current situation.
Possible responses for one mark e.g.
To gain more dividends / make a capital gain on the shares
1.3.1 The Cash Flow Statement revealed decisions taken by the directors. Identify TWO
major decisions taken by the directors in 2023 that were different to those from the
previous year. Quote figures.
TWO decisions Figures
• In 2023 the company issued more shares for R3 750 000 (in 2022 the company bought
back shares for R250 000).
• In 2023 they repaid R1 800 000 of the loan (in 2022 the company borrowed R3 500 000).
Do not accept R1 700 000 as a valid figure.
Give ONE reason for these decisions.
ONE valid reason
• Place less reliance on loans / pay less interest / improve or reduce financial risk
• There is an attempt to sustain the company by using equity (own capital)
1.3.2 Explain the impact of these decisions on the degree of financial risk over the two
years. Quote ONE financial indicator, with figures and trends.
Financial indicator with figure(s) and trend
Debt/equity ratio decreased (from 0,4: 1) to 0,1: 1 / by 0,3 : 1)
Explanation
Reduced or lower financial risk / less reliance on loans / use of own (share) capital
1.3.3 Explain how these decisions affected the gearing of the company. Quote ONE financial
indicator, with figures and trends.
Financial indicator with figure(s) and trend
ROTCE dropped (from 11,4%) to 9% / by 21,1% / by 2,4% points
Explanation of gearing (compared to interest rate)
Expected responses:
• ROTCE is below the interest rate of 13%; was negatively geared in 2022 and dropped
further in 2023.
• Company was not making effective use of loans in 2022 and this trend has continued in
2023 in spite of effects of attempts to reduce the loan.
1.4.1 Certain shareholders expressed concern about the change in the dividend payout
policy. Explain TWO points to support their opinion.
Any TWO valid points
N.B. Figures are not compulsory here:
• The increase in the dividend pay-out rate (from 67,6%) to 106,7% means that funds must
be used from retained income / depleting company funds / paid higher dividends whilst
earnings were low.
• The directors want to distract shareholders by trying to appease them in order to distract
them from the poor performances of the company / misleading.
• Directors are acting irresponsibly by showing no intentions for the growth of the company
/ Company is not retaining funds for future growth.
• Directors should have focused on improving the cash resources because they are
actually depleting cash resources.
Responses for one mark e.g.
Dividend pay-out rate increased significantly / directors want to be re-elected
1.4.2 Explain whether shareholders would be satisfied with the trend in the
% return and earnings of the company, as well as the dividends they earned. Quote TWO financial
indicators, with figures and trends.
Financial indicator figures and trend
Any TWO of:
• ROSHE decreased (from 7,2%) to 5,7% / by 1,5% points / 20,8%
• EPS decreased (from 74c) to 60c / by 14c / drop in profitability by 18,9%
• DPS increased (from 50c) to 64c / by 14c / by 28%
Explanation (figures not compulsory here)
• Returns are below interest rate on fixed deposits [alternative investment of 7%]
• Some shareholders may be satisfied with a [14cent] increase in DPS / others concerned that company
pays high dividends when profits dropped
• Due to high dividends, dividend yield improved (from 4,9%) to 7,5% / by 2,6% points / 53,1%
1.5 In EACH case, provide evidence for the shareholders' concerns over these trends, and explain why
they would be concerned about the future prospects for the company. Quote figures and trends.
Award relevant mark allocation if correct evidence, figures or reasons are placed in the incorrect columns.
Evidence of concern Reason for concern
Issues
Figure Comparison Be alert to other valid reasons
Cash and cash C&CE decreased by R836 000 OR Operating activities reflects deficit /
equivalents ineffective use of available funds /
C&CE decreased (from R1,914m)
generating funds with no intention to
to R1,078m over the two years OR
increase profitability / liquidity issues in the
Net outflow in 2023 of R836 000 future if trend continues
compared to
net inflow of R2,2m in 2022
Market price of shares The market price on the JSE has The shares are not in demand by the public
on JSE decreased (from 1 020 cents) to (due to general decline in company's
850 cents / The market price of performance) / Future prospects for the
850 cents is less than the NAV of 1 company are not good as new shareholders
007 cents. might not want to buy shares if the shares
are not performing well
.1 ACTIVITY D3 INTERPRETATION OF FINANCIAL INDICATORS
Which company uses more loans? Quote a financial indicator to support your answer.
Nero Ltd
Debt / equity ratio 1,8 : 1 for Nero and 0,3 : 1 for Rainbow
Explain whether this is a good idea or not. Quote a financial indicator to support your answer.
No, they did not benefit
Return on Capital Employed for Nero is 12,4 % which means that the return he is earning is lower
than the interest he is paying on the loan, 14% (negative gearing)
3.2 According to Daymond the liquidity indicators of Nero Ltd are better than those of Rainbow
Ltd. Explain, quoting THREE financial indicators to support his opinion.
Quoting of indicator
Comparison with figures
Explanation
• Current ratio of Nero is 1,7 : 1 and of Rainbow is 5,8 : 1. Nero has enough current assets to
cover his current liabilities whereas Rainbow Ltd is holding too much of his funds in the form
of current assets which may not result in a return for the business.
• Acid test ratio of Nero is 0,8 : 1 and of Rainbow is 3,7 : 1. Even if Nero is not able to sell all
of his trading stock he should still be able to cover his short term debt. Rainbow is holding
much of her current assets in the form of trading stock (stock piling).
• Period for which enough stock is on hand for Nero is 80 days and for Rainbow is 140 days
(almost 5 months). Nero has enough stock for almost 3 months which is appropriate. Rainbow
is holding stock for too long, resulting in obsolete stock.
• Debtors collection period of Nero Ltd is 26 days which is within the acceptable period of 30
days. Debtors’ collection period for Rainbow is much longer, 55 days.
3.3 Although the market price of the shares of Rainbow Ltd is higher than those of Nero Ltd,
Daymond is of the opinion that Nero Ltd’s shareholders are more satisfied with the market
price of their shares. Explain, quoting financial indicators to support this opinion.
Comparing market price and NAV of Nero

Comparing market price and NAV of Rainbow
Market price of Nero Ltd is 630 cents which is higher than the Net Asset Value of 520 cents. Their
shares are in demand and investors have confidence in the company.
Market price of Rainbow Ltd is 680 cents which is lower than the Net Asset Value of 790 cents.
3.4 In which company is Daymond a major shareholder?
Rainbow Ltd
Support your answer with a calculation.
He owns 300/500, 60% of the shares.
ACTIVITY D4 CASTRO LTD
4.1 Comment on the price of R9,10 charged by Castro Ltd for the new shares issued.
Compare issue price to market price or NAV
Figures R12,00 or R10,73
Expected responses:
• The shares were issued at the average share issue price.
The existing shareholders are being rewarded as the price is lower than the R12,00 charged on the
JSE and the NAV of R10,73.
• The shares could have been issued at the market price of R12,00 or the NAV of R10,73 (they have
diluted the value of the shares).
4.2 Explain how the issue of new shares has affected the financial gearing and risk of Castro Ltd.
Quote TWO financial indicators.
Explanation Financial indicators Figures
• Gearing has improved – less risk (as there was an issue of new shares)
debt-equity ratio decreased from 0,8: 1 to 0,5: 1 (by 0,3: 1)
• ROTCE improved (due to increased efficiency / profits on new branch)
from 15 % to 20 % (by 5% or 33,3%)
4.3 If David wanted to retain his 60% shareholding in the company, how many shares would he have
had to buy?
(700 000 x 60%) – (500 000 x 60%) = 120 000
420 000 300 000
OR.
200 000 x 60% = 120 000
How much would he have had to pay?

120 000 shares at R9,10 each = R1 092 000
David decided NOT to buy these shares. Apart from the

% shareholding, explain TWO reasons why he has made a mistake by not taking up this option.
Explanation Figures
Expected responses: Any two
• His dividends would have increased by R61 200 (51c x 120 000 shares). This is more than the
interest he earned on the savings account R54 600 (1 092 000 see above x 5%)
• He could buy the shares for capital growth - bought the shares for R9,10 and then could sell
them on the JSE for R12,00 / total profit could have been R348 000 / would be a good buy as
R12,00 exceeds NAV R10,73
• He would have earned more dividends on bigger investment (51c/910c = 5,6%)
• ROSHE would be 23% on a bigger investment.
• He would lose 120 000 votes at the AGM.
RONKI LTD
4.4 Comment on the liquidity of Ronki Ltd. Quote TWO financial indicators.
Explanation:
The liquidity situation has improved / is able to meet current debts / liquidity ratios have decreased / liquidity
ratios are more efficient
Financial indicators any two
• Current ratio has improved/decreased (from 3,5: 1) to 1,9: 1
• Acid-test ratio has improved/decreased (from 1,7: 1) to 1,1: 1
• Stock-holding period appears to be efficient at 54 days (less than 2 months)
4.5 Comment on the price paid by Ronki Ltd for the repurchase (buy-back) of shares.
Expected response:
The company is paying a premium above the average share price in order to entice shareholders to give up
their shares / they wanted to increase returns by decreasing equity / this is a fair value same as the price on
the JSE.
Compare price paid (R15,00) to
• market value R15,00
• net asset value R13,30
• average issue price of shares R10,20
4.6 Explain THREE ways in which David has benefited from the repurchase of the shares by Ronki Ltd.
Expected responses: Three different responses

• He has now become a majority shareholder. His 300 000 shares are 51,7% of the total shares
(33,3% before the share buy-back)
• Due to the reduced number of shares, his return has improved i.e. EPS
has increased by 95c / from 171c to 266c / ROSHE increased from 13% to 16%. (NOTE: EPS and
ROSHE reinforce the same point).
• The reduced number of shares could have contributed to an increase in the DPS by 57c / by 55,3%
/ from 103c to 160c (Directors may have maintained the dividend pay-out policy).
E. CORPORATE GOVERNMENTS AND AUDIT REPORT
ACTIVITY E1: CORPORATE GOVERNANCE
1.1 4.1.1 Shareholders
4.1.2 Unqualified
4.1.3 Disclaimer of opinion
1.2 Explain THREE CONCERNS that the shareholders would want to raise with the board of
directors at the meeting.
THREE valid reasons
• Poor control by the Board or Remunerations committee over Donald’s appointment / were
correct procedures not followed when deciding on his salary package / did they not check
references from previous employers regarding his qualifications & experience?
• Why did the Board match the competitor’s offer without verifying it properly?
• Given Donald’s dishonesty (over his qualifications and job offer), has the Board conducted
further investigations into his conduct (e.g. embezzlement)?
• Is there any evidence good performance by Donald in terms of influencing productivity and
profitability in the company?
• No transparency regarding the significant increase in Donald’s remuneration? / Were

external auditors negligent in any way regarding this?
• What internal disciplinary consequences will be taken against Donald or others who
appointed him (e.g. CEO, directors or remunerations committee)?
• What external or legal steps will be followed to recover the salary overpaid (due to his
fraudulent CV) / to ensure Donald’s dismissal?
1.3 Provide ONE point of possible mismanagement or corruption under EACH of the
following subheadings. Quote relevant figures to support your answer in EACH case.
Payment of directors' fees
Any valid point (must refer to productivity)
Fee increases for directors were not justified or / they did not make any difference to improving
the company / they do not deserve the high increases due to the decrease in the profitability
(productivity) of the company.
Possible figure/s
• Operating profit dropped by 4,7% and net profit decreased by 3%
• Directors fees (in total) increased by / 37,6% (R66m to R90,8m)
• The CEO received a 44,4% increase (R18m to R26m)
• Other directors fees increased by 45% (R36m to R52,2m) + extra 3 directors
Salaries of other employees
Valid point (must mention possible mismanagement)
Employing additional employees did not contribute to better profits (productivity) / more
workers should have had a positive effect on profits / possible ghost workers / under-qualified
or incompetent workers employed / nepotism / poor HR decisions to increase workforce
Possible figure/s
• Operating profit dropped by 4,7% (despite +8% in GP / -3% in net profit
• The workforce increased by 25% (55 more workers)
• Salaries increased (from R70,4m) to R91,3m / by R20,9m / by 29,7%

ACTIVITY 2
2.1 Explain what is meant by “corporate governance”.
Refers to the strategic direction the company is taking and major decisions which are made to
achieve this direction.
2.2 One of the most important decisions that shareholders have to make at the annual general
meeting (AGM) is to appoint directors to serve on the board.
Explain why the shareholders have been given this responsibility.
• The shareholders are the major investors, but they cannot all work at the company.
• They appoint directors to run the company for them.
• They have entrusted their investment to the directors.
If you were a shareholder, what factors or characteristics would you want to find out about the
directors who would get your vote? Explain points and give a reason for each.
EXPLANATION REASON
POINT 1 Integrity The shareholders have entrusted their

investment to the directors.
Honesty
No criminal record
POINT 2 Good qualifications

They need expertise to run a company.
2.3 What is your understanding of the term kickbacks?
• A reward offered to a person after the occurrence of a transaction which has led to another
person’s gain.
• The company was awarded the supply of PPE worth R1,8 million after paying to get the contracts.
As a shareholder, explain what you would say at the AGM.
This appears to be an under-handed agreement that did not follow the normal tender processes;
Illegal, unethical, devious tactics were used to secure the business deal.
If the directors’ integrity is compromised, this will affect the reaction of the public and the customers.
This would affect the share price and the profits.
An investigation or criminal case should be instituted against the CEO and the police officers.
2.4 Explain why an adverse audit report would be bad for a company’s reputation.
This indicated that there is something seriously wrong with the financial statements.
The company and its results cannot be trusted.
This can negatively affect the share price on the JSE.
This can damage a company’s reputation.
This could result in delisting from trading exchanges.
ACTIVITY E3: CORPORATE GOVERNANCE
3.1 The Johannesburg Securities Exchange (JSE) Refer to paragraph 1. Explain why companies
might want to be listed on the JSE.
• The public can participate in the purchase of shares / easier access to potential investors / tapping the
global investment environment (internet)
• Adds to the prestige of the company (due to additional listing requirements & publicity)
• Ensures compliance with Companies Act and other regulations (e.g. BBEEE scores, audit
requirements)
• Easier to access additional funds by advertising new issue of shares / ongoing advertising through JSE
publications
• The public can make their shares available to other potential investors if they want to 'cash in' their
investments / facilitates transfer of shares /
• Constant update of share prices will indicate investor confidence / demand for shares / a good image of
the company.
Explain why the JSE would not tolerate 'incorrect, false and misleading financial results from
companies that are listed.
• They will not deceive the public as it is their role to ensure that sound business management practices
are in place / do not want to cast doubts about their operations
• Would want to avoid any legal action against the JSE for misleading shareholders / Reputation of JSE
may become questionable.
• JSE is a vital organisation in facilitating capital funds that stimulate the economy / leads to creation of
jobs / public relies on credible information.
• JSE competes with international stock markets / need to guard their activities / ensure adherence to
rules & regulations
3.2 Audit reports
Refer to paragraph 2
Explain the difference between a qualified audit report and a disclaimer of opinion
audit report.
Combined response: A qualified report mentions only specific items which are of concern to
the auditor while a disclaimer report means that the auditors are refusing to express an
opinion.
Examples of separate responses for 1 mark each:
• Qualified audit report: The external auditors identified a few areas of concern /
does not allow them to give an unqualified audit report / internal control processes might
be deficient.
• Disclaimer report: The external auditors refuse to or were unable to obtain sufficient
evidence to support an audit opinion / The company does not exercise reliable internal
control processes / Management was incompetent in performing basic recording and
reporting tasks / financial statements do not adhere to GAAP & IFRS.
3.3 Concerns of shareholders Refer to paragraphs 1, 2 and 3.
This is a very open-ended question; be alert to any other valid responses
As a concerned shareholder, what questions would you raise at the AGM? Provide THREE
different questions. In EACH case explain an appropriate reason.
Any three valid questions Any three valid reasons Reasons to be

aligned to the questions The same
reason could apply to more than one
question / could be verbatim from
scenario
Questions you would raise at the AGM One reason for each question
Why do the disqualified directors seem to For a company listed on the JSE highly
have no skills and/or experience in qualified directors are required.
QUESTION
governance issues? Why are there no criteria
for directors’ appointments?
Why did the board not take immediate action Poor audit reports will severely affect the
QUESTION over the qualified and disclaimer audit company and the market price of its
reports? shares.
Why have they not implemented disciplinary The board should have taken prompt
QUESTION procedures on these directors (before the action to prevent further problems.
JSE disqualified them)?
Why were very important roles allocated to It is reckless to allocate important tasks to
QUESTION
these directors? directors who cannot carry them out.
Why do the board and the other directors The board and the other directors could
appear to be negligent or careless in lay themselves open to legal claims due
QUESTION appointing or voting for the unskilled directors to negligence / failure to screen directors
at the AGM / solving the problems in this and conduct background checks.
company?
Where will the funds come from to pay the Transparency required by King Code in
QUESTION R6,5m fine? all processes. Profits or retained income
could be negatively affected.
What measures will the board put in place to Transparency / accountability / improving
prevent this in future? What control controls.
QUESTION
measures does the Audit & Risk committee
have in place?
ACTIVITY AA TANGIBLE ASSETS
ACTIVITY AA1
MNGADI LTD
1. WORKINGS Answer
(i) Carrying Value of Vehicle on 1 March 2022
=2 35 000-840 000 1 510 000
(ii) Total depreciation on equipment
= 640 000 x 10%= 64 000 (CV is 28 000)

Old: 28 000-1 = 27 999 36 124
New: 195 000 x10% x 5/12 8 125
(iii) Carrying Value of the vehicle sold
Current depreciation
80 000 x 20% x 9/12 =12 000
OR 298 000-286 000 =12 000 68 000
252 000-172 000- 12 000
OR: 252 000-(172 000+12 000)
2. No, This is an unethical practice and it’s against the historical cost principle which says fixed assets
must be recorded at their original cost price
ACTIVITY AA2: FIXED ASSET SHUKELA LTD
2.1 WORKINGS ANSWER
(i) Cost new office R610 000

(ii) R13 000 – R3 (check explanation below) R12 997
(iii) Equipment: Cost price X % X time =

depreciation New: R172 500 X 10% X4/12= R5
750
R130 750
Existing: R1 250 000 X10% = R125 000
R5 750 + R125 000

(iv) Disposal of vehicle = cost price – accumulated
depreciation R176 000 – (128 000 + 5 600) R42 400
Depr: (R176 000 – R128 000) X 20% X 7/12 = R5600

(v) Accumulated depreciation at the end = AD(B)+DEPR-AD R922 400
(SOLD) R800 000 + R256 000 – R133 600
(ii) Computers
2.2
Three computers have been fully depreciated therefore depreciation amount will be replaced by
carrying value and subtract R3 (R1 each) since computers still belongs to the business.
Calculation of depreciation of three computers.

2.3
R108 000 X 3331% X 12/12 = R36 000 > CV of R13 000
Explain how the internal auditor should check that movable fixed assets were not stolen.
• Conduct physical inspection (regular and random)
• Compare to fixed asset register
As an independent auditor, what advice would you give? Provide ONE point.
• GAAP prescribes the historical (original) cost principle when recording assets
and only recognizing profits and/or losses on disposal (i.e., prudence).
• Essentially, financial statements must not be overstated to create
a false Impression on profitability.
ACTIVITY AA 3: FIXED ASSET: ASSET DISPOSAL AND ASSET MANAGEMENT STHATHU LTD
3.1.1 MOVEMENT OF FIXED ASSET ASSET DISPOSAL
2022 31 Equipment 120 000 2022 31 Accumulated depreciation on 46 560

equipment (38 400 + 8 160)
Aug. Aug.
Bank 73 440
120 000 120 000
3.1.2 MANAGEMENT OF FIXED ASSETS
Problem with figures Advice
Sah was absent for 8 days. He is the highest paid Investigate the reason for his
driver, absence.
Vehicle 1 (Sah)
R8 000 where other drivers earn R5 000.
Only pay for the number of days at
work.
Mthoh is travelling too many kilometers (4 600 km Possible disciplinary action against
for 80 trips = 58 km per trip) which is higher than Mthoh for unauthorised use of
the maximum of 40 km per customer. vehicle. Improve internal control over
Vehicle 2 (Mthoh) the use of the vehicles.
He is travelling more km than Sgah (4 200
compared to 2 800 km) but doing fewer trips (70
compared to 110).
Sgah is doing the most number of trips (120) but Consider replacing this vehicle as it is
his vehicle is the oldest and the most expensive to expensive to maintain.
Vehicle 3 (Sgah)
run (R0, 81 per km).
Page 39 of 95
ACTIVITY AA4
4.1
Dr. ASSET DISPOSAL Cr
2022 2022 Accumulated depreciation on

equipment
Dec 31 Equipment GJ 30 000 Dec 31 GJ 11 250
Bank CRJ 10 000
Loss on disposal GJ 8 750
30 000 30 000
4.2
4.2.1 Identify the cost price of delivery vehicle 3.
R 879 000 - R315 000 - R144 000 = R420 000 OR R288 750 + R131 250 = R420 000
4.2.2 Explain why delivery vehicle 1 is shown at a carrying value of R1.

It is very old and has been fully depreciated. It has to be left in the books at a value of R1 as it still exists/has
not
been disposed of / has not reached the end of its life span.
4,2.3 What rate of depreciation is used for vehicles?

25% as they had the value for 4 years (I July 2019 -30 June 2022)
144 000/4=36 000
36 000/144 000× 100=25%
4.3 Explain how and why the Fixed Asset register assists the internal auditor in his duties.
• It enables the internal auditor to keep control of assets as he can identify each one by make and model
and therefore can determine exactly where all the assets are and whether any are missing.
He will be able to see the complete history of each asset and ensure that they are all properly
valued/depreciated etc. so that the financial statements are reliable and accurate.
Page 40 of 95
4.4 In order to solve their cash flow problems, Zinhle sold half of the premises at cost price. Luyanda thinks
Zinhle should not have done this. Do you agree with Luyanda or with Zinhle? Give a reason.
• I agree with Luyanda. If the business needed money, they could have taken out a mortgage using the property as
a security. OR
• Property is one of the best investments one can have as, over time it appreciates. OR
• They will be short of space in future. OR
• It is inconceivable that one would sell property at a cost price unless it was bought very recently or in the ‘wrong’
area.
ALTERNATIVE
• I agree with Zinhle’s decision because the property was not being fully utilized and the costs e.g rates keep
increasing. OR
• The property is in an area where appreciation in value is not going to happen.
4.5 One of the employees in the accounting department, Miso Mnyamande, knows that the insurance policy
only covers theft if there is evidence of forced entry. On 31 December 2022 she saw Zinhle’s son break
the security gate of the office to make incident look like forced entry. She is not sure if Luyanda knows
about this. What advice would you give Miso? Give ONE point.
• I would advise Miso to tell Luyanda about Zinhle’s dishonest son as he needs to know what is going on and what
problems he may have in future.
• I would advise her to tell Luyanda not to claim against insurance as it would be unethical. OR
• If he does not listen to her, I would advise her to ‘blow the whistle’ i.e. tells the insurance company.
ACTIVITYAA.5.5 FIXED ASSETS
(a) 3 640 000 – 2 002 000 = 1 638 000
750 000 x 15% x 4/12

(b)
750 000 – (491 750 + 37 500) = 220 750
529 250
Page 41 of 95
(Sold): 37 500
(New): 900 000 x 15% x 5/12 = 56 250
(c ) (Old): 2 890 000 x 15% = 433 500

(3 640 000 – 750 000)
Total: 527 250
(d) 3 640 000 + 900 000 – 750 000 = 3 790 000
ACTIVITY AA.6
Fixed assets Problem solving
Identify ONE different problem regarding each VAN and the Driver, Quote figures. Provide advice for
each problem.
Problem and figures Advice

NISSAN 1400 The vehicle had fully depreciated, carrying value Purchase a new vehicle as a
is R1, replacement for the old vehicle
Palisa
OR Consider replacing this vehicle as it is
expensive to maintain.
High cost of repair
R34 000
And high fuel consumption R6 500
CHERVE UTLITY Unauthorized trips/ abuse of vehicle for personal Improve internal control over the use of
use. vehicles
Nokwanda
100 trips 4 000 km but 4600 km traveled 600 km Possible disciplinary action for
unauthorized trips unauthorized use of vehicle
NP200 Highest paid driver Investigate reason absents from work,
Pay salary per number of trips or
Miya R15 000 but lazy driver with lowest trip 30 trips
deliveries
Page 42 of 95
ACTIVITY AA.7
7.1 Calculate the cost price of BOLT
R102 750+R22 250=R125 000
7.2 Explain why carrying value of IPHELA is R1 and the carrying value of office premises is still
R750 000 as they were bought on a same date.
• IPHELA TAXI fully depreciated, it had passed its useful life as it an old vehicle.
• Office premises/ land and buildings the nature of these assets do not depreciate but it may increase in
value on property valuation.
7.3 Advise an internal auditor the importance of preparing the asset register.
• It keeps accurate records of all assets of the business.

• It contains details of the assets from date of purchase, cost price, rate of depreciation.
• It determines whether assets are owned by the business or leased.
• Help to identify each asset on model and identify missing or sold assets
• Helps to determine history of an asset to ensure all assets are properly valued to disclose accurately in
financial statement.
7.4
7.4.1 Calculate the profit or loss of stolen DELL laptops
ASSET DISPOSAL
Equipment 30 000 Acc. Depreciation 11 250
(R7500X4) Bank 10 000

Loss on sale 8 750
30 000 30 000
Page 43 of 95
7.4.2 Outline Advantages of insuring all business assets.
• In a case unforeseen events such as theft, damage on fire the assets may be replaced or maybe paid/
compensated at a certain value.
• The business will not lose everything in case of accident, can claim from the insurance.
7.4.3 The asset manager is of view that he must add a new statement, stating four more laptops were
stolen to claim more from the insurance. What advice would your provide to the fixed asset
manager
• Dishonest and Unethical practice by fixed asset manager

• Business may be investigated for fraud and temper the good image of the business.
• The business and him may face legal actions.
BB: INVENTORY VALUATION
ACTIVITY BB 1: INVENTORY VALUATION

1.1 INVENTORY VALUATION:
1.1.1 Calculate the value of the closing stock of Longlast AA 6-pack units on 31 October 2022.
5 000 x R23.50 = 117 500

7 000 x R23 = 161 000
1 500 x R22.50 = 33 750
13 500 312 250
1.1.2 Calculate the average stock-holding period, given the cost of sales amounted to R483 750 for
the year ended
31 October 2022.
352 250 176 125

½ (40 000 + 312 250 ) 365
483 750 X 1
= 132,9 (133) days OR 4,4 months
Comment on your findings above:
Too much working capital locked up in stock, can lead to cash flow problems.
Possible stock losses in future, since batteries have a limited shelf life.
Page 44 of 95
1.1.3 The owner is concerned about the sales of Petcell AA 6-pack units, and considers to discontinue
this product line:
Calculate the cost of sales of the Petcell AA 6-pack units.
(28 000 + 120 200)

148 200 – 72 150 = 76 050
Calculate the stock turnover rate for the year.
. 76 050
½(28 000 + 72 150)
50 075
= 1,5 times per year
1.1.4 Give TWO reasons why the owner must discontinue the sales of Petcell AA 6-pack units.
Any TWO reasons
The Petcell batteries are more expensive in comparison with the Longlast, customers prefer cheaper
batteries even if the quality is not the same.
Sales far too low 1 950 compared to 23 500.
Stock turnover rate of 1.5 time is to low, approximately 240 days.
Possible stock losses in future, since batteries have a limited shelf life
ACTIVITY BB2
2.1
2.1.1 first in first out (FIFO)
2.1.2 perpetual inventory system
2.1.3 Weighted-average method
2.2 ILLOVO CAR TRADERS
2.2.1 Calculate the selling price per BMW 3 series sold during the 2022 financial year.
R4 340 000 = 434 000

10
Page 45 of 95
2.2.2 Calculate the value of the closing stock on 30 June 2022 using the specific identification
method.
BMW 3 series (10 - 10) = 0

BMW 4 series (15 - 8) = 7 x R480 000 = R3 360 000
BMW 5 series (12 - 5 - 2) = 5 x R620 000 = R3 100 000
R6 460 000
ACTIVITY BB3
Calculate the value of the closing stock on 29 February 2022 using the weighted-average
3.1 method.
1 690 500
R313 220 + 1 392 380 – 15 100 x 320
510 + 1 960 – 20
2 450
R220 800
3.2 Calculate the following for the year ended 29 February 2022:
Cost of sales:
Opening stock 313 220

Purchases(Note: Purchase can include carriage = 1 392 380) 1 347 500
Returns (15 100)
Carriage on purchases 44 880
1 690 500
Closing stock (220 800)
Cost of sales 1 469 700
Gross profit:
Sales (2 115 x R1 400) 2 961 000
3.3 Calculate the average stockholding period (in days) on 29 February 2022.
267 010 415

½ (313 220+ 220 800) x 365 ½ (510 + 320) x 365
1 469 700 2 115
= 66,3 days = 71,6 days
Page 46 of 95
ACTIVITY BB4 INVENTORY VALUATION
4.1.1 Calculate the value of closing stock on 28 February 2022.
63 140 + 328 330 - 3 740 – 2 900 x 320

412 + 2 010 – 22 – 20
384 830 x 320
2 380
161,69 x 320
= R51 740,80 Accept R51 741
Must be x 320
Calculate the gross profit for the year ended 28 February 2022.
Sales (1 986 x R220) 436 920

Cost of sales (384 830 - 51 741 ) (333 089)
Gross profit 103 831
4.1.2 What advice can you offer Claude in this regard? State TWO points.

-He should explain to Nelson that it is unethical to favour family/friends to the
disadvantage of the business.
-There should be policies in place to make sure all employees understand and
abide.
-Best quality and prices should always be a priority for the business.
4.2 MANAGEMENT OF STOCK (PROBLEM SOLVING)
4.2.1 Provide a calculation to prove that sun hats are being stolen.
412 + 1 968 - 320 - 1 986 = 74 one part correct
Give TWO points of advice to Claude.
-Improve security/ security guards/ security tags on hats
-Restrict access to storeroom
-Order smaller quantities, more often/ order as needed
-Regular stock count and check against records
Page 47 of 95
4.2.2 Claude is unsure whether he is charging the correct prices for the sunglasses
and the beach bags.
Give him advice on EACH product. Quote figures.
PRODUCT ADVICE WITH FIGURES

Any valid advice
Figures
Sunglasses
-Mark-up of 25% is deemed as reasonable by buyers.
-Selling price of R3 438 acceptable for buyers.
-1 850 units are sold.
-Stock holding period is 52 days. Closing stock only 280 units.
Beach bags Mark-up of 80% is deemed as too high by buyers.

Selling price of R702 is not acceptable for buyers. Only 740 units
are sold.
Stock holding period of 163 days/ way too long
Closing stock of 420 units are too high.
If mark-up % is reduced, sales may increase.
ACTIVITY BB5
TABLES
5.1.1 Calculate the value of closing stock using FIFO.
Workings Answer
370 – 50 R416 500

(320 x 1 100) + (60 x 1 075 )
352 000 64 500
Page 48 of 95
5.1.2 Calculate the % mark-up achieved in 2022
Workings Answer
54.2 %
1 291 250 x 100 (accept 54%)
2 383 750
5.1.3 Provide TWO points (with figures) to prove that this decision achieved its aims.
Two different points and Figures
• Sales increased from R3 510 000 to R3 675 000/by R165 000/by 4,5%
• Gross profit decrease from R1 316 250 to R1 291 250/R25 000/by 1,8%
• Number of customers increased from 44 to 59/ by 15/by 34%
5.1.4 The CEO feels that this decision also negatively affected the company. Provide TWO points
(with figures) to support his opinion. (Do not accept Mark-up % here)
Two different points and Figures
• Cost of sales increased from R2 193 750 to R2 383 750/by R190 000/by 8,6%
• Units sold dropped from 2 700 to 2 450/by 250/by 9,3%
• Average units per customer dropped (2 700/44 = 66) to (2 450/59 = 41)/by 20/by 30%
Give the directors advice to solve this problem. Explain TWO points.
Any two suggestions
• Restrict trade discounts to good customers only
• Find a cheaper supplier (to compensate for keeping selling prices low)
• Increase marketing/advertising in areas outside the current areas targeted
• Provide other incentives such as free deliveries
CHAIRS
5.1.5 Calculate the stockholding period for chairs in days (use closing stock).
Workings Answer
90 800 41,3 days
802 300 x 365 OR
OR 34,3 days
465/4 945 x 365
Page 49 of 95
5.1.6 Calculate the number of missing chairs.
Workings Answer
(900 + 4 510 = 5 410) – 4 900 – 465 45
Give ONE suggestion to solve this problem.

One valid suggestion
• Increase supervision at regular intervals/random physical inspection of stock
• CCTV as an internal control measure
• Insist on proper documents for all stock supplied
STOVES
3.1.7 Calculate the value of the closing stock of stoves on 28 February 2022 using the
specific identification method.
Workings Answer
(1 300 – 560)
NIVA:
740 x 5 000 = 3 700 000
(1 450 – 880) R8 260 000
MILLE 570 x 8 000 = 4 560 000
ACTIVITY BB6
GOLF BALLS
6.1.1 Calculate the value of closing stock on 30 April 2022.

WORKINGS ANSWER
55 200 + 359 900 – 17 550 + 8 075

14 750 81 400
405 625
14 750 = 27,50 x 2 960
Page 50 of 95
The stock holding period in days using the closing stock.
WORKINGS ANSWER
81 400 x 365
324 225
405 625 – 81 400 91,6 days / 92 days
OR
2 960 x 365
11 790
GOLF CLUBS
6.1.2 Calculate the value of closing stock on 30 April 2022.

WORKINGS ANSWER
STRAIGHT DRIVERS/CLUBS
(35 – 30 = 5 X 4 900) 220 500
24 500
SHANKY DRIVERS/CLUBS
(22 – 10 = 12 X 7 000 + (23 – 7 = 16 X 7 000
84 000 + 112 00
OR (45 – 17) x 7 000 = 196 000
6.2 LEO APPLIANCES
6.2.1 Leo Appliances changed their supplier. Do you agree with the decision? Explain and provide
figures.
Yes
Units returned in 2021 were 35 and in 2022 returns are 0.
6.2.2 Explain the decision that Leo took regarding the selling price of the microwave ovens and
explain the effect of this decision. State TWO points with relevant figures.
Decision with figure:
Decision (one mark) Figure (one mark)
• He increased the mark-up from 50% to 80%.

• He increased the selling price from R1 920 to R2 610/by R690/by 35,9%.
Effect the business
Page 51 of 95
Any two valid points Figure
• Gross profit increased from R208 000 to R348 000/by R140 000/ by 67,3%.
• Stock turnover rate decreased from 7,2 to 6,0 times.
• Orders of ovens decreased from 390 to 350 units/by 40 units/by 10,3%.
• Sales of ovens decreased to 325 to 300 units/by 25 units/by 7,7%.
6.2.3 Leo significantly reduced the selling price of frying pans in the 2022 financial year.
Explain why Leo found it necessary to do this.
Competitor decreased his price.

Leo wanted to increase sales and profits.
Provide TWO separate suggestions with figures to Leo on how to improve profit on frying
pans in 2022.
One valid point for pricing One valid point for orders
• Must keep more stock because orders are more than nett sales.
• Leo should increase the price just below the R1 200 of the competitor.
• Leo should increase MU%; Any % between 10% to 20%.
• Mark-up % of competitor at least 60%.
• Leo must plan purchases of pans / must follow up on orders to meet the demand of 850 units
(i.e., 125 more than current sales).
ACTIVITY BB7
7.1 Mention ONE additional control measure that Mbali could consider to improve controls
in the branches.
Encourage customers to use EFT/ credit cards

Introduce online shopping facilities
Create a policy of regular banking to avoid rolling of cash
7.2 Identify TWO problems (with figures or calculations) relating to the Ermelo Plaza branch
and provide a solution in each case.
Problem with a figure Solution

80% are credit sales/ cash sales are 20% Discount on cash sales
of total sales Charge interest on credit sales
They only work 5 days per week The competitor work 6/7 days
There are only 2 shop assistants. The business should consider to increase
the number of shop assistants.
Page 52 of 95
7.3 List THREE decisions taken by Venessa, the manager of Tonga Plaza, which led to
much better results than those of the other two branches. Quote figures.
Any ONE valid explanation
The business is operating for 7 days per week

Advertising, R16 200 increased sales
The business is offering online facility, 750 units sold
Employed 6 shop assistants
ACTIVITY BB8
8.1.1 – 8.2.2: check workings when awarding method mark on final answer for reasonableness.
8.1.1 Calculate: Value of the closing stock of the Arctic TV sets using the FIFO method on 28
February 2023
WORKINGS ANSWER
[300 – 60] one mark [270 – 240]

240 x R 4 100 + 30 x R 4 000 1 104 000
984 000 120 000
If only amounts are used:
[1 230 000 – 246 000] [1 600 000 – 1 480 000]

984 000 120 000
8.1.2 Calculate: Stockholding period (in days) of the Arctic TV sets using the closing stock
figure on 28 February 2023
WORKINGS ANSWER
Choose only ONE option
1 104 000 x 365

67 days
6 010 000
Days not necessary
OR: if units are used
OR
270 one mark x 365
63,6 days
1 550 one mark
Accept 64 days
Numerator and denominator must be marked as such / all amounts are
stand-alone
Page 53 of 95
8.2.1 Calculate: Value of the closing stock of the Pacific TV sets on
28 February 2023 using the specific identification method
WORKINGS ANSWER
Only calculation for Pacific Brand
(350 + 800 ) 1 150 – 765 = 385 x R9 300
Using stock values:

Opening stock purchases cost of sales
3 255 000 + 7 440 000 – 7 114 500 3 580 500
one mark one mark one mark
Using stock balance at the end of each quarter:

(500 + 155 – 160 – 110)
385 units x 9 300
8.2.2 Calculate: Gross profit on the Caspian Smart TV sets on 28 February 2023
WORKINGS ANSWER
10 934 400 x [60 /160]

OR 10 200 x 60%
R 6 120 one mark x 670 one mark 4 100 400
10 200 x 670
OR R 6 834 000 one mark x 60% one mark
OR 10 934 400 one mark – 6 834 000 one mark
8.2.3 Comment on the quarterly sales of Pacific TV sets and explain whether or not Mandie's adjustment
of the selling price was a wise decision. Quote figures or calculations.
Explanation or comment on decision
The reduction in price was not a wise decision because: (any of the following)
sales did not increase as expected / decline in sales over each quarter / money tied up in stock / decline in
gross profit over time.
Comparative figures any two figures from each point (could include figures from 1st and last quarter)
• Units sold dropped per quarter (from 250 or 245 units) to 160 (by 85) to 110 (by 50)
by 56%.
• Gross profit per unit declined in each quarter (from R4 200) to R1 000 to R500.
• Sales revenue declined (from R3 375 000) to R1 078 000 in the last quarter.
• Closing stock is 35 units more than opening stock (385 – 350).
8.2.4 Comment on the stockholding periods of the Pacific and Caspian TV sets. Quote figures or
calculations.
Comment on Pacific (one mark) figure (one mark)
SHP of 184 days (6 months) is long, and it is an older model that will not be able to be sold in the future / A
decrease in units sold resulted in high stock value of R3 580 500 see 2.2.1 and lower profits.
Comment on Caspian (one mark) figure (one mark)
SHP of 71 days (2,3 months) is acceptable as it is new, a durable product that can easily be sold / is in
demand.
Page 54 of 95
Explain how the different holding periods affect the business financially. Quote figures or
calculations.
Explanation for Pacific (one mark) Figure/s (one mark)
• Pacific places the business under strain / contributes to cash flow problems.
• High closing stock value of R3 580 500 and slower rate of sales (from 250 units) to 110 units.
means that money is tied up in stock / requires more liquid assets / incurs additional expenses
due to insurance / storage costs / possible obsolescence, damage.
Explanation for Caspian (one mark) figure/s (one mark)
• Caspian brand sells well; 340 & 330 in two quarters / sales revenue is high (R5 548 800 and
R5 385 600 or R10 934 400); better gross profit (R4 100 400)/ minimises the pressure on liquidity
/ will be able to recoup investment in stock in the near future.
Explain what these periods indicate about the preferences of the customers. Quote figures or
calculations.
Explanation (mention both brands, or is implied) (2marks)
Customers not interested in the Pacific TVs (old technology) / might be negatively affected by the
introduction of the newer brand / They prefer the newer, more expensive Caspian.
Figures (comparison of each brand)

Gradual lowering of SP (from R13 500) to R9 800 of Pacific did not influence customers. They are
prepared to pay more for Caspian, R16 320 vs R9 800 for better quality, or later technology, better features
/ low sales: compare (110 to 330 / 160 to 340 / 270 to 670) units / Caspian sells faster; 83,75% of available
units were sold whilst 66,5% of Pacific was sold.
Provide TWO points of advice to Mandie on how she can rectify the high stock levels of some of
8.2.5 her products without reducing prices offered to customers any further.
• Transfer TVs to the other branch (Howick) to offer an alternative at that town.
• Extend the target market / exploring other areas / guesthouses / hotels.
• Sell them in bulk to other retailers (offer bulk discounts).
• Introduce online sales as a cost-saving initiative.
• Donations / Donate as part of corporate social responsibility / tax purposes.
• Promote sales by advertising more regularly or creating package deals (combo’s).
• Offer more favourable terms (lower deposit / instalments).
• Offer incentives to salespersons based on sales volume.
CC. COST ACCOUNTING

ACTIVITY CC1
1.1 CONCEPTS
1.1.1 C
j1.1.2 D
1.1.3 A
1.1.4 B
Page 55 of 95
1.2 WOODWARD MANUFACTURERS
1.2.1 Prepare the Production Cost Statement for the year ended 31 March 2023.
R
Direct/Prime costs 1 980 820
Direct Material costs 1 158 400

Direct Labour costs 822 420
Factory overhead costs 856 125
Total manufacturing costs 2 836 945

Work-in-progress at beginning of the year 44 000
2 880 945
Work-in-progress at the end of the year (661 445)
Cost of production of finished goods 2 219 500
1.2.2 Notes to the Production Cost Statement:

DIRECT MATERIAL COST
Net purchases 950 000
Carriage on purchases (72 000 + 4 050) 76 050
1 491 050
Closing stock (404 650 – 72 000(𝑅8 − 0.80 = 𝑅7.2 × 10 000) (332 650)
Direct material cost 1 158 400
DIRECT LABOUR COST

Factory wages (745 000 + 212 210 ×
100 761 500
74
7
Pension fund contributions (252 150 + (12 210 × 74 ) 53 305
UIF contributions (7 450 + (12 210 ×74)

1 7 615
Direct labour cost 822 420
Page 56 of 95
FACTORY OVERHEAD COST
Factory manager salary 190 000
Indirect materials (4 150 + 58 000 – 2 550 – 10 500) 49 100
Water and electricity (106 500 ×

100
) (177 500 × 80%) 142 000
60
Insurance (115 500 × 70%) 80 850
Rent (248 625 + 23 625 = 272 250 × 2000)

1600 217 800
Depreciation (1 250 000 × 15%) + 2 400 000 × 15% × 12 × 85%)

4 176 375
Factory overhead cost 856 125
COST OF FINISHED GOODS SOLD

Opening stock finished goods 122 500
Cost of finished goods produced during the year 2 219 500
2 342 000
Closing stock if finished goods (367 000)
Cost of finished goods sold/ Cost of sales (𝟑 𝟗𝟓𝟎 𝟎𝟎𝟎 ×200 )

100 1 975 000
ACTIVITY CC2
2.1 Indicate whether the following statements are True or False.
2.1.1 False
2.1.2 True
2.1.3 False
2.2 COSTUME MANUFACTURES

2.2.1 Calculate the direct labour cost.
Normal time 10 × 1760 = 17 600 × 𝑅92 = 𝑅1619 200 R 1 619 200
Overtime 𝑅92 × 1,5 = 𝑅138 × 900 = 𝑅124 200 R 124 200

Contribution R1 619 200 × 8 = R129 536 R129 536
100
R 1 872 936
Page 57 of 95
2.2.2 Calculate the amounts for (a) and (f) on the note for Delivery Vehicles and Factory Plant and Equipment.
CALCULATION ANSWER
(a) R640 000 – R152 000 R488 000
(b) 25 9
New: 𝑅240 000 × 100 × 12 = 𝑅45 000 R83 000
25 12
Old: R152 000 × 100 × 12 = R38 000
(c) R640 000 + R240 000 R880 000
R320 000 + R80 000 – R325 000 = R75 000 R33 750
Asset disposal
Cost 75 000 Acc dep 41 250
Bank 30 750
(d)
Loss 3 000
R75 000 – R41 250 = R33 750
Or R30 750 + R3 000= R33 750
Accumulated depreciation: R75 000 – R33 750 = R41 250
(e) Sold: R75 000 ×
15
×
8
= R7 500 R46 250
100 12
15 2
New: R80 000 × × = R 2000
100 12
15 12
Old: (R320 000 – R75 000) × 100 × 12 = R36 750
(f) R192 000 – R41 250 + R46 250 R197 000
2.2.3 Notes to the Production Cost Statement

DIRECT MATERIAL COST
Net purchases (𝑅331 500 × 15 )

100 2 210 000
Carriage on purchases 331 500
2 951 254
Closing stock (312 904)
Direct material cost 2 638 350
Page 58 of 95
Workings Direct material cost:
+ Work in Progress Stock account -

Balance 45 000 FGS 5 320 000
DMC 2 638 350 Balance 262 468

DLC 1 872 936
FOHC 1 026 182

Depreciation 46 250
Loss on disposal of asset 3 000

28 800
Salary factory foreman and cleaning staff (𝑅360000 ×
Rent expense 32 000
Consumable stores 31 843
Insurance 𝑅23 100 ÷ 11 = (𝑅2 100 + 𝑅189) 2 289
Factory overhead cost 1 026 182
2.2.4 Calculate the cost of sales for the year ended 31 March 2023.
+ Finished Goods Stock -
Balance 510 000 Cost of Sales 5 190 000
Balance 640 000

Work-in-progress 5 320 000
(𝑅70 × 76 000)
Page 59 of 95
2.2.5 Complete the Abridged Statement of Comprehensive Income (Income Statement)
Sales (5 190
150
000 × 100 7 785 000
Gross Profit 2 595 000
Other expenses (1 171 591)
753 104
Selling and distribution cost (636 457 + 83 000 + 36 000 + 13 647 - 16 000)
Administration cost (457 487 – 3 000 – 36 000) 418 487
Net profit for the year 1 423 409
Workings:
Rent:
𝑅208 000 ÷ 13 = 𝑅16 000 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ
𝑅208 000 − 𝑅16 000 = 𝑅192 000 × = 𝑅384 000 ÷ 12 = 𝑅32 000
Consumable stores:
COH 7 458 COH 9 568
Spent 47 600 FOHC (𝑅45 490 × 70%) 31 843

SDC (𝑅45 490 × 30%) 13 647
ACTIVITY CC 3
3.1 Do a calculation to prove that the break-even point for the record players in 2023 is correct.
1 000x 800 = 8 000

2 900-1 500 1 400
571.4 units
Page 60 of 95
3.2 Comment on the break-even point and the level of production for both products.
Record players The BEP increased from 435 units in 2022 to 572 units in 2023.
137
[𝑏𝑦 137/ [435 × 100 = 31,5%)
The units produced and sold remained constant at 800 units.
The profitability decreased from 365 units in 2021 to 228 units in
137
2022.[𝑏𝑦 137/ 365× 100 =37,5%)
The BEP decreased from 7 500 units in 2022 to 4 574 units in 2023.
Portable radios 2 926
[𝑏𝑦 2 926/ [ 7 500 × 100 = 39,0%)
The units produced and sold remained constant at 7 500 units.
The profitability increased from 0 units in 2021 to 2 926 units in 2023.
No profit or loss was made in 2022 compared to 2023.
In 2022 the business made a profit of 2 926 units (R839 762).
3.3 Jolie feels that she can produce and sell more portable radios. Calculate the number of extra portable
radio’s she must produce and sell to make an additional profit of R80 000. Assume that the selling price for 2023
remain unchanged.
(550 − 263) (175 × 7 500)

287
=278,7 units
=279 units 287
=4 851,9 units = 4
851,9 − 4
573,1
= 278,8
= 279 𝑢𝑛𝑖𝑡𝑠
3.4 Jolie decided to increase the selling price of the portable radios in 2023. Calculate the percentage increase
in the selling price
150
(550 – 400) X 100 = 37,5%
400 1
Provide a reason why the owner felt it necessary to increase the selling price.
No profit or loss in 2022 The BEP and the number of units produced and sold were 7 500 units.
An increase in the selling price will invariably lead to a lower BEP if costs stay the same.
Page 61 of 95
3.5 Identify ONE variable cost for the record players and ONE variable cost for the portable radios
that were not well controlled. Provide figures. In each case, provide a solution/advice to
address the problem.
COST IDENTIFIED ADVICE OR SOLUTION
Record players Direct material cost increased

750−600
by 25% 600 ) × 100) ▪ Look for cheaper suppliers.
%"" ▪ Take advantage of bulk discounts.
▪ Investigate wastage and train staff.
Portable radios Direct labour cost increased by

68−55
23,6% ( 55 × 100) Control overtime
▪ Train staff to be more efficient.
Or
Selling and distribution cost ▪ Give sales persons’ commission.
45−35
increased 29% ( 35 ) × 100) ▪ Identify cost and monitor use.
▪ Reduce advertising.
▪ Maintain this strategy. (The above
may have contributed to better profits)
ACTIVITY CC4
4.1 SUMMER SPLASH MANUFATURES
4.1.1 Calculate the value of raw materials that were issued to the factory for the year ended 28 February 2023.
($2 400 x R17) (R40 800 x 10%)

R684 000 + R1 512 000 + R40 800 + R4 080 + R8 300 – R29 000 – R816 000
=R1 404 180
4.1.2 Complete the Direct labour cost note and the Factory Overhead note
DIRECT LABOUR COST
Factory wages (7 x R15 000 x 12) 1 260 000
5 3
Bonus (28 000 × 2= 70 000 × 5= 42 000 or (28
3
000 × 2) 42 000
’ , ’
Medical aid contributions (7 x R36 000 x 55%) 138 600
UIF contributions (R1 260 000 x 1%) 12 600
Direct labour cost 1 453 200
Page 62 of 95
Loss due to theft 29 000
Insurance (85 700 – 8 200) 77 500 ÷ 2 38 750
Water and electricity (73 400 + 6 800 = 80 200 x 80%) 64 160
Rates and taxes (34

1200
000 × 1500) 27 200
3
Indirect materials (16 700 + 38 000 – 19 700 = 35 000 × 7) 15 000
1200
Rent expense (84 700 × 1500 ) 67 760
Depreciation on factory equipment 58 000
Workings:
Rent: R77 000 ÷ 11 = 7 000 + 700 =R7 700 R77 000 + R7 700= R84 700
4.1.3 Complete the Production Cost Statement for Summer Splash Manufacturers for the year ended 28 February 2023.
R
Direct/Prime costs 2 857 380
Direct Material costs 1 404 180
Direct Labour costs 1 453 200
Factory overhead costs 299 870
Total manufacturing costs 3 157 250
Work-in-progress at beginning of the year 375 000
3 532 250
Work-in-progress at the end of the year (532 250)
Cost of production of finished goods (20 000 x R150) 3 000 000
4.1.4 Summer Splash Manufactures buys from overseas suppliers. Upon investigation, it was
found that most of the raw materials used in the production process can be obtained from
local suppliers. Explain ONE possible reason why a local supplier should be used.
• Support for local business

• No import duties
• Lower transport cost
• Exchange rate varies – variation in profits
.
Page 63 of 95
DD. RECONCILIATIONS
BANK RECONCILIATIONS
1.1 CONCEPTS
1.1.1 True
1.1.2 False
1.1.3 True
1.2.1 CASH RECEIPT JOURNAL - MARCH 2023 CRJ 3

Doc Day Details Bank Amount Details
30 Total 49 000 49 000
B/S S. Sithole 8 300 8 300 Rent income
B/S S. Phakathi 2 750 2 75 Debtors Control
B/S VE Bank 232 232 Interest income
60 282 60 282
CASH PAYMENT JOURNAL - MARCH 2023 CPJ 3

Doc Day Details Bank Amount Details
30 Total 48 000 48 000
Sales 5 000 5 000 Sales
B/S Ace Traders 5 900 5 900 Creditors Control
B/S Town Council 3 200 3 200 Water and electricity
B/S VE Bank 1 112 1 112 Bank charges
B/S Zulu Insurers 5 100 Insurance
6 600 1 500 Drawings
69 812 69 812
Page 64 of 95
1.2.2 GENERAL LEDGER OF ELANGENI STORES
Bank Account
2023 2023
Mar Balance 11 400 Mar Sundry 69 812
1 31 Accounts
Mar Sundry Accounts 60 282 Balance 1 870

31
71 682 71 682
Balance 1 870
1.2.3 Prepare a Bank Reconciliation Statement for March 2023.
Debit Credit
Balance according to bank
statement 10 070
Cr. Outstanding deposit 17 400
Dr. Outstanding EFT 6 600
Dr amount wrongly credited 19 000
Dr. Balance according to the bank 1 870
account
27 470 27 470
Page 65 of 95
ACTIVITY DD2
2.1 2.1.1 False

2.1.2 True
2.1.3 False
2.2.1 Update the CRJ and CPJ totals in the table provided, and calculate the correct Bank
balance in the General Ledger on 31 July 2023.
CASH RECEIPTS JOURNAL CASH PAYMENTS JOURNAL
116 400 132 500

1 800 1 150
1 840
740
118 200 136 230
Bank Balance:
21 800 + 118 200 – 136 230 = 3 770
2.2.2 BANK RECONCILIATION STATEMENT ON 31 JULY 2023
DEBIT CREDIT
Balance as per statement 36 270
Outstanding deposits: 20/07 22 500
29/07 12 700
Deposit for rent not yet reflected 9 200
Outstanding EFT 778 6 200
Error on statement / amount duplicated 1 840
Balance as per bank account 3 770
46 240 46 240
Page 66 of 95
2.2.3 Refer to the outstanding deposit of R22 500 dated 20 July 2023.
Explain why the Accountant should be concerned about this deposit. Provide ONE
point.
ONE valid point

• Deposit is late / not good business practice to keep cash (security risk)
• Poor internal controls – lack of checks and balances / supervision
• Possible lack of division of duties – person taking advantage / negligent
• May contribute to poor management of cash – liquidity problems in future
• Possible rolling of cash
ACTIVITY DD3
3.1 COMPLETE THE CRJ AND CPJ:

Cash Receipts Journal Cash Payments Journal
(figures only) (figures only)
47 220 97 860
36 400 2 800
15 300 1 250
9 100 880
2 160
11 000
108 020 115 950
Bank balance on 30 June 2023:

– 49 700 + 108 020 – 115 950 = – 57 630
Unfavourable
Page 67 of 95
3.2 Prepare the Bank Reconciliation Statement on 30 June 2023.
Debit Credit
Debit balance as per bank statement 55 020
Credit outstanding deposit 34 620
Debit amount incorrectly credited 23 000
Rectify error 10 570
Debit outstanding EFT 633 24 800
Credit balance as per bank account 57 630
102 820 102 820
3.3 Refer to Information H.

Explain why the internal auditor would be concerned (provide figures). What actions
should be taken? Provide TWO points.
Concern (with figures):
• R10 000 less cash from sales were recorded and deposited.
Actions:
Any ONE action
• Division of duties
• Control deposits before going to the bank
Page 68 of 95
ACTIVITY DD4
4.1 Cash Receipts Journal Cash Payments Journal

60 334 34 865
(1 780 + 1 780) 3 560 (19 700 – 17 900) 1 800
315 1 670
(12 080 – 10 080) 2 000
651
64 209 40 986
4.2 Calculate the correct balance of the Bank account in the ledger on 31 May 2023.
–34 274 + 64 209 – 40 986 = –11 051
4.3 Prepare the Bank Reconciliation Statement on 31 May 2023.

Debit Credit
Balance as per bank statement R89 731
Outstanding deposit 54 370

26 300
Outstanding EFT 3 660
Correction of error by the bank 1 670
Balance as per bank account 11 051
93 391 93 391
Page 69 of 95
4.4 Explain ONE problem to confirm the auditors concern and give an advice on how the problem
can be avoided. Quote figures.
Problem Figure(s) Advice
• Shortfall in cash deposit, • Use security company to collect deposits on daily or

R2 000/R12 080 received and regular basis
documented but only R10 080 was
• Divide duties: person receiving the money must not
deposited/Delay in cash deposit (15
be the one depositing it / count in, count – out cash
April – 17 May 2023)
procedure (count cash at the beginning and end of
• EFT incorrectly recorded as payment shifts).
of R1 780.
• Senior personnel should check (monitor) internet
banking transactions regularly (daily) /deposit slips
that reflects daily deposits.
• Encourage debtors to make direct deposit/EFTs.
Do not accept “install cameras”
ACTIVITY DD5
5.1
5.1.1 True
5.1.2 False
5.1.3 False
5.2 BANK RECONCILIATION
5.2.1 CASH RECEIPTS JOURNAL CASH PAYMENT JOURNAL

Amount Amount
Total 101 200 Total 135 215

2 700 4 000
5 800 1 400
260 1 800
825
109 960 143 240
Page 70 of 95
5.2.2 Calculate the correct bank balance in the ledger on 31 July 2023.
WORKINGS ANSWER
53 800 + 109 960 - 143 240 20 520
5.2.3 BANK RECONCILIATION STATEMENT ON 31 JULY 2023

DEBIT CREDIT
Balance per Bank Statement 71 020

Outstanding deposit (30 July) 29 500
Outstanding EFT No. 350 4 200
No. 351 3 800
Correction: 72 000
Balance as per Bank Account 20 520
100 520 100 520
ACTIVITY DD6
6.1
6.1.1 True
6.1.2 True
6.1.3 False
Page 71 of 95
6.2 SIGQAMISE TRADERS
6.2.1 UPDATE THE CASH JOURNALS FOR 30 APRIL 2023
CASH RECEIPTS JOURNAL CASH PAYMENTS JOURNAL

Amount Amount
Total 115 600 Total 217 800

900 15 000
8 400 2 880
18 300 740
580
143 200 237 000
6.2.2 Calculate the correct Bank Account balance on 30 April 2023.

WORKINGS ANSWER
49 720 + 143 200 – 237 000 (44 080)
6.2.3 BANK RECONCILIATION STATEMENT ON 30 APRIL 2023
DEBIT CREDIT
Balance per Bank Statement 20 110

Outstanding deposit 22 500
Outstanding EFT No. 883 9 520
No. 884 12 530
Error on statement 65 000
Correction of error 360
Balance as per Bank Account 44 080
87 050 87 050
Page 72 of 95
6.2.4 Oscar noticed problems with the depositing of cash. Explain TWO measures that she can
use to address these problems.
TWO valid points
Implement a depositing routine / policy on daily or regular depositing.
Employ a different person to be responsible for depositing money (division for duties
must be explained).
Engage the services of a cash in transit company (security services) / or split large
amounts into smaller deposits.
Supervise / conduct independent check / authorize funds to be deposited / inspect
documentation (deposit slips) before and after deposit times.
Encourage more customers to pay by EFTs (less cash handling).
Set up a bank notification service for all transactions (to receive SMS).
Do regular or random reconciliations using mini statements from banking application, as
an interim control measure / cash and credit card transactions can also be reconciled
daily, to avoid errors later.
ACTIVITY DD7
CREDITORS RECONCILIATION
7.1
Creditors Ledger Creditors Reconciliation Statement

Balance 43 900 40 475
(i) +10 000
(ii) - 3 300
(iii) + 750
(iv) - 775
(v) - 8 600
(vi) +2 100
(vii) - 7 500
- 750
38 150 38 150
Page 73 of 95
7.2
The owner, Precious, suspects that the purchasing manager may be buying goods for himself
through the business ordering system.
Suggest TWO internal control measures that she can use to ensure that practices do not occur.
Division of duties/ rotation of duties of persons making the orders and receiving the orders
Check the documents regularly against the goods and make random stock counts to double check all
stock.
Activity DD8
8.1 No. CREDITORS LEDGER ACCOUNT STATEMENT
5 350 12 540
A. +540
B. +8 400
C. +4 000
D. -250
E. -2 500
14 040 14 040
The owner of Loyiso stores is concerned that the bookkeeper could be defrauding the
business through the credit system. List TWO internal control measures that can be applied
in order to maintain control over creditors.
• Conduct internal audits to minimize the possibility of fraud and error.

• Check documents to ensure accuracy of calculations and entries.
• Ensure that all purchases have valid authorization.
• Ensure that creditors are paid on time to make use of discounts / avoid interest charged
discounts.
Page 74 of 95
Activity DD9
CREDITORS' LEDGER STATEMENT RECEIVED

ACCOUNT OF LAWES FROM LAWES
WHOLESALERS WHOLESALERS
Balance 67 870 46 590
(i) – 750
(ii) + 580 – 580
– 900
(iii) (– 8 700 + 7 800)
two marks
– 1 280
(iv) – 640 – 640
one mark one mark
(v) – 11 400
(vi) – 1 920
– 14 720 + 12 800
(vii) + 1 250
(viii) + 3 180
(ix) + 9 900
BALANCE 56 270 * 56 270
ACTIVITY DD9
DEBTOR’S RECONCILIATION AND AGE ANALYSIS
9.1 Explain why the Debtors’ Control account balance should agree with the Debtors’ List
total.
Valid answer
The Debtors’ Control account is a summary of the individual debtors’ accounts and therefore the
balance of the Debtors’ Control account should be equal to the List of Debtors according to the
Debtors’ Ledger.
9.2 Briefly explain how the preparation of a Debtors Age Analysis can assist the business in
controlling their debtors.
Steps can be taken against debtors who do not comply with credit terms by suspending their
rights, taking legal steps against them.
9.3 Provide Theo with FOUR key points that confirms his suspicions.
Quote specific information from the Age Analysis (TWO points) and from the Debtors Control
account (TWO points).
Note: You don’t have to take the errors and omissions into account.
Page 75 of 95
Debtors Age Analysis
Valid answer to do with limit of R15 000
Valid answer to do with terms of 30 days
H. Horton has been allowed to exceed the credit limit of R15 000 – he owes R28 300. He also
exceeded his credit term by not settling his debt within the 30 days limit – he owes R9 100 for
more than 60 days. He shouldn’t be granted any credit until he has paid his outstanding debts.
M. Mooney also exceeded the terms of 30 days – he owes R2 700 for more than 60 days.
Debtors Control account
Any TWO valid answers
The dishonoured cheques amounts to 20% of payments received from debtors. (R11 300/10 800
of R55 700) It is unacceptable.
The bad debts written off amounts to R4 500. Their credit control is not good, sell to unreliable
debtors, debtors are not scrutinized thoroughly.
Debtors’ allowances consist of 5% of sales. Too much stock is returned by debtors.
9.4 Prepare the correct Debtors’ List on 31 August 2023.

Debtor R
23 700
H. Horton (28 300 – 900 – 3 700 )
L. Lorax (4 500 - 4 500) -

12 000
K. Knox (13 000 – 1 000 )
13 500
V. Vladikoff (9 800 + 3 700 )
16 000
M. Mooney (14 600 + 1 400)
Total 65 200
DEBTORS CONTROL
Page 76 of 95
No Details Amount
Balance R38 180
(i) - 1 800
(ii) + 600
(iii) - 900
Adjusted balance 36 080
No Details Amount
Total 38000
(i) B Maharaj -1620
(ii) A Marks + 600
(iii) G van der Merwe - 900
Adjusted total operation if one part correct 36 080
Activity DD11
11.1 The bookkeeper, Litzie, says it is not necessary for her to prepare a Creditors'
Reconciliation Statement because the creditors send monthly statements to the business
anyway. What would you say to her? State TWO points.
Expected responses:
• The statement could contain errors.
• This is an internal control measure.
• This will lead to detection of errors/omissions/fraud.
• To compare/check/reconcile the account to the statement.
• To ensure VAT return is correct / to assist in doing the VAT return.
Page 77 of 95
11.2
No. Creditors' Ledger of N Statement of account received

Maduna Stores from Valley Ltd
Balance 112 820 182 150
A – 9 000 – 9 000
B + 87 500
C + 7 200
D - 1 400
E - 630
F + 2 100
G - 5 250 - 5 250
- 10 500
H + 4 600
182 920 * 182 920 *
11.3
11.3.1 Explain what action should be taken against J van Wyk. State TWO points.
Any two valid points
• Must be subjected to a disciplinary hearing
• Open a criminal case at SAPS
• Redeploy pending decision / suspend pending decision (on outcome of the
hearing/case)
• Require employee to refund/repay employer for the costs/deduct from salary/take
legal action for repayment
• Dismiss him as this is gross misconduct
Dismiss the employee / fire him; Warning; Redeploy him; Suspend him; Sue him; Take legal
action.
Page 78 of 95
11.3.2 What must the business do to prevent a similar incident in future? Explain THREE
points.
• Division of duties so that each person serves as a check on another / get someone
else to authorise these transactions.
• Rotate duties so that employees do not have permanent control over an aspect of
the business.
• Conduct internal audits / check documents to detect the fraud and errors.
• Physical stock control (to records) / check stock on hand to stock records.
• When goods are received, the receiving officer must check the stock received to the
invoice and order form.
• Inform suppliers of the procedure for delivering goods to the business and do not
deviate from this.
For 1 mark:
Division of duties; Rotation; Authorisation of all orders; Internal control; Security cameras
(CCTV); Security checks (at exits); Regular stock counts.
EE. BUDGETING AND FORECASTING
ACTIVITY EE 1
1.1 BLING TRADERS

CASH BUDGET FOR NOVEMBER AND DECEMBER 2015
CASH BUDGET NOVEMBER 2015 DECEMBER 2015
R R
CASH RECEIPTS:
Cash sales 420 000 399 000
Cash from debtors 536 025 597 975
Commission income 6 000 7 000
Total receipts 5
962 025 1 003 975
CASH PAYMENTS:
Cash purchases of stock 120 000 114 000
480 000
Payments to creditors 520 000
Sundry expenses 22 500 20 700

Wages and salaries 200 000 256 000
Page 79 of 95
Advertisements 33 000 0
Repayment of loan 36 000
Interest on loan 3 780 3 510

Total payments 935 280 874 210
Surplus (deficit) 26 745 129 765
Opening bank balance (56 000) (29 255)
Closing bank balance (29 255) 100 510
1.2 DREAM BEDS (PTY) LTD
1.2.1 Calculate the percentage increase in the amount budgeted for salaries and wages for
October 2015.
1 800 x 100 = 6%
30 000 1
Should the employees be satisfied with this? Explain.
Yes / No – compare to inflation rate / compare to directors fees
1.2.2 The financial director is pleased with the work being done by the bookkeeper and
internal auditor. Identify an expense that indicates that he is correct.
Audit fees
Explain your answer.

: The audit fees are much lower than expected, which means that they spent less time on the
audit / records were in order
Audit fees lower than expected
Page 80 of 95
1.2.3 Comment on how the new competitor has affected the sales of Dream Beds. Provide
figures. Comment Figures
Cash sales are ¼ of the amount budgeted
Cash sales projected R1,2m while actual was R300 000
Actual cash sales for Sept were R1,28m and dropped to R300 000 in Oct
Budgeted cash sales was 80% but actually achieved 20%
Sales decreased by 60 beds
Gross profit decreased by R120 000 (R2 000 gross profit per bed)
Sales decreased by R400 000
Explain how Dream Beds has responded to this problem. Provide THREE points.
Provide figures.
They deliberately increased credit sales (R300 000 was budgeted but
Point 1
R900 000 was sold on credit).
They increased delivery expenses to expand their target market / improve
Point 2 after-sales service. (Budgeted R150 000 but spent R168 000; 12%
increase).
They spent R40 000 on advertising (Budgeted R10 000; 300% overspent).
Point 3
/ Decreased directors’ fees by R44 000 to fund more advertising R30 000.
1.2.4 Comment on the cash balances. Provide figures.

Expected responses:
Disappointing / they expected a closing balance of R335 000

The actual balance is an overdraft of R210 000 (difference R545 000)
Actual balance for Sept is R230 000 while Oct reflects an overdraft of R210 000.
(Difference R440 000).
Explain how the directors can improve the cash balances in future. Explain TWO
points.
Encourage debtors to pay faster Charge clients for deliveries

Negotiate with creditors for longer Take out a loan (to reduce the overdraft and
payment terms interest)
Raise more capital / issue more shares Decrease mark-up to increase sales
Move to cheaper premises Look for alternative income e.g. commission
Decrease expenses / increase income / decrease rent / increase sales
Page 81 of 95
ACTIVITY EE 2
NOZULU TRADERS
2.1.1 Debtors' Collection Schedule

MONTH CREDIT SALES SEPTEMBER OCTOBER
JULY 126 000 6 300
AUGUST 131 400 72 270 6 570
SEPTEMBER 133 200 53 280 73 260
OCTOBER 136 800 54 720
CASH FROM DEBTORS 131 850 134 550
2.1.2 Calculate the missing amounts indicated by (a)–(e) on the Cash Budget.
WORKINGS ANSWER
CASH PURCHASES: SEPTEMBER
(a) (222 000 x 100/150) 44 400

148 000 x 30%
PAYMENTS TO CREDITORS: OCTOBER
(b) 148 000 x 70% x 96% 99 456
OR: 148 000 – 44 400 x 96%
SALARIES AND WAGES: OCTOBER
(c) 41 500 x 107% 44 405
INSURANCE: SEPTEMBER
(d) 13 952 x 100/109 12 800
LOAN INSTALMENT: OCTOBER
(e) 1 875 – 1750 12 000

125 x 12
0,125
Page 82 of 95
2.1.3 Refer to Information G.
Comment on how the online sales have affected the actual cash and credit sales in
August. Quote figures or calculations
• Cash sales increased from R87 600 to R162 000

• Credit sales increase from R131 400 to R133 650
Refer to Information H.
Identify TWO other costs already in the budget that were affected by the decision to go
online and explain whether they were well controlled or not. Quote figures or
calculation
• Delivery cost is more by R20 367 (is now 18% of sales but the budget is for 15% of sales)
so not well controlled.
• Packing material increased by 7 880 (18% of sales was budgeted; 15,6%) was the actual
– so this was well controlled.
• Telephone is more than budgeted by 8 400 (80%) possibly due to extended use of data
and the internet – resulting in increased sales.
• Advertising more than budgeted by 6 132 (35%) possibly needed to attract customers for
online sales.
Provide ONE point that he should consider to manage online sales as a permanent
feature.
ONE point
• More than one person must be trained.
• The computer operator must be supervised and provide reports daily.
• Arrange SMS facilities with bank for notifications of all transactions.
• Get feedback from customers on service offered.
2.1.4 Calculate the cost price of the new delivery vehicle.

WORKINGS ANSWER
R360 000 450 000

(R7 500 x 48) x 100/80
List TWO other costs related to the vehicle that Claudio will have to include in the
budget. Figures are not required.
Any 2 points
• Fuel costs must be included.
• Salary of a driver must be provided for.
• Insurance on the vehicle
• Vehicle maintenance cost
Page 83 of 95
ACTIVITY EE 3
3.1 Creditors' Payment Schedule for December 2022

CREDIT PURCHASES NOVEMBER DECEMBER
October 300 900 60 180
November 331 500 251 940 66 300
December 222 700 169 252
If cash purchases of
222 670 169 229
39 330 used (English
222 870 169 381
only)
312 120 235 552
3.2 Calculate the missing figures (i) to (iii) in the Cash Budget.
NO. WORKINGS ANSWER
Collection from debtors: December 2022
643 500 x 70% OR 193 050 x 70/30 450 450
(i)
Rent income: December 2022
(15 000 / 60m)

R250 x 75m
15 000 + 18 750
33 750
Be alert to alternative calculations, such as:
(ii)
OR 15 000 + (15 000 x 75/60)
OR 15 000 + (15 000 x 125%)
OR 15 000 + (15 000 + 3 750)
OR 15 000 x 225%
OR R250 x 135m
Salaries: November 2022

39 000
(iii)
(55 595 – 14 840)
40 755 x 100/104,5 OR 40 755 – 1 755
3.3.1 Calculate the deposit that will be paid for the purchase of the company vehicle during
December 2022.
WORKINGS ANSWER
(20 800 x 24)
(499 200 – 45 600) OR (18 900 x 24) 151 200
453 600 x 25 / 75 453 600 x 100/75 OR: 604 800 – 453 600
Page 84 of 95
3.3.2 Lisa is concerned about the cash position for December 2022.
She proposes moving the purchase of the vehicle to January 2023.
Use the table below to show the effect of this proposal to the December 2022 Cash Budget.
Budgeted deficit on 31 December 2022 (120 000)
Deposit on vehicle 151 200
Monthly instalment (18 900 + 1 900) 20 800
Fuel for company vehicle 7 500
Insurance 3 200
Cash deficit/surplus after the proposed move 62 700
3.4 Lisa is concerned about her decisions in October 2022 to adjust the mark-up % and the
amount actually spent on advertising. Provide TWO points to indicate whether these were
wise decisions or not. Quote figures and/or calculations.
The reduction in mark-up % led to:

• Sales of 4 390 units more than budgeted / from 7 080 units to 11 470 units /
by 62%. OR sales exceeded the budget by R247 446 (from R584 100 to
POINT 1 R831 546 or 42,4%)
• Gross profit is more than budgeted by R27 966 or 12,2% (from R230 100 to
R258 066) / cost of sales was more than budgeted as expected, due to more
sales (by R219 480)
Underspent on advertising by R12 000 (40 000 – 28 000) or by 30% was not
significant as it did not affect sales negatively / budgeted figure was 6,8% of
POINT 2 sales, but actual amount used was 3,4% of sales.
It could be argued that sales could have been higher if more was spent on
advertising.
3.5.1 Explain why Lisa should be concerned about the actual amount spent on repairs and
maintenance during October 2022. Quote a figure or a calculation.
Underspent on maintenance by R22 000 / spent only R8 000 of the R30 000 budget / 26,6% of the
budget was used / 73,3% of budget was not used.
Explanation for concern
This could affect the long-run productivity of the assets / neglecting maintenance may cause
disruptions to operations / cash savings in the short-run may cause fixed assets to break down or
deteriorate, leading to greater expenses in the future.
Page 85 of 95
3.5.2 James feels that there has been a lack of control over the amounts spent on delivery expenses
and packing material. Explain whether James' opinion is correct or not. Provide calculations.
Explanation (comparison with sales)
The delivery costs were well maintained; service provider was able to
operate more efficiently in spite of increased sales:
• Delivery expenses is 22,4% more than budgeted, but units sold is more than
budgeted by 62% / sales is 42,4% more than budgeted
EXPLANATION ON • Delivery cost per unit is R3,74 compared to the R4,95 budgeted.
DELIVERY • Budgeted for 6% of sales actual was 5,2% of sales
EXPENSES
THREE-mark option: comparison with sales quoting variances:
Delivery expenses is over the budget by R7 850, but sales is more than
budgeted by 4 390 units / by R247 446
ONE-mark option: no comparison with sales but variances mentioned:
Delivery expenses is over the budget by R7 850.
Explanation (comparison with sales)
Figures comparison of percentages or unit cost
award ONE mark if only comparative figures (variances) are used.
Packing material was efficiently managed / in line with the budget:
• Packing material is 62% more than budgeted and units sold is also 62%
more than budgeted / sales is 42,4% more than budgeted / cost of sales is
also 62% more than budgeted.
EXPLANATION ON
• Unit cost of packing material was maintained at R3,30.
PACKING
MATERIAL • Budgeted for 4% of sales actual was 4,6% of sales
THREE-mark option: comparison with sales quoting variances:

Packing material is over the budget by R14 486, but sales is more than
budgeted by 4 390 units / by R247 446
ONE-mark option: no comparison with sales but variances mentioned:

Packing material is over the budget by R14 486.
3.6 Lisa wants to use social media to create an on-line shopping platform to increase her sales from
January 2023. Name THREE additional payments that must be included in the January 2023
budget.
Accept any relevant example, including existing payments that may have to be adjusted because of this
venture.
Possible examples. Be alert to examples not mentioned on this list

Establishment of a call centre / telephone lines
Additional couriers services / transport and carriage costs
EXAMPLE 1
Additional delivery vehicles
Computer, computer hardware, file server
Generator / inverter / UPS / solar panels
Page 86 of 95
Increased salaries / for drivers, assistants, IT technician, staff
Packaging costs / packing material
Insurance
Staff training
Data costs, fibre installations, internet cost
Software construction costs, website design
Additional advertising
IT maintenance
ACTIVITY EE 4
4.1 GEMASE HARDWARE
4.1.1 Calculate the missing amounts indicated by (a. to .e) in the Cash Budget for March and
April 2023.
Calculation Amount
28 000 ÷ 7% x 60 240 000
(a)
R28 250 x 90/10 R254 250
(b)
6000 6 330
(c) (3 000 x 2) x 105,5%
180 000 ÷ 24 R7 500

(d)
180 000 x 10,5% x 1/12 R1 575
(e)
4.1.2 Complete the Debtors' Collection Schedule.
CREDIT SALES MARCH APRIL

FEBRUARY 152 000 76 000
MARCH 160 000 80 000
68 400
APRIL 158 400 67 716
147 716
144 400
4.1.3 Calculate the percentage increase in sundry expenses.
2 190
Page 87 of 95
(89 790 – 87 600) = 2,5%
87 600
4.1.4 The Cash Budget for March and April 2023 indicates that this business will face serious
financial difficulties. Identify TWO items to support this statement. Quote relevant figures.
Item & Figures
• The overdraft in March is R75 300 and April is R44 900. This exceeds the overdraft limit
of R40 000 as approved by bank.)
• The business is going to acquire a loan of R180 000 in April 2023.
4.1.5 Explain why each of the items reflects a problem for the business and advise Gemase
regarding each case.
Item Explanation
Any two valid reasons Alternative valid answers acceptable
Collection from • Collections are much lower than expected.
debtors • This will cause a cash flow problem.
• Internal control of debtors is poor.
• These are a lot lower than they should have been.
Payments to
• Suppliers will stop selling to the business.
creditors
• Interest can be charged by the creditors.
• Poor credit rating for the business.
• The policy will lapse. risk of being uninsured).
Insurance
• It will be difficult to replace assets.
• There could be an increase in premiums in future.
• This puts strain on meeting more important business
expenses.
Drawings
• This creates a further cash flow problem.
• It is not ethical for the owner to draw more money while
the business is struggling. .Increased loans, overdraft)
4.2 MANAGEMENT OF FIXED ASSETS

Identify ONE problem regarding each vehicle/driver. Quote figures to support your
answers. Give Gemase ONE point of advice for EACH problem identified.
Problem with figures Advice

Problem
Figures
Page 88 of 95
Leroy was absent for 8 days./ He is the Investigate the reason for his
Vehicle 1 highest paid driver, R8 000 where other absence./Only pay for the
.Leroy) drivers earn R5 000. number of days at work.
Fred is travelling too many kilometres 4 Possible disciplinary action
600 km for 80 trips = 58 km per trip) against Fred for
which is higher than the maximum of 40 unauthorised use of
Vehicle 2 km per customer./He is travelling more vehicle./Improve internal
.Fred) km than Bheki .4 200 compared to 2 control over the use of the
800 km) but doing fewer trips .70 vehicles.
compared to 110).
Bheki is doing the most number of trips Consider replacing this
Vehicle 3 .120) but his vehicle is the oldest and vehicle as it is expensive to
.Bheki) the most expensive to run .R0,81 per maintain.
km).
ACTIVITY EE5
Explain the main purpose of a Cash Budget.

5.1 Explanation
To predict the cash balances / cash flow for a period To
project / plan / forecast receipts and payments.
Explain the main purpose of a Projected Income Statement.

Explanation
To predict the profit that will be earned for a period To
plan / forecast income and expenses.
Page 89 of 95
Larry expects debtors to settle accounts by the end of the month following the sales
5.2.1
transaction month.
Use the November figures to calculate the % of debtors that are expected to comply with the
credit terms.
181 440
56 000 + 125 440 x 100 = 81%

224 000
OR 25% + 56% = 81%
Use the November figures to calculate the % of bad debts expected.

8 960
-181 440
(224 000 – 56 000 –125 440 – 33 600) x 100 = 4%
224 000
Larry does not believe that his debtors' control clerk, Shirley, deserves a bonus on 31
October
OR 100%2022.
– 25% – 56% – 15% = 4%
Provide evidence to support his opinion.
Explanation (calculation / figures) from the Age Analysis

58% of the amounts owed are still within the credit terms
OR
42% of the amounts owed are not complying with terms Offer Larry advice to improve debtors'
collections (TWO points). Two valid points
Expected responses:
• Contact debtors through statements / phone calls / SMS / reminders
• Offer discounts for prompt payments.
• Give her a bonus if she collects the outstanding amounts
• Charge interest
• Refuse to sell to debtors who are not compliant
• Improve screening process (so that bad debtors do not open accounts).
Note: Do not accept implement screening of debtors (i.e. already debtors)
5.3.1
Calculate the amount of the loan to be repaid on 31 December 2022

510 x 12 ÷0,085 = R72 000
2 975 – 2 465
OR
10x 12x 100 = R72 000
(2 975 – 2 465 ) 8,5
OR
Page 90 of 95
(2 975 x 12 ÷ 0,085) – (2 465 x 12 ÷ 0,085) = 72 000
420 000 348 000
OR
348 000
1 200 x 2 975 – 1 200 x 2 465 = 72 000
8,5 8,5
5.3.1
Refer to variances in Information D. Explain why Larry would feel that all these variances
are problems for his business
COMMENT ON VARIANCES
Cash sales are under budget , while credit sales are over budget.
5.3.2 Sales This will contribute to cash flow problem of the business.
The full advertising budget was not used (under-spent)

Advertising which could have led to the decline in sales.
Packing There was no saving in packing materials (misuse of packing

materials materials) despite the decline in sales.
There should have been a bigger saving in delivery expenses as sales 9

Delivery decreased by 9,4% , while delivery expenses decreased by only 2,3%.
expenses / 4,3% of total sales
while budget was 4%.v
ACTIVITY EE6
6.1
Calculate the expected monthly percentage of goods sold on credit.

70 000 x 100
1 = 80%
87 500 two marks
6.2 OR 64 000/64 000 + 16 000 x 100= 80%
Page 91 of 95
MONTH CREDIT SALE FEBRUARY MARCH
December 2022 74 000 16 280 0
January 2023 68 000 27 200 14 960
February 2023 70 000 24 010 28 000
March 2023 64 000 21 952
Cash from debtors 67 490 64 912
6.3.1
Explain why the owner is concerned. Give TWO reasons with

supporting figures.
Explanation Figures
Expected responses:
• Actual amount collected from debtors in February (R43 870) is lessthan the budgeted
amount of (R67 490) or by (R23 620)
• Credit terms are 30 days but records show that 52% of debtors take 60days or more to
pay/Only 48% are meeting the credit terms.
6.3.2
Suggest ONE solution for this problem.
Expected responses
• Offer discounts to encourage early/prompt paymentsCharge
• interest on overdue accounts
• Proper screening of debtors to ensure debtors is able to pay their debtspromptly.
Send regular reminders
•
WORKINGS ANSWER
(a) Payment to (70 000+17 500) 66 500
creditors 87 500x 100/125 = 70 000 x 95%
OR 87 500 x 100/125 = 70 000 – 3 500
OR 87 500 x 0,8 3 500
(b) Salaries of 20 800 x 107,5% = 22 360 + 5 200 27 560

sales OR
assistants 5 590 x 4 = 22 360 + 5 200
6.4.2
Page 92 of 95
Calculate the percentage increase in rent on 1 March 2023.
(12 544 – 11 200)

1 344 x 100 = 12%
11 200
6.4.3
The amount of the interest on investment expected to be received inMarch 2023.
16 830 x 2 /102 = R330 OR

16 830 – (16830 ÷ 1,02) = R330
6.5 Identify TWO payments that you consider to be poorly managed in February 2023. In EACH
case, give a suggestion to improve the internal control of the items identified.
PAYMENT ADVICE
Relevant advice
Advertising The business must make use of the budgeted

amount for advertising to influence sales
Stationery The business should minimize wastage/theft

and use stationery effectively.
Drawings Stick to the budget or amend the budget to

accommodate the increase in drawings.
Maintenance of office Equipment must be maintained properly to

Equipment prevent it from breaking down.
Page 93 of 95
FF. VALUE ADDED TAX
ACTIVITY FF1
(NATI STORES)
1.1 Explain what is meant by VAT exempted items. Supply ONE example.
Explanation
• Items/Products/Services that no VAT is being charged, according to law.
• A law need to be changed in order to change VAT on these items.
Examples
interest, rates, export services, childcare services, educational services,
services provided by non-profit organisations, salaries, wages, fuel.
1.2 Why must Nati Stores register for VAT?

Their annual turnover is more than R1 000 000.
1.3 Calculate the amount of VAT payable to OR receivable from SARS on 28 February 2023.
(You may draw up a VAT Control Account to assist you in your calculations)
(315 882 x 15 /115)
VAT Input: 41 202 + 6 440 + 1 168 = R48 810 (Dr)
VAT Output: 36 600 + 350 + 1 275 = R41 075 (Cr)
(244 000 x 15%) (9775 - 8 500) OR (8 500 x 15%)
VAT amount: 2 850 + 35 700 - 48 810 (see calculations above)
= R7 735 receivable from SARS
OR
VAT CONTROL
41 202 Balance 2 850
6 440 36 600
1 168 350
1 275
(Total input) 48 810 (Total output) 41 075
RECEIVALBLE from SARS 7 735
(Dr. – Cr.) +
1.4 Nati's bookkeeper has a special agreement with one of their suppliers. When purchases are made,
the supplier will issue two tax invoices - one showing the original price, while the other one is
inflated by 25%. The bookkeeper then uses the tax invoice with the higher prices to claim VAT.
Do you think the bookkeeper is acting ethically correct?
No ("Yes" not accepted as an option)
What can the internal auditor, who recently learned about this practice, do about this situation?
• Bookkeeper is acting illegally, so he may be charged for fraud.
• Auditor should conduct a full audit to determine the total amount of the fraud.
• Auditor will have to report it to SARS, before they discover it themselves.
• Nati Stores should pay penalties and interest to SARS.
• SARS can conduct their own audit on site/at the shop.
• Auditor may also report the supplier to SARS, as they are also advantaged and will have to pay penalties and
interest.
Page 94 of 95
ACTIVITY FF 2 (KOTINI TRADERS)
2.1 Calculate the final amount payable to SARS on 31 July 2023.

– 11 200 + 135 000 – 82 500 + 273 – 7 170 – 1 425 = 32 978 OR 11 200 – 135 000 + 82 500 –
273 + 7 170 + 1 425 = –32 978 OR
VAT CONTROL
11 200 135 000
82 500 273
7 170
1 425
102 295 135 273
Dr. – Cr (102 295 – 135 273 = - 32 978) Payable
ACTIVITY FF3 (Macrozone Sports)
Calculate the amount owing to SARS in respect of VAT at the end of February 2023 after taking
transactions 1 to 5 into account. Clearly state whether the amount would be added or subtracted by using
a (+) or (-) sign.
NO. VAT AMOUNT OWING TO SARS

1. R8 120
2. + R912
3. + R252
4. - R330
(300 - 630)
5. + R10 200
(11 100 - 900)
R19 154 Cr (Payable)
ACTIVITY FF4
Calculate the VAT amount that must be paid to SARS for the VAT period ended 31 May 2022.
WORKINGS ANSWER
55 785 + 5 070 – 6 240 + 5 400 – 2 460 – 4 680 OR
– 55 785 – 5 070 + 6 240 – 5 400 + 2 460 + 4 680
6 240 55 785 55 785 6 240 52 875

2 460* 5 070* 5 070* 2 460*
4 680* 5 400* 5 400* 4 680*
52 875 52 875
66 255 66 255 66 255 66 255
Page 95 of 95

2023 Accounting Grade 12 TEACHER GUIDE Final Push - 230920 - 165547

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2023 Accounting Grade 12 TEACHER GUIDE Final Push - 230920 - 165547

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CURRICULUM GRADE 10 -12 DIRECTORATE

LAST MILE REVISION PROGRAMME

B. STATEMENT OF FINANCIAL POSITION

C. CASH FLOW STATEMENT

D. ANALYSIS AND INTERPRETATION OF FINANCIAL INFORMATION

E. CORPORATE GOVERNANCE AND AUDIT REPORT

AA. TANGIBLE ASSETS

BB. INVENTORY VALUATION

CC. COST ACCOUNTING

DD. RECONCILIATIONS (BANK RECONCILIATION, CREDITORS

EE. BUDGETING AND FORECASTING

FF. VALUE ADDED TAX

Interest income (R59 100 – R53 850 = R5 250) 5 250

Bad debts (2 600 x 80c) (2 080)

UIF contributions 380

Depreciation (23 205 + 232 499) (255 704)

Interest expense (400 000 x 12% x 1/12) (4 000)

Provision for bad debts adjustment 1 750

Directors fee (66 000)

Net profit before tax (246 000 x 30

Income Tax (246 000)

2.2.1 NOTE 5: TRADE AND OTHER RECEIVABLES

Provision for bad debts (15 000 – 1 750) (13 250)

Net trade debtors 251 750

Accrued income (5 250) 5 250

Deposit for water and electricity (20 000 – 2 000) 18 000

SARS: Income Tax (290 000 – 246 000) 44 000

Petty cash (5 000) 5 000

Savings account (300 000) 300 000

2.2.3 NOTE 7: ORDINARY SHARE CAPITAL

Number of authorised ordinary shares: 1 500 000 shares

800 000 Ordinary shares at the beginning of the year

2.2.4 NOTE 8: RETAINED INCOME

Repurchase of shares (40 000 x 280c) (112 000)

Dividends on ordinary shares (520 000)

Interim dividends 140 000

Final dividends recommended (760 000 x 50c) 380 000

Retained income at the end of the year. 357 600

Creditors control 339 120

SARS: PAYE (22 500 – 9 500) 13 000

Unemployment Insurance Fund (7 760 – 760) 7 000

Accrued expense (See Income Statement) 66 000

Shareholders for dividends 380 000

Current portion of loan 42 000

GROSS OPERATING INCOME 4 110 000

OPERATING EXPENSES (2 990 000)

Net profit before interest expense 1 151 600

(781 632 + income tax)

NET PROFIT AFTER TAX 781 632

Number of authorised ordinary shares: 1 800 000 shares

800 000 Ordinary shares on 1 March 2020 at R4 each 3 200 000

200 000 Ordinary shares issued at R10 each 2 000 000

(50 000) Ordinary shares repurchased at R5,20 each (260 000)

950 000 Ordinary shares on 28 February 2021 4 940 000

3.2.2 Retained income.

Retained income in the beginning of the year 480 500

Net profit after tax 781 632

Repurchase of shares (50 000 x 80c) (40 000)

Dividends on ordinary shares (709 968)

Interim dividends 253 968

Final dividends recommended (950 000 x 48c) 456 000

Retained income at the end of the year. 512 164

NON-CURRENT ASSETS 5 737 632