ACCOUNTING

GRADE 12 REVISION PROGRAMME

TOPIC(S): PAPER ONE TOPICS

PRESENTER (S) :Beauty Mpanza, Vuyisile Deluhlazo

DATE: 06 October 2021
 OBJECTIVES OF THE LESSON
Paper one Topics
• Balance Sheet ( Statement of Comprehensive income )

• Cash flow Statement

• Tips and easy marks

 FORMAT OF BALANCE SHEET
FORMAT OF COMPANIES STATEMENT OF FINANCIAL POSITION (BALANCE SHEET )
Notes R
ASSETS Bank overdraft must appear in the face of
NON-CURRENT ASSETS xxxxx the Balance Sheet
Tangible/ Fixed assets 3 xxxx
Financial assets
Fixed deposits xxxx
CURRENT ASSETS xxxxx
Creditors
Inventories 4 xxx
include
Trade and other receivables 5 xxx SARS-income
Cash and cash equivalents (Include fixed deposit maturing in 12 months ) 6 xxx tax payable
and
TOTAL ASSETS XXXXX
Shareholders
for dividends

EQUITY AND LIABILITIES

CAPITAL AND RESERVES / SHAREHOLDERS’ EQUITY xxxxx
Ordinary share capital 7 xxxx
Retained income 8 xxx
NON-CURRENT LIABILITIES xxxx
Mortgage bond (repaid over a long period ,longer than 12 months) xxxx
CURRENT LIABILITIES xxxxx
Trade and other creditors 9 xxx
Bank overdraft xxx
Short-term loans (portion of long term loan payable within 12 months) xxxx
TOTAL EQUITY AND LIABILITIES XXXXX
ACTIVITY EXTRACTED FROM NSC NOV 2017
• The following information relates to Odette Ltd. The financial year ended
on 28 February 2017.
• Calculate the missing amounts denoted by (a) to (d).
  LAND AND
BUILDINGS
VEHICLES EQUIPMENT TOTAL Only D is
Cost   350 000 460 000   recorded in
Accumulated depreciation   (315 000)     the Balance
Carrying value (01/03/2016) (a) 35 000     Sheet
Movements:        
Additions 325 000 422 550 0  
Disposals 0 0 (89 100)
Depreciation   (b) (13 766)  
Carrying value (28/02/2017) 2 550 000 (c) 50 994 (d)
Cost   772 550 340 000  
Accumulated depreciation        
 Calculations for:
• Land and Buildings
  LAND AND
BUILDINGS
Cost  
Accumulated depreciation   Bottom – Up
  LAND AND
Carrying value (01/03/2016) (a)
Movements:  
BUILDINGS calculations
Cost  
Additions 325 000
Accumulated depreciation  
Disposals 0
Carrying value
Depreciation   2 225 000
(01/03/2016)
Carrying value (28/02/2017) 2 550 000 Answer
Movements:  
Cost   Additions 2 - 325 000
Accumulated depreciation   Carrying value
2 550 000
(28/02/2017) 1
Cost  
Accumulated depreciation  
Calculations for : Depreciation and carrying value
 Depreciation on vehicles is calculated at 20% p.a. on cost. 
• The company has two vehicles on 28 February 2017. One of these vehicles was purchased on 1 September
2016.
Depreciation –Vehicle A Vehicle is
fully
  350 000 x 20% = 70 000
VEHICLES Amount incorrect –is greater than depreciated –
Cost 350 000 R35 000 Residual
Depreciation is R35 000 - R1 = value of R1
Accumulated depreciation (315 000) R34 999
Carrying value (01/03/2016) 35 000
Movements:   34 999 + 42 555 = 77 254
Additions 422 550 Depreciation –Vehicle B
Disposals 0 422 550 x 6/12 x 20% = 42 255
Depreciation (b)
Carrying value (28/02/2017) (c)
Cost 772 550 Carrying Value
35 000 + 422 550-77 254 = 380 296
Accumulated depreciation  
Calculate the total denoted by d
  LAND AND
VEHICLES EQUIPMENT TOTAL
BUILDINGS
Cost   350 000 460 000  
Accumulated depreciation   (315 000)    
Carrying value (01/03/2016) 2 225 000 35 000     D will be
Movements:        
recorded in
Additions 325 000 422 550 0  
Disposals 0 0 (89 100)   the Balance
Depreciation   (77 254 ) (13 766)   Sheet
Carrying value (28/02/2017) 2 550 000 380 296 50 994 (d)
Cost   772 550 340 000  
Accumulated depreciation        

Carrying value (28/02/2017)

2 550 000 380 296 50 994 2 981 290 
Cost
 
 NOTE 3 TANGIBLE ASSETS
NOTE 3 : TANGIBLE ASSETS AND TRADE AND OTHER RECEIVABLES

TANGIBLE ASSETS
Land and Vehicles Equipment
Buildings
Carrying value at beginning (H) xxx xxx xxx
Cost (A) xxx xxx xxx
Session 12-16
Accumulated depreciation (B) (xxx) (xxx) (xxx)
Movements
Page 69 -78
Asset disposed @ Carrying
Additions at cost (C) xxx xxx xxx value = Cost Price LESS
Accumulated depreciation
Disposals at carrying value (D) (xxx) (xxx) (xxx)
Depreciation for the year (E) (xxx) (xxx)
Carrying value at end of year (I) xxx xxx xxx
Cost (F) xxx xxx xxx F = A + C - Cost price of
Asset disposed OR
Accumulated depreciation (G) (xxx) (xxx) Cost at beginning PLUS
additions LESS Cost price of
asset disposed

I=H+C-D–E
Carrying Value @beg PLUS
additions at cost LESS Disposal at
carrying value LESS depreciation
 Prepare the Balance Sheet -28 February 2017
INFORMATION:

A. Amounts extracted from the records on 28 February 2017:

Balance Sheet accounts section R
Ordinary share capital ?
Retained income (28 February 2017) 520 000
Fixed assets (carrying value) ?
Loan from Beque Bank 284 000
Trading stock 408 880
Net trade debtors 67 200
Fixed deposit: Elze Bank ?
Bank (favourable) ?
SARS: Income tax (provisional payments) 209 000
Creditors' control 184 000
Nominal accounts section
(pre-adjustment amounts)
Insurance 30 200
Rent income 108 450
Electricity 42 000
 Adjustment C - electricity
A. Amounts extracted from the records on 28 February 2017:
     
  Nominal accounts section (pre-adjustment amounts)  
  Electricity 42 000
     
  C.The electricity account for February 2017, R5 600, was still
 
outstanding.

Income Statement Note 9

Operating expenses   Trade and other payables
Accrued expenses 5 600
Electricity 47 600
   
(42 000 + 5 600)  
 Adjustment D – Provision for bad debts
A. Amounts extracted from the records on 28 February 2017:
     
  Balance sheet accounts section  
  Net Trade Debtors 67 200
     
  D.The provision for bad debts must be increased by R270.  

Income Statement Note 5

Operating expenses   Trade and other receivables
Provision for bad 270
Net Trade debtors 67 200
debts
 Less Provision (270) 
 
 Adjustment E- insurance
A. Amounts extracted from the records on 28 February 2017:
     
  Nominal accounts section (pre-adjustment amounts)  
  Insurance 30 200
     
  An additional insurance policy was taken out on 1 November 2016.
 
The annual premium of R10 200 was paid and recorded.

Income Statement
Note 5
Operating expenses   Trade and other receivables
Insurance 25 200
(30 200 – 6 800)   Prepaid expenses 6 800
10 200 X 8/12 =6 800    
 Adjustment F- Rent Income
A. Amounts extracted from the records on 28 February 2017:
     
  Nominal accounts section (pre-adjustment amounts)  
  Rent Income 108 450
   
  The rent for February 2017 has not been received yet. The rent
 
increased by 15% on 1 July 2016.

5 minutes to complete
 Calculations for rent

Accounting period ends on 28 Feb 2017.

M A M J J A S O N D J F
                       
Rent for 4 months @ 100% 7 months @ 115% (100% +15%) 115%

100 x 4 = 4 00 7 x 115 = 805

400 + 805 =1 205 total received

UK - to calculate amount owing: 115 /1 205 x 108 450 = 10 350
 Disclosure in our statements

Income Statement
Operating income  
Rent income 118 800
(108 450 + 10 350 )  

Note 5
Trade and other receivables
Accrued income 10 350
   
 Adjustment G- Income tax
A. Amounts extracted from the records on 28 February 2017:
  ADJUSTMENT G
SARS: Income tax (provisional payments) 209 000
Use UK

  Net profit after tax, R518 000, was calculated after taking into account all 518 000 X 30/70 = 222 000
 
  the adjustments above. Income tax is 30% of the net profit.   
 
 

Income Statement Note 9

Net profit before tax 740 000 Trade and other payables
Income Tax (222 000) SARS –Income tax 13 000
Net Profit before tax 518 000 (222 000 - 209 000)  
 Adjustment H- Final dividend
A. Amounts extracted from the records on 28 February 2017:
  ADJUSTMENT G
Ordinary share capital ?

  75% of the authorised share capital of 900 000 shares was in issue. The
  directors declared a final dividend of 24 cents per share on 28 February
  2017.
 

Note 8 Retained Income Note 9

Dividends Trade and other payables
Final dividends 162 000 shareholders for 162 000
900 000 X.75 = 675 000 dividends
675 000 X 0.24
SHARES  
 Loan (I)

Extract from Beque Bank loan statement:

Balance on 1 March 2016 R376 000
Instalments (including interest) R92 000
Interest capitalised R48 000
Balance on 28 February 2017 ?
NOTE:
Interest has not been entered in the books.
R50 000 of the loan balance will be settled in the next financial year.

Income statement Balance sheet

Profit before interest Long term loan 282 000
expense 332 000 - 50 000
Interest expense (48 000) (376 + 48-92) 332
Current liabilities
50 000
Short term loan
Calculate Shareholders Equity and Retained Income (J)

Extract from the Pre-adjusted Trial Balance on 28 February 2017:

  Debit Credit
Balance sheet section    
Ordinary share capital   ?
Retained income   520 000

• The net asset value per share on 28 February 2017 is 620 cents.
NOTE
• 75% of the authorised share capital of 900 000 shares was in
issue. The directors declared a final dividend of 24 cents per share
on 28 February 2017. (Adjustment H)
• Number of shares in issue is 900 000 x 75% = 675 000
Calculate Retained income
Net asset value per share Note : the
shareholders equity
= cents is not provided only
the share capital has
been provided
= 620 cents
620 /100 = 6.20

x = 6.20 x
Short cut for SE
6.2 x 675 000 =
4 185 000
= 4 185 000 (Shareholders equity )
 Balance Sheet
 
3.2 BALANCE SHEET OF ODETTE LTD ON 28 FEBRUARY 2017
   

  ASSETS      

  NON CURRENT ASSETS (TA – CA) 4 010 940   

  Fixed assets See (3.1 e) 2 981 290 R  

Financial assets (Fixed Deposit)

3 1 029 650 R  
Non-current assets – Fixed assets
         

  CURRENT ASSETS CL X 2,1 870 660   

  Inventory 408 880    

Trade and other receivables

  84 080 R*  
67 200  – 270  + 6 800 +10 350 
Cash and cash equivalents
  377 700 R  
CA – Inv – T & OR
12 TOTAL ASSETS SHE + L 4 881 600 R  
 Balance Sheet
  EQUITY AND LIABILITIES    
SHAREHOLDERS EQUITY 675 000  x 620 c 
  4 185 000 R
900 000 x 75%
  Ordinary share capital SE – 520 000 3 665 000 R
4 Retained income 520 000  
       
  NON-CURRENT LIABILITIES 282 000  
Loan: Beque Bank 376 000–92 000
  
4 282 000 *
284 000 + 48 000 – 50 000
332 000 two marks
 
     
CURRENT LIABILITIES 414 600 *
version to allow for SARS as a

# Trade and other payables 184 000 + 5 600 189 600 *

## SARS: Income tax 222 000  – 209 000 
13 000 *
518 000 x 30/70
Shareholders for dividends (675 000  x 0,24) See no. of shares in SHE 162 000 *
T&OR
CASH FLOW STATEMENT AND FINANCIAL INDICATORS

QUESTIONS ARE EXTRACTED FROM THE 2021

PRELIMINARY EXAM PAPER
 REQUIRED:
ORANGE LTD  
  The information relates to the financial year ended 29 February 2020.  
  REQUIRED:  
  2.2.1 Calculate the following financial indicators on 29 February 2020:  
     Debt-equity ratio (3)
     Earnings per share (EPS) (4)
     Dividend pay-out rate (3)
     % return on average equity (ROSHE) (4)
2.2.2 Complete the Cash Flow Statement on 29 February 2020.  
  All cash outflows must be shown in brackets to earn full marks. (23)
 INFORMATION
Information:
A. Extract from the Income Statement on 29 February 2020:
Depreciation R 234 000
Interest expense 126 000
Income tax 415 200
Net income after tax 968 800

 
 INFORMATION
B. Extract from the Balance Sheet:
  29 February 2020 28 February 2019
Fixed assets (carrying value) R 9 528 300 R 8 320 300
Fixed deposits 100 000 500 000
Current assets 1 002 000 755 000
Cash and cash equivalents 56 500 5 000
Bank overdraft 0 220 000
Shareholders' equity 8 980 300 7 411 500
Ordinary share capital 8 281 000 7 200 000
Retained income 699 300 211 500
Loan: BB Bank 900 000 1 200 000
Current liabilities 750 000 963 800
SARS: Income tax 4 500 Dr 23 800 Cr
Shareholders for dividends 120 000 160 000
 INFORMATION
C. Fixed assets:
 Old equipment was sold at carrying value, R48 000.
 Extensions to the buildings were completed during the financial year.
  Share capital:
D.
• On 1 March 2019, the ordinary share capital comprised 800 000 ordinary shares. A further
200 000 shares were issued on this date.
• On 29 February 2020, the company repurchased 90 000 shares at R81 000 above the
value of the shares based on the average share price of R9,10 per share. These shareholders
qualified for final dividends.
E. Dividends and earnings:  
    29 February 2020 28 February 2019
Interim dividends 28 cents 60 cents
Final dividends 12 cents 20 cents
Earnings per share ? 94 cents
 TAKE NOTE

NB: Remember the following when you

have TWO years.

Opening balance: Always do what the

examiner is telling you to do.

Closing balance: Always do the opposite

of what the examiner is telling you to do.
 
 TAXATION PAID
iiiiiii
Information:
A. Extract from the Income Statement on 29 February 2020:
Income tax 415 200
B. Extract from the Balance Sheet:
  29 February 2020 28 February 2019
SARS: Income tax R 4 500 DR R 23 800 CR
 CASH FLOW FROM OPERATING ACTIVITIES
1. CASH FLOW STATEMENT ON 29 FEBRUARY 2020
CASH EFFECTS OF OPERATING ACTIVITIES  
 

Cash generated from operations  

Interest paid (126 000)
Dividends paid (440 000)
 
Income tax paid
(443 500)
23 800 + 415 200 + 4 500

SARS: Income tax

Bank 443 500 b/d 23 800
Income Tax 415 200
   c/d 4 500
443 500 443 500
 INFORMATION
A. Extract from the Income Statement on 29 February 2020:

Depreciation R 234 000

B. Extract from the Balance Sheet:
  29 February 2020 28 February 2019
Fixed assets (carrying value) R 9 528 300 R 8 320 300

C. Fixed assets:
 Old equipment was sold at carrying value, R48 000.

 Extensions to the buildings were completed during the financial year.

 CASH FLOW FROM INVESTING ACTIVITIES
Fixed assets  @CV
CASH EFFECTS OF INVESTING ACTIVITIES  
 
  b/d 8 320 300 Disposal 48 000
Fixed assets purchased
(1 490 000) Bank 1 490 000 Depreciation 234 000
9 528 300 + 234 000 + 48 000 – 8 320 300   c/d 9 528
Proceeds of sale of fixed assets 48 000 300
Decrease in fixed deposits 400 000 9 810 300 9 810 300
b/d 9 528 300  
Balance sheet note 3
Cost price ?
Accumulated depreciation (1 March 2019) ?
Carrying Value ( 1 March 2019) 8 320 300
Additions (at cost) 1 490 000
Disposals (at carrying value) (48 000)
Depreciation (234 000)
Carrying Value (29 February 2020) 9 528 300
Cost (29 February 2020) ?
Accumulated depreciation (28 February 2021) ? 
 INFORMATION
B. Extract from the Balance Sheet:

29 February 2020 28 February2019

Shareholders' equity 8 980 300 7 411 500
Ordinary share capital 8 281 000 7 200 000
Retained income 699 300 211 500
Loan: BB Bank 900 000 1 200 000
D. Share capital:
 
• On 1 March 2019, the ordinary share capital comprised 800 000
ordinary shares. A further 200 000 shares were issued on this date.
• On 29 February 2020, the company repurchased 90 000 shares at
R81 000 above the value of the shares based on the average share
price of R9,10 per share. These shareholders qualified for final
dividends.
 CASH FLOW FROM FINANCING ACTIVITIES
CASH EFFECTS OF FINANCING ACTIVITIES    
Proceeds of shares issued The shares repurchased were
8 281 000  + 819 000  – 7 200 000  1 900 000 * bought back at R81 000 above
90 000 x 9,10 average price
Funds used to repurchase shares
81 000 ÷ 90 000 = 0,90
819 000  + 81 000  OR 90 000 x 10 (900 000) *
 
see above (9,10 + 0,90)
Decrease in loans 1 200 000 – 900 000
(300 000) 

Ordinary share capital

Bank (Repurch) 819 000 b/d 7 200 000
c/d 8 281 000 Bank (Issued) 1 900 000
 
9 100 000 9 100 000
c/d 8 281 000 
 NET CHANGE IN CASH AND CASH EQUIVALENTS
B. Extract from the Balance Sheet:
  29 February 2020 28 February 2019
Cash and cash equivalents 56 500 5 000
Bank overdraft 0 220 000

Net change in cash and cash equivalents

271 500
inspect, operation
Cash (Opening balance) – 220 000 + 5 000 (215 000)
Cash (closing balance)
56 500
Bank overdraft - 220 000
cash and cash equivalents 5 000
  - 215 000
 CASH FLOW STATEMENT
CASH EFFECTS OF OPERATING ACTIVITIES  
  Cash generated from operations    
  Interest paid (126 000)  
  Dividends paid (440 000)  
  Income tax paid (443 500)
  CASH EFFECTS OF INVESTING ACTIVITIES    
  Fixed assets purchased (1 490 000)
  Proceeds of sale of fixed assets 48 000  
  Decrease in fixed deposits 400 000  
  CASH EFFECTS OF FINANCING ACTIVITIES    
  Proceeds of shares issued 1 900 000
  Funds used to repurchase shares (900 000)
  Decrease in loans (300 000)

  Net change in cash and cash equivalents 271 500

  Cash (Opening balance) (215 000)
  Cash (closing balance) 56 500
 DEBT EQUITY RATIO
B. Extract from the Balance Sheet:

29 February 2020 28 February2019

Shareholders' equity 8 980 300 7 411 500
Ordinary share capital 8 281 000 7 200 000
Retained income 699 300 211 500
Loan: BB Bank 900 000 1 200 000

  Debt-equity ratio
  Workings Answer
     
900 000 : 8 980 300 0,1 : 1
 
 EARNINGS PER SHARE
A. Extract from the Income Statement on 29 February 2020:
Net income after tax 968 800

D. Share capital:
• On 1 March 2019, the ordinary share capital comprised 800 000
ordinary shares. A further 200 000 shares were issued on this date.

Earnings per share (EPS)

Workings Answer
   
968 800 x 100* 96,9 cents
1 000 000  
(800 000 + 200 000) Do not accept 910 000
 DIVIDENDS PAY-OUT RATE
D. Share capital:
• On 1 March 2019, the ordinary share capital comprised 800 000 ordinary shares.
A further 200 000 shares were issued on this date.
E. Dividends and earnings:  
    29 February 2020 28 February 2019
Interim dividends 28 cents 60 cents
Final dividends 12 cents 20 cents
Earnings per share ? 94 cents

Dividend pay-out rate

Workings Answer
   
(28 + 12) (280 000 + 120 000) 41,3%
40 cents x 100* OR 400 000 x 100
96,9 cents EPS above 968 800  
 INFORMATION
A. Extract from the Income Statement on 29 February 2020:
Net income after tax 968 800
B. Extract from the Balance Sheet:
29 February 2020 28 February2019
Shareholders' equity 8 980 300 7 411 500
Ordinary share capital 8 281 000 7 200 000
Retained income 699 300 211 500
Loan: BB Bank 900 000 1 200 000
 % RETURN ON AVERAGE EQUITY
% return on average equity (ROSHE)
Workings Answer
   
11,8%
968 800 x 100*
½ (8 980 300 + 7 411 500 )
 
END OF SESSION