SENIOR CERTIFICATE EXAMINATIONS/

NATIONAL SENIOR CERTIFICATE EXAMINATIONS

ACCOUNTING

2019

MARKS: 300

TIME: 3 hours

This question paper consists of 18 pages and a 15-page answer book.

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Accounting 2 DBE/2019
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INSTRUCTIONS AND INFORMATION

Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions.

2. A special ANSWER BOOK is provided in which to answer ALL the questions.

3. Show ALL workings to achieve part-marks.

4. You may use a non-programmable calculator.

5. You may use a dark pencil or blue/black ink to answer the questions.

6. Where applicable, show ALL calculations to ONE decimal point.

7. Write neatly and legibly.

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8. Use the information in the table below as a guide when answering the
question paper. Try NOT to deviate from it.

QUESTION 1: 35 marks; 20 minutes

Topic: This integrates:
Financial accounting
VAT concepts and calculations
VAT and reconciliation Bank reconciliation
Managing resources
Internal control

QUESTION 2: 40 marks; 25 minutes

Topic: This integrates:
Managing resources
Specific identification
Inventory valuation
Weighted average
Internal control

QUESTION 3: 40 marks; 25 minutes

Topic: This integrates:
Managerial accounting
Production Cost Statement
Manufacturing Interpretation
Managing resources
Internal control

QUESTION 4: 80 marks; 45 minutes

Topic: This integrates:
Financial accounting
Concepts, Income Statement and notes
Audit report and company financial
Managing resources
statements
Audit report
Fixed asset management

QUESTION 5: 75 marks; 45 minutes

Topic: This integrates:
Financial accounting
Concepts, Retained Income Note, Cash flow
Cash flow and interpretation
calculations
Interpretation of financial information

QUESTION 6: 30 marks; 20 minutes

Topic: This integrates:
Managerial accounting
Cash Budget: analyse and interpret
Budgeting
Managing resources
Internal control

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Accounting 4 DBE/2019
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QUESTION 1: VAT AND RECONCILIATION (35 marks; 20 minutes)

1.1 CONCEPTS

REQUIRED:

Indicate whether the following statements are TRUE or FALSE. Write only 'true'
or 'false' next to the question numbers (1.1.1 to 1.1.4) in the ANSWER BOOK.

1.1.1 Output VAT is collected by a business when goods are sold.

1.1.2 The calculation of salaries does not take VAT into account.

1.1.3 A credit balance on the Bank Statement indicates an unfavourable

balance.

1.1.4 Recording bank charges separately from interest on an overdraft is an

application of the materiality concept. (4 x 1) (4)

1.2 VALUE-ADDED TAX (VAT)

The information relates to Longhill Traders for the VAT period ended
30 April 2019. The VAT rate of 15% applies to all goods and services.

REQUIRED:

Calculate the amount receivable from or payable to SARS for VAT on

30 April 2019. Indicate whether the amount is receivable or payable. (11)

INFORMATION:

A. Amount owed to SARS on 1 April 2019, R15 890

B. VAT transactions for April 2019:

EXCLUDING VAT INCLUDING

DETAILS VAT AMOUNT VAT
(R) (R) (R)
Returns by debtors 1 470
Drawings by owner 3 075
Debtors' accounts written off 8 700 10 005
Total purchases (cash and credit) 224 000
Total sales 396 750

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Accounting 5 DBE/2019
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1.3 BANK RECONCILIATION

The following information relates to Thandeka Traders for May 2019.

REQUIRED:
1.3.1 Calculate the correct Bank Account balance on 31 May 2019. Indicate
whether this is favourable or unfavourable. (9)
1.3.2 Prepare the Bank Reconciliation Statement on 31 May 2019. The bank
statement balance is the missing figure. (7)
1.3.3 Refer to Information B(iii).
State TWO internal control measures that the business can use to
ensure that this will not happen in the future. (4)
INFORMATION:
A. Before the bank statement was received, the Bank Account showed a
favourable balance of R19 400 on 31 May 2019.
B. Extract from the Bank Reconciliation Statement on 30 April 2019:
Outstanding deposit (dated 23 April 2019): R31 560
Outstanding payments:
Cheque 654 (dated 23 November 2018) R2 350
EFT (electronic funds transfer) R15 400
Cheque 705 (dated 30 June 2019) R9 450

NOTE:
(i) Cheque 654 does not appear in the May Bank Statement.
(ii) The EFT payment of R15 400 appears in the May Bank Statement.
(iii) The outstanding deposit of R31 560 does not appear in the May
Bank Statement. An investigation shows that this is cash paid by a
debtor and has never been deposited. The amount must be written
off.
C. The following items must also be taken into account:
(i) Items appearing in the May Bank Statement but not in the journals:
 Bank charges, R1 060
 A deposit of R4 500 made by another business. The bank will
correct this error in June 2019.
 Interest on favourable balance, R313
(ii) Items appearing in the journals but not in the May Bank Statement:
 A deposit of R21 343 made on 31 May 2019
 Cheque 797 (dated 15 June 2019), R14 350
(iii) An EFT payment appeared correctly in the Bank Statement as
R5 678. The Cash Journal shows this EFT as R6 578.

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Accounting 6 DBE/2019
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QUESTION 2: INVENTORY VALUATION (40 marks; 25 minutes)

2.1 CONCEPTS

Choose the correct term from those given in brackets. Write only the term next
to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK.

2.1.1 The most recent purchases will be considered as closing stock in the
(FIFO/weighted-average) stock valuation method.

2.1.2 Merchandise purchased is recorded in a Trading Stock Account in the

(perpetual/periodic) inventory system.

2.1.3 Carriage on purchases is recorded as an (asset/expense) in the

periodic inventory system. (3 x 1) (3)

2.2 PHOTO-FIX TRADERS

The information relates to Photo-fix Traders for the financial year ended
30 April 2019. The business is owned by Tom Samuels and sells two models of
cameras (Grand and De-Lux) and photo frames.

 The stock of cameras is valued using the specific identification method.

 Photo frames are valued using the weighted average method.

REQUIRED:

2.2.1 Calculate the value of closing stock of cameras on 30 April 2019. (9)

2.2.2 Calculate the value of closing stock of photo frames. (8)

2.2.3 The owner suspects that photo frames are being stolen. Provide a
calculation to confirm his suspicions. (5)

2.2.4 Tom is thinking of employing an assistant at a wage of R3 500 per

month to control the stock of photo frames. Explain why this is NOT a
good idea. Provide TWO points with figures/calculations. (6)

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INFORMATION:
The following information is in respect of the year ended 30 April 2019:
A. CAMERAS: STOCK, BOUGHT AND SOLD

BOUGHT UNITS
UNITS UNIT COST TOTAL SOLD

GRAND MODEL
Opening stock 20 R5 500 R110 000 14
Purchases 240 R5 750 R1 380 000 170

DE-LUX MODEL
Net purchases: 270 R1 104 000 235
September 2018 180 R4 000 R720 000 140
Returns (30) R4 000 (R120 000)
January 2019 120 R4 200 R504 000 95

B. PHOTO FRAMES: STOCK, BOUGHT AND SOLD

UNITS AMOUNTS
Opening stock 60 R7 200
Purchases 720 R108 000
Returns 30 R4 500
Closing stock 80 ?
Sales 657

2.3 MANAGEMENT OF INVENTORIES

The information relates to Lyle Furnishers for the financial year ended
28 February 2019. The business sells cupboards, tables and chairs. No stock
went missing during the year.

REQUIRED:
Provide ONE different problem (with figures) relating to EACH product and
ONE solution to EACH problem. (9)

INFORMATION:
CUPBOARDS TABLES CHAIRS
Opening stock (units) 200 160 1 300
Purchases (units) 2 500 3 050 6 000
Selling price per unit R1 750 R850 R350
Credit sales (units) 800 2 400 2 100
Returns by customers (units) (500) (10) 0
Cash sales (units) 1 000 600 2 250
Closing stock (units) 400 200 2 950
Cash received from cash sales R1 750 000 R470 000 R787 500

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Accounting 8 DBE/2019
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QUESTION 3: MANUFACTURING (40 marks; 25 minutes)

3.1 Choose the correct term from those given in brackets. Write only the term next
to the question numbers (3.1.1 to 3.1.4) in the ANSWER BOOK.

3.1.1 Wages paid to the factory cleaner is considered to be (direct/indirect)

labour.

3.1.2 Bad debts must be shown as a (selling and distribution/

factory overhead) cost.

3.1.3 Rent paid for the factory building is regarded as a (fixed/variable) cost.

3.1.4 Carriage on purchases of raw materials is regarded as a/an

(direct material/indirect material) cost. (4)

3.2 ZINZI MANUFACTURERS

Information is provided for the financial year ended 31 December 2018.

The business manufactures leather jackets according to orders received. There
is no work-in-progress stock.

REQUIRED:

3.2.1 Raw material stock:

Calculate:

 The value of the closing stock using the first-in-first-out stock

valuation method (5)
 The direct material cost (4)

3.2.2 Refer to Information C.

Calculate the correct factory overhead cost for the year. (8)

3.2.3 The owner is concerned about the increase in the following:

 Total fixed cost per unit

 Direct labour cost per unit

Provide evidence (figures) to justify his concern. In each case, also give
a possible reason for the increase in EACH unit cost, apart from normal
inflation. (6)

3.2.4 Break-even:

 Calculate the break-even point on 31 December 2018. (4)

 Explain whether or not there was any improvement in the trends of
the level of production and the break-even point from one year to the (4)
next. Quote figures.
 The owner cannot understand why he is making a better profit this
year. Explain how this happened. Provide TWO points. Quote figures. (5)

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INFORMATION:

A. Raw material:

Stock balance: Metres Cost per metre Total amount

1 January 2018 920 R65 R59 800
31 December 2018 1 195 ? ?

B. Purchases for the year:

Date Metres Cost per metre Total amount

February 2018 5 200 R75 R390 000
May 2018 2 480 R80 R198 400
September 2018 930 R90 R83 700
TOTAL 8 610 R672 100

C. Factory Overhead Costs:

The bookkeeper calculated the factory overhead cost at R84 330. He did
not take into account the following expenses:

Insurance R31 200

Rent expense R114 000
Water and electricity for the administration section R7 110

 60% of the insurance relates to the factory.

 The rent must be allocated between the factory, sales and
administration in the ratio 5 : 2 : 1.
 15% of the water and electricity expense relate to the office.
50% must be allocated to the factory.
D.
2018 2017
TOTAL PER
PER UNIT UNIT
AMOUNT
Fixed costs: R264 000 R44 R36
Factory overheads R26
Administration R10

Variable costs: R165 R150

Direct materials R94
Direct labour R330 000 R50 R38
Selling and distribution R18

E. Additional information:

2018 2017
Number of jackets produced and sold 6 000 units 7 560 units
Break-even point ? 3 888 units
Selling price per jacket R300 R220
Inflation rate 5%

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Accounting 10 DBE/2019
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QUESTION 4: AUDIT REPORT AND COMPANY FINANCIAL STATEMENTS

(80 marks; 45 minutes)

4.1 Choose a term in COLUMN B that matches an explanation in COLUMN A. Write

only the letters (A–E) next to the question numbers (4.1.1 to 4.1.4) in the
ANSWER BOOK.

COLUMN A COLUMN B
4.1.1 Reflects the financial position of the A Audit report
business on a specific date
B Cash Flow Statement
4.1.2 Shows whether the business made a
profit or loss C Balance Sheet

4.1.3 Provides details about the movement D Income Statement

of money with regard to operating,
investing and financing activities E Directors' report

4.1.4 Provides an unbiased opinion on the

reliability of the financial statements of
a business
(4 x 1) (4)

4.2 AUDIT REPORT

Extract from the audit opinion of Everest Ltd for the financial year ended
30 April 2018:

Audit opinion
In our opinion, the financial statements fairly present, in all material respects, the
financial position of the company at 30 April 2018 and the results of their
operations and cash flow for the year ended in accordance with International
Financial Reporting Standards, and in the manner required by the Companies Act,
2008 (Act 71 of 2008).
Kego and Murray Associates
Chartered accountants (SA)
31 July 2018
REQUIRED:
4.2.1 Choose the correct word from those given in brackets. Give ONE reason.
Everest Ltd received a/an (qualified/unqualified/disclaimer of opinion)
audit report. (3)
4.2.2 Give ONE reason why the Companies Act requires public companies to
be audited by an independent auditor. (2)
4.2.3 Newspaper reports have indicated that Kego and Murray Associates have
been found guilty of misconduct in terms of audit work done at several
large firms. Explain how this may influence shareholders of Everest Ltd.
State TWO points. (4)
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4.3 MVVS LTD

The information relates to the financial year ended 31 March 2019.

REQUIRED:

4.3.1 Complete the Statement of Comprehensive Income (Income Statement)

for the year ended 31 March 2019. (53)

4.3.2 Complete the following notes to the Balance Sheet:

 Fixed/Tangible Asset Note (8)

 Ordinary share capital (6)

INFORMATION:

Figures extracted from the Pre-adjustment Trial Balances on 31 March:

2019 2018
R R
Ordinary share capital 9 300 000 4 800 000
Mortgage loan: Sapphire Bank 1 430 200 1 658 000
Land and buildings 12 500 000 12 500 000
Vehicles 1 377 000 750 000
Equipment ? 398 000
Accumulated depreciation on vehicles ? 475 000
Accumulated depreciation on equipment ? 117 500
Provision for bad debts ? 30 100
Trading stock 364 200
Debtors' control 578 000
Sales 10 563 280
Cost of sales 6 236 000
Rent income 99 500
Directors' fees 1 262 100
Water and electricity 218 000
Telephone 75 600
Audit fees 104 000
Sundry expenses 61 001
Salaries and wages 1 280 000
Employer's contributions (medical, pension and UIF) 316 000
Bad debts 22 300
Consumable stores 53 200
Interest income ?
Insurance 79 500
Depreciation (on equipment sold) 1 750
Interest on loan ?
Bad debts recovered 6 000
Ordinary share dividends (interim) 375 000

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Adjustments and additional information:

A. A credit invoice for R36 720 (after deducting a 10% trade discount) issued on
31 March 2019, was not recorded. Goods are marked up at 70% on cost.

B. The physical stock count on 31 March 2019 revealed the following on hand:

 Trading stock, R334 500

 Consumable stores, R3 400

C. Debtor S Magnum was declared insolvent. His estate paid R2 000, which
was 20% of his debt. The difference must be written off as a bad debt.

D. R1 800 was received from a debtor, J Misting, whose debt had previously
been written off. The bookkeeper incorrectly credited the amount to the
Debtors' Control Account. Correct the error.

E. Adjust the provision for bad debts to R28 500.

F. Insurance includes an annual premium of R51 000 paid for the period
1 January 2019 to 31 December 2019.

G. An employee was left out of the Salaries Journal for March 2019.
The following details are applicable:

 Net salary of the employee, R9 100

 The deductions by the employer totalled 30% of the gross salary
 Employer's contributions were R2 200

H. Interest on loan is capitalised. A fixed monthly repayment (including interest)

of R25 400 was paid for the financial year.

I. Fixed assets and depreciation:

(i) Vehicles:

 Details for the three vehicles are as follows:

Accumulated depreciation
Cost price Date purchased
31 March 2018
1 R350 000 R315 000 1 October 2013
2 R400 000 R160 000 1 April 2016
3 R627 000 30 November 2018

 Vehicles are depreciated at 20% p.a. on cost.

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(ii) Equipment:

 Equipment was sold for R9 600 cash on 31 August 2018. Only the
following entries in respect of this sale were processed:

Cost price 28 000

Accumulated depreciation at the date of disposal 21 500
Depreciation for the current financial year 1 750

 Depreciation on the remaining equipment is calculated at R92 500

after taking all of the above into account.

J. Interest income is the missing figure in the Income Statement.

K. Income tax is calculated at 28% of the net profit. The net profit before tax was
R691 000.

L. Shares and dividends:

 The company has an authorised share capital of 8 000 000 shares.

 The company had 1 200 000 shares in issue on 1 April 2018.
 150 000 shares were repurchased on 30 November 2018. EFT payments
totalling R825 000 were made for these shares.
 850 000 additional shares were issued on 30 September 2018.

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QUESTION 5: CASH FLOW AND INTERPRETATION (75 marks; 45 minutes)

5.1 Choose a term from the list below that answers the specific following questions.
Write only the term next to the question numbers (5.1.1 to 5.1.4) in the ANSWER
BOOK.

gearing; return on equity; solvency; liquidity; profitability

5.1.1 Is the business able to pay off all its debts?

5.1.2 Can the business pay off short-term debts in the next financial year?

5.1.3 Will shareholders be satisfied with the benefit that they receive for
investing in the company?

5.1.4 To what extent is the company financed by loans or borrowed capital? (4)

5.2 KULFI LTD

Information for the financial year ended 28 February 2019 is provided.

Where financial indicators are required to support your answer, quote

the financial indicator and actual figure/ratio/percentage and trends.

REQUIRED:

5.2.1 Prepare the Retained Income Note to the Balance Sheet. (12)

5.2.2 Calculate the following amounts for the Cash Flow Statement. Show
workings.
 Income tax paid (4)
 Dividends paid (4)

5.2.3 Complete the following sections of the Cash Flow Statement:

 Cash effects of investing activities (9)
 Net change in cash and cash equivalents (4)

5.2.4 Calculate the following financial indicators on 28 February 2019:

 Acid-test ratio (4)
 Debt-equity ratio (4)
 % return on average shareholders' equity (ROSHE) (5)

5.2.5 The shareholders are satisfied with the improvement in the liquidity
position. Quote THREE financial indicators (with figures) to support this
statement. (6)

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5.2.6 The company increased the share capital by R840 000, and the loan by
R550 000.

 Explain how this affected the gearing and risk of the company. Quote
TWO financial indicators. (5)
 Explain what the directors have done with this cash inflow. State TWO
points. (4)

5.2.7 The directors decided to decrease the dividend pay-out percentage.

 Provide calculations to show the change in the pay-out rate.

(4)
 Give ONE reason why many shareholders were satisfied with the
change in policy. Quote figures. (2)

5.2.8 On 1 March 2018 Martha owned 475 000 shares in the company. She did
not purchase any shares from the shares issued on 1 May 2018.

 Explain how the repurchase of the shares benefited Martha's

shareholding. Quote figures. (4)

INFORMATION:

A. Share capital:

 There were 900 000 ordinary shares in issue on 1 March 2018.

 An additional 100 000 ordinary shares were issued on 1 May 2018.
 On 1 October 2018 the company repurchased 60 000 shares at R9,00 per
share. The average share price at the time was R8,04.

B. Dividends:

 Interim dividends of 25 cents per share were paid on 15 September 2018.

 Final dividends were declared on 28 February 2019.

C. Extract from Income Statement for the year ended 28 February 2019:
R
Depreciation 123 600
Interest expense 143 000
Income tax (at 30% of the net profit) 293 100

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D. Extract from Balance Sheet on 28 February 2019:

2019 2018
R R
Fixed assets (carrying value)* 8 775 720 8 430 720
Fixed deposit: Flay Bank 150 000 100 000
Current assets 996 480 684 300
Inventories 448 000 281 000
Trade and other receivables (Note 1) 288 300 378 300
Cash and cash equivalents 260 180 25 000
Shareholders' equity ? 7 341 500
Ordinary share capital 7 557 600 7 200 000
Retained income ? 141 500
Loan: Home Bank 1 400 000 850 000
Current liabilities 553 600 923 520
Trade and other payables (Note 2) 553 600 781 000
Bank overdraft 0 142 520
* Old equipment was sold at carrying value, R111 800, for cash.

Note 1: Trade and other receivables: 2019 2018

Debtors' control 288 300 367 000
SARS: Income tax 0 11 300

Note 2: Trade and other payables: 2019 2018

Creditors' control 325 000 421 000
Shareholders for dividends 206 800 360 000
SARS: Income tax 21 800 0

E. The following financial indicators were calculated on 28 February:

2019 2018
Current ratio 1,8 : 1 0,7 : 1
Acid-test ratio ? 0,4 : 1
Debtors' collection period 28 days 39 days
Creditors' payment period 60 days 60 days
Debt-equity ratio ? 0,1 : 1
Return on shareholders' equity (ROSHE) ? 10.2%
Return on total capital employed (ROTCE) 12,9% 14,4%
Earnings per share (EPS) 71 cents 83 cents
Dividends per share (DPS) 47 cents 80 cents
Net asset value per share (NAV) 837 cents 816 cents
Market value per share 840 cents 807 cents
Interest rate on loans 13,5% 13,5%

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QUESTION 6: BUDGETING (30 marks; 20 minutes)

You are provided with information relating to Cimpiwe Clothing Shop.

REQUIRED:

6.1 Refer to Information A.

Identify TWO items in the Cash Budget that will not appear in a Projected Income
Statement. (2)

6.2 Calculate the missing amounts indicated by (i) to (iii) in the Cash Budget for June
and July 2019. (7)

6.3 Calculate the total purchases for April 2019. (2)

6.4 Complete the Debtors' Collection Schedule for July 2019. (8)

6.5 Refer to Information F.

6.5.1 Comment on the following:

 Effect of the advertising on sales (3)

 Payment to creditors (2)

6.5.2 Sales strategy:

 Identify TWO strategies (except advertising) that the business used to

achieve sales targets for May 2019. Quote figures. (4)
 Explain whether these were good strategies, or not. Provide ONE point
with figures. (2)

INFORMATION:

A. Extract from the Cash Budget

JUNE 2019 JULY 2019
CASH RECEIPTS
Cash sales 186 000 285 000
Cash from debtors 533 430 ?
Rent income (i) 9 180
Interest on fixed deposit 1 800 2 200

CASH PAYMENTS
Salaries and wages 73 400 73 400
Fixed deposit: Protea Bank 0 (ii)
Cash purchases of trading stock ? (iii)
Payment to creditors 192 000 ?
Insurance 3 250 3 250
Drawings 21 600 21 600
Sundry expenses 96 360 98 700

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B. Cash sales are 25% of total sales.

Collections from debtors:

 30% in the month of sales less 5% discount

 65% in the following month
 Provision is made for 5% bad debts.

C. Budgeted purchases of trading stock:

April ?
May R484 000
June R496 000
July R760 000

 40% of trading stock is bought on credit.

 Creditors are paid two months after the transaction month.

D. Rent increased by 8% in July 2019.

E. The business has a fixed deposit of R360 000. An additional amount is budgeted to
be invested on 1 July 2019. Interest (not capitalised) at 6% p.a. is receivable at the
end of each month.

F. Cimpiwe is concerned about the following items for May 2019:

BUDGETED (R) ACTUAL (R) VARIANCE (R)

Cash sales 172 000 140 000 – 32 000
Credit sales 516 000 552 000 + 36 000
Collection from debtors 475 000 380 000 – 95 000
Advertising 36 000 64 800 + 28 800
Payments to creditors 180 000 105 000 – 75 000
Delivery expenses 0 19 000 – 19 000
Packing materials 3 000 2 500 – 500

30

TOTAL: 300

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