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Department of Basic Education 2012
Accounting
e
Study Guid
Grade
12
First published by the Department of Basic Education in 2012

222 Struben Street, Pretoria
South Africa
Enquiries
Office of the Director General
Mr P.B. Soobrayan
Email: njobe.p@dbe.gov.za
Email whittle.g@dbe.gov.za
Tel: (012) 357 4010
Fax: (012) 323 5837
http://www.education.gov.za
Call Centre: 0800202933
Copyright Department of Basic Education
ISBN 9780621409086
All rights reserved. You may copy material from this publication for use in non-profit
education programmes if you acknowledge the source. For use in publications,
please obtain the written permission of the Department of Basic Education.
This publication is not for sale.
Mind the Gap production team
Production manager: Dr Patricia Watson
Authors: Anthony Ash, Kirsti Chapman, Glynis Schreuder, Tracey Megom,
Florence Nxumalo and Barbara Wies
Expert readers: Johnson Adekoya, Sali Ameen, Trevor Hall, Eugenia Maila,
Melanie Marchbank, Jacqualine Ndlovu, Joe Ramsamy, Thandi Sindane
Editors: Julia Grey and Herbert Opland
Designers: Alicia Arntzen, Philisiwe Nkosi and Rizelle Stander
Study skills: Margie Karnasopoulos
Lead illustrator: Bi Venter
Cover illustration: Alastair Findlay
Ministerial foreword
The Department of Basic Education has pleasure in releasing the series
called Mind the Gap study guides for Grade 12 learners. The first subjects
in the series include Life Sciences, Accounting, Economics and Geography.
These study guides are another innovative and committed attempt by the
Department of Basic Education to improve the academic performance of
Grade 12 candidates in the National Senior Certificate (NSC) examination.
The Mind the Gap study guide series is produced in both English and
Afrikaans to assist those learners that have been underperforming due to a
lack of exposure to the content requirements of the curriculum. The series
aims to mind-the-gap between failing and passing, by bridging-the-gap in
learners understanding of commonly tested concepts so candidates can
pass.
The Mind the Gap study guide series takes its brief in part from the 2011
National Diagnostic report on learner performance. The marking and
moderation process has revealed that candidates consistently perform
poorly in certain basic concepts. The Mind the Gap study guides also draw
on the Grade 12 Examination Guidelines.
Matsie Angelina Motshekga, MP

Minister of Basic Education
Each of the Mind the Gap study guides provide explanations of key
terminology, simple explanations and examples of the types of questions
that learners can expect to be asked in an exam. Model answers are
included to assist learners in building their understanding. Learners are
also referred to specific questions in past national exam papers and exam
memos that are available on the Departments website
www.education.gov.za
The study guides have been written by subject expert teams comprised
of teachers, examiners, moderators, subject advisors and subject coordinators. All that is now required is for our Grade 12 learners to put in
the hours studying hard for the examinations. It should be remembered
that the support of the teachers and parents is also of utmost importance
as they are responsible for supporting the learning process at school and
at home.
Mr Enver Surty, MP
Deputy Minister of Basic Education
It is my fervent wish that the Mind the Gap study guide series takes us all
closer towards ensuring that no learner is left behind.
Learners make us proud - study hard. We wish you all good luck for your
Grade 12 examinations.
____________________________________
____________________________
Matsie Angelina Motshekga, MP

Minister of Basic Education
July 2012
Mr Enver Surty, MP
Deputy Minister of Basic Education
July 2012
Table of contents
Dear Grade 12 learner .................................................................vi
How to use this study guide........................................................vii
Top 10 study tips.........................................................................viii
Question words to help you answer questions.......................... ix
Study skills to boost your learning............................................... x
Top 10 exam tips.........................................................................xiii
Learners checklist...................................................................... xiv
1. Basic Accounting concepts.................................................... 1
1.1 Basic concepts................................................................................. 1

1.2 Rules of Accounting......................................................................... 2
1.3 Classification of accounts............................................................... 3
1.4 Steps to recording transactions...................................................... 5
2. Companies............................................................................... 6
2.1 Concepts relating to companies..................................................... 6

2.2 Company General Ledger accounts............................................... 8
2.3 Preparation of Financial Statements for companies.................. 11
2.4 Cash Flow Statements................................................................... 24
2.5 Analysis and interpretation of Financial Statements.................. 30
3. Manufacturing....................................................................... 38
3.1 Important concepts of manufacturing......................................... 39

3.2 Production Cost Statement........................................................... 40
4. Budgets................................................................................... 47
4.1 Key concepts.................................................................................. 47

4.2 Debtors collection schedule........................................................ 48
4.3 Analysis of cash budget................................................................ 50
4.4 Projected Income Statement........................................................ 54
5. Reconciliations...................................................................... 59
5.1 Bank reconciliation ....................................................................... 60

5.2 Debtors reconciliation.................................................................. 61
5.3 Debtors age analysis ................................................................... 63
6. Inventories.............................................................................. 65
6.1 Inventory systems.......................................................................... 65

6.2 Inventory valuation methods........................................................ 66
7. Value Added Tax (VAT)..........................................................69
7.1 VAT calculations............................................................................. 71
Appendix: Past Grade 12 exam papers................................... 74
Dear Grade 12 learner

This Mind the Gap study guide helps you to prepare for the end-of-year
Accounting Grade 12 exam.
The study guide does NOT cover the entire curriculum, but it does focus on
core content of each knowledge area and points out where you can earn
easy marks.
You must work your way through this study guide to improve your
understanding, identify your areas of weakness, and correct your own
mistakes.
We are confident that this Mind the Gap study guide can help you to prepare
well so that you pass the end-of-year exams. To ensure a high-quality pass,
you should also cover the remaining aspects of the curriculum using other
textbooks and your class notes.
In order for you to be successful in Accounting you must:
Ensure that you know the formats or layouts of the:
Income Statement
Balance Sheet
Cash Flow Statement
Production Cost Statement
General Ledger accounts
Understand the concepts explained in this guide and know how to do
calculations.
Work through as many past exam papers as you can (use the
explanations and steps in this guide to assist you). There are some
suggested questions from past papers at the end of each section for
extra practice.
Do not give up
keep working hard!
Practice makes
perfect Practice,
practice, practice.
Remember, your success in the final exam will depend on how much extra
time you put into preparing.
Overview of the Accounting

Grade 12 exam

There is one exam of 3 hours for 300 marks.

All questions are compulsory (no choice questions).
There are no different sections.
All past papers have had 6 questions.
Each question covers different levels so all learners should be able
to gain some marks in every question.
All questions should be attempted.
Questions will include conceptual understanding, application,
interpretation and reflective type questions.
Learners will be provided with a specially prepared answer book
for their answers. This is specially designed for the Accounting
exam. The answer booklet provides space for every question. All
calculations, workings and final answers will be done in this answer
booklet.
vi
Introduction
How to use this study guide

This study guide covers selected parts of the different topics of the Grade
12 Accounting curriculum. The selected parts of each topic are presented
in the following way:
An explanation of terms and concepts
Worked examples to explain and demonstrate
Activities with questions for you to answer
Answers for you to use to check your own work
NB!
Pay special attention
Step-by-step
instructions
Hint
Exams
Hints to help you

remember a concept
or guide you in solving
problems
E. G.
Refers you to past

exam papers
A checklist from the exam guidelines for Accounting has been

provided on page xiv for you to keep track of your progress. Once
you have mastered the core concepts and have confidence in your
answers to the questions provided, tick the last column of the
checklist.
Look out for

these icons in the
study guide.
Worked examples
Activities with
questions for you to
answer
Look out for

these helpful features
in the study guide.
The activities are based on exam-type questions. Cover the answers

provided and do each activity on your own using the suggested
steps in this guide. Then check your answers. Reward yourself for
the things you get right. If you get any incorrect answers, make sure
you understand where you went wrong before moving onto the next
section. Pay special attention to the way the workings have been
shown in the worked examples. This is the best way for you to earn
maximum marks. Where you see this tick you will be awarded a
mark even if your answer is incorrect, provided you have followed the
correct procedure (e.g. adding, subtracting or transferring figures).
Two past exam papers are also included in the study guide for you to
do. Check your answers by looking back at your notes and the exam
memoranda. Past exam papers go a long way in preparing you for
what to expect and help reduce exam anxiety.
Go to www.education.gov.za to download more past exam papers.
Use this study guide

as a workbook. Make notes,
draw pictures and highlight
important concepts.
Introduction
vii
Top 10 study tips

Try these study
tips to make
learning easier.
Have all your materials ready before you begin studying
Be positive. Make sure your brain holds onto the information
Take a walk outside. A change of scenery will stimulate your
Break up your learning sections into manageable parts. Trying to
Keep your study sessions short but effective and reward yourself
Teach your concepts to anyone who will listen. It might feel
Your brain learns well with colours and pictures. Try to use them
Be confident with the learning areas you know well and focus
Repetition is the key to retaining information you have to learn.
pencils, pens, highlighters, paper, etc.
you are learning by reminding yourself how important it is to

remember the work and get the marks.
learning. Youll be surprised at how much more you take in after

being outside in the fresh air.
learn too much at one time will only result in a tired, unfocused
and anxious brain.
with short, constructive breaks.
strange at first, but it is definitely worth reading your revision

notes aloud.
whenever you can.
your brain energy on the sections that you find more difficult
to take in.
10
viii
Introduction
Keep going dont give up!
Sleeping at least 8 hours every night, eating properly and

drinking plenty of water are all important things you need to
do for your brain. Studying for exams is like strenuous exercise,
so you must be physically prepared.
Question words to help you answer questions

It is important to look for the question words (the words that tell you what
to do) to correctly understand what the examiner is asking. Use the words
in the following table as a guide when answering questions.
Question word
Analyse
Classify
Comment
Compare
Define
Describe
Discuss
Evaluate
Explain
Forecast
Give/provide
Identify
Interpret
List
Mention
Name
State
Suggest
What is required of you

Separate, examine and interpret
Divide into groups or types so that things that are similar
are in the same group
Write generally about
Point out or show both similarities or differences
Give a clear meaning
List the main characteristics of something
Consider all information and reach a conclusion
Express an opinion based on your findings
Make clear, interpret and spell out
Say what you think will happen in the future
Write down only facts
Name the essential characteristics
Give the intended meaning of
Write a list of items
Refer to relevant points
State something give, identify or mention
Write down information without discussion
Offer an explanation or solution
Examples of question words

Choose a definition from COLUMN B that matches the type of account
in COLUMN A.
Draw a line from COLUMN A to COLUMN B to match the definitions.
Column A
Column B
1. Fixed/tangible A This increases profit and therefore increases

assets
owners equity.
2. Current assets B This decreases profit and therefore decreases
owners equity.
3. Non-current
liabilities
C Amounts owing that will take longer than 12 months

to pay off.
4. Current
liabilities
D Assets which are expected to be kept for a long

period of time, usually longer than a year. Without
them the business will not exist or earn a profit.
5. Income
E The value (net worth) of the business at any point in

time (total assets total liabilities).
6. Expenses
F Amounts owing that will be paid back within 12

months.
7. Owners
equity
G Assets which are expected to be converted into cash

in a short period of time (i.e. less than a year).
You must put a

CIRCLE around the
question word and
underline the key
words in every exam
question. These words
tell you exactly what
is being asked.
Introduction
ix
Study skills to boost your learning

This guide makes use of 3 study techniques you can use to help you learn
the material:
1. Mobile notes
2. Mnemonics
3. Mind maps
Mobile notes
1. Fold an A4 paper into

8 squares. Cut or tear
neatly along the folded
lines.
liabilit y
2. Write the basic concept
on one side of a bit of
paper.
An amount
a person oorwed by
to another business
business. person or
3. Write the definition of

the basic concept on
the back of the piece of
paper.
Introduction
Mobile notes are excellent tools for

learning all the key concepts in the
study guide. Mobile notes are easy
to make and you can take them
with you wherever you go:
1. Fold a blank piece of paper in
half. Fold it in half again.
Fold it again.
2. Open the paper. It will now be
divided into 8 parts.
3. Cut or tear neatly along the
folded lines.
4. On one side of each of these 8 bits
of paper, write the basic concept.
5. On the other side, write
I know
the meaning or the
this
one now!
explanation of the basic
Next"
concept.
6. Use different colours and
add pictures to help you remember.
7. Take these mobile notes with you
wherever you go and look at them
whenever you can.
8. As you learn, place the cards in
3 different piles:
I know this information well.
Im getting there.
I need more practice.
9. The more you learn them, the better
you will remember them.
Mnemonics
A mnemonic code is a useful technique for learning information that is
difficult to remember. This is an example of a word mnemonic using the
word BALANCE where each letter of the word stands for something else:
B Best doing your best is
more important than being

the best.
A Attitude always have a

positive attitude.
L Load spread the load so
you dont leave everything to

the last minute.
A Attention pay attention to

detail.
N Never give up!

C Calm stay calm even when
the questions seem difficult.
E Early sleep early the night

before your exam.
Mnemonics code information and make it easier to remember.

The more creative you are and the more you link your codes to familiar
things, the more helpful your mnemonics will be.
This guide provides several ideas for using mnemonics. Be sure to make
up your own.
Neither you nor the world knows what you

can do until you have tried.
Ralph Waldo Emerson
Introduction
xi
Mind maps
There are several mind maps included in this guide, summarising some of
the sections.
Have a look at the following pictures of a brain cell (neuron) and, below it,
a mind map:
Figure 1: Brain cell or neuron
Figure 2: Mind map rules
Mind maps work because they show information that we have to learn in
the same way that our brains see information.
As you study the mind maps in the guide, add pictures to each of the
branches to help you remember the content.
You can make your own mind maps as you finish each section.
A picture says
a 1000 words.
xii
Introduction
How to make your own mind maps:

1. Turn your paper sideways so your brain has space to spread out in all
directions.
2. Decide on a name for your mind map that summarises the
information you are going to put on it.
3. Write the name in the middle and draw a circle, bubble or picture
around it.
4. Write only key words on your branches, not whole sentences. Keep it
short and simple.
5. Each branch should show a different idea. Use a different colour for
each idea. Connect the information that belongs together. This will
help build your understanding of the learning areas.
6. Have fun adding pictures wherever you can. It does not matter if you
cant draw well.
TOP 10 exam tips

1
Make sure you have all the necessary stationery for your exam,
Arrive on time, at least one hour before the start of the exam.
Go to the toilet before entering the exam room. You dont want to
Use the 10 minutes reading time to read the instructions carefully.
Break the questions down to make sure you understand what is
Try all of the questions. Each question has some easy marks in it
Never panic, even if the question seems difficult at first. It will be
Manage your time properly. Dont waste time on questions you are
Check weighting how many marks have been allocated for your
i.e. pens, pencils, eraser and calculator (with new batteries). Make
sure you bring your ID document and examination admission letter.
waste valuable time going to the toilet during the exam.
This helps to open the information in your brain. All questions in

Accounting are compulsory, but you do not have to answer them
in order. Start with the question you think is the easiest to get the
flow going.
being asked. If you dont answer the question properly you wont
get any marks for it. Look for the key words in the question to
know how to answer it. A list of question words is on page ix of
this study guide.
so make sure that you do all the questions in the exam.
linked with something you have covered. Find the connection.
unsure of. Move on and come back if time allows.
10
answer? Take note of the ticks in this study guide as examples

of marks allocated. Do not give more or less information than is
required.
GOOD LUCK!
Write big and bold and clearly. You will get more marks if the
marker can read your answer clearly. Show workings in brackets
for Accounting as suggested in this study guide.
Introduction
xiii
Learners Checklist
Basic Accounting
Concepts
Companies
Manufacturing
Budgets
Reconciliations
Inventories
VAT
Fixed assets
xiv
3
Company concepts
GAAP principles
Company ledger accounts
Financial statements with adjustments: Income Statement
Balance Sheet
Notes to the Balance Sheet
Analysis and interpretation of financial statements
Comment on an audit report
Manufacturing concepts
Production Cost Statement with notes
Cost calculations
Break-even point
Trading and Profit and Loss Statements
Budgeting concepts
Debtors collection schedule
Creditors payment schedule
Cash budget (analyse and interpret)
Projected Income Statement (analyse and interpret)
Bank reconciliation
Debtors reconciliation
Age analysis
Creditors reconciliation
Inventory concepts
Inventory valuation FIFO and weighted average method
Concepts and calculations
Asset disposal
Introduction
I understand
Aspect of the curriculum
I do not
understand
Topic
Covered in
study guide
Use this checklist to monitor your progress when preparing for the
examination. The ticks [3] tell you which aspects of the curriculum are
covered in this study guide. The stars (*) tell you to go to textbooks and
class notes.
chapter
BASIC ACCOUNTING
CONCEPTS
1.1 Basic concepts

Term
Definition
Accrued expenses/
expenses payable
Expenses that are still owing at the end of the

financial year.
Accrued income/income
receivable
Income that is still owing to the business at the

end of the financial year.
Asset
Item of value owned by a person or business

which enables a profit to be made.
Bad debts
Debts written off as the debtors are unlikely to

settle their accounts.
Cost of sales
Cost of sales is the cost price of all goods that

have been sold.
Creditors
People/suppliers the business owes money to.
Debtors
People who owe the business money for goods

bought on credit.
Depreciation
The amount by which fixed assets reduce in value

over time due to wear and tear.
Income received in
Income that has already been received by a
advance/deferred income business but which is for the next financial year.
Liability
An amount owed by a person or business to

another person or business.
Loss
When the expenses are more than the income.
Mark-up
The percentage added to the cost price to

calculate the selling price, i.e. the profit %.
Owners equity
The net worth (value) of the business at any given

time.
Prepaid expenses
Expenses that have already been paid but which

are for the next financial year.
Profit
When the income is more than the expenses.
Trading stock deficit
This amount is calculated when the physical

stock-take figure is less than the figure for trading
stock in the general ledger.
Trading stock surplus
This amount is calculated when the physical

stock-take figure is more than the figure for
trading stock in the general ledger.
Mind the Gap

Accounting
These definitions
help you understand
the meaning of basic
accounting concepts
that are used in this
study guide.
Spend time
learning the meanings
of these terms. Use
mobile notes to help
you learn them. See
page x for more
infomation.
Chapter 1 Basic Accounting Concepts

LO1 AS1
1.2 Rules of Accounting
NB!
Assets
Dr
+
Owners equity
Cr
Dr Drawing Cr
Dr Expenses Cr
These rules of accounting do not change.

LEARN THEM WELL!!!
Dr
Dr Capital Cr
Cr
+
Dr Income Cr
(if expenses
increase
then profit
decreases)
(if expenses
decrease
then profit
increases)
(if income
decreases
then profit
decreases)
(if income
increases
then profit
increases)

LO1 AS1
Liabilities
Mind the Gap

Accounting
1.3 Classification of accounts

NON-CURRENT ASSETS
Tangible/fixed assets
Land and buildings
Equipment
Vehicles
Financial assets
Fixed deposit (longer than
12 months)
CURRENT ASSETS
Inventories
Trading stock
Consumable stores on hand
Trade and other receivables
Debtors control
Accrued income/income receivable
Prepaid expenses
Cash and cash equivalents
Bank (DR)
Petty cash
Cash float
Fixed deposit (less than 12 months)
Expenses
Income
Cost of sales
Interest expense
Rent expense
Salaries and wages
Stationery
Fuel
Packing material
Repairs
Insurance
Advertising
Discount allowed
Telephone
Water and
electricity
Loss on sale of
asset
Bad debts
Depreciation
Sales
Current income
Interest income
Rent income
Discount
received
Bad debts
recovered
Profit on sale of
asset
Trading stock
surplus
NON-CURRENT
LIABILITIES
(to be paid over
more than 12
months)
Mortgage bond
Loans
CURRENT LIABILITIES
(to be paid in less
than 12 months)
Trade creditors
Bank overdraft
(CR)
Short term portion
of loan
Accrued
expenses/
expenses payable
Income received
in advance/
deferred income
Activity 1: Matching items

Choose a definition from COLUMN B that matches the type of account in
COLUMN A.
Draw a line from COLUMN A to COLUMN B to match the definitions.
Column A
Column B
1. Fixed/tangible
assets
A This increases profit and therefore increases owners equity.
2. Current assets
B This decreases profit and therefore decreases owners equity.
3. Non-current
liabilities
C Amounts owing that will take longer than 12 months to pay off.
4. Current
liabilities
D Assets which are expected to be kept for a long period of time, usually longer than a
year. Without them the business will not exist or earn a profit.
5. Income
E The value (net worth) of the business at any point in time (total assets total liabilities).
6. Expenses
F Amounts owing that will be paid back within 12 months.
7. Owners equity
G Assets which are expected to be converted into cash in a short period of time (ie less
than a year).
[7]
Mind the Gap

Accounting

LO1 AS1
Answers to activity 1
Column A
Column B
[7]
Activity 2: Multiple-choice questions

Three options are provided as possible answers to the following questions.
Circle the correct answer.
1. Bank overdraft is classified as a... 2. Consumable stores on hand is
classified as...
A Non-current liability
A Owners equity
B Current asset
B Current asset
C Current liability
C An expense
[2]
1
This is a current liability because it will be paid back within

1 year (short-term).
This is a current asset because the business will use them

within the next 12 months.

LO1 AS1
[2]
Mind the Gap

Accounting
1.4 Steps to recording transactions

Refer to Rules of Accounting and Classification of accounts on page 2.
1. Read the transaction/adjustment.
Bought stationery and paid by cheque, R150.
2. Identify the two accounts affected (double entry principle).
1. Stationery 2. Bank
3. Decide what type of accounts these are (classify).

Stationery = expense and therefore affects owners equity
Bank = current asset
4. Decide which account is debited and which account is credited.
The expense is increasing therefore DR stationery
The asset is decreasing therefore CR bank
5. Record your answer showing the effect on Assets (A), Owners equity (O) and Liabilities (L):
Account debit
Stationery
Account Credit
Bank
A=
150
O+
150
L
0
A zero indicates no effect.

DO NOT leave blank!
Activity 3: Accounting equation

Refer to Steps to recording transactions 14 above.
Record the transactions in the table below assuming bank is favourable
(Dr) at all times.
1. Wrote off a debtors account of R500 as a bad debt.
2. Sent a cheque to a creditor to settle our account of R2 000.
3. Received rent of R5 000 from a tenant.
4. Bought trading stock on credit for R1 800.
5. Bought equipment for R600 and paid by cheque.
Account debit
Account credit
A=
O+
When a bank is favourable

it means it is an asset of
the business and remains
in a debit balance.
1
2
3
4
5
[5]
1
2
3
4
5
Account debit
Bad debts (expense
increasing)
Creditors control
(liability decreasing)
Bank (asset
increasing)
Trading stock (asset
increasing)
Equipment (asset
increasing)
Account Credit
A=
O+
L
Debtors control
500
500
0
(asset decreasing)
Bank (asset
2 000
0
2 000
decreasing)
Rent income
+5000 +5000
0
(income increasing)
Creditors control
+1800
0
+1 800
(liability increasing)
Bank (asset
600
0
0
decreasing)
[5]
Mind the Gap

Accounting
Keep going!

LO1 AS1
chapter
COMPANIES
Companies
is the
BIGGEST
section in your exam.
NB!
Spend time on it!
2.1 Concepts relating to companies

Persons in a company
Concept
Hint
Use mobile notes

to learn these
concepts. See page x
for instructions on how
to make them.
Explanation
Directors
People who are appointed by the shareholders to run

the company.
Independent auditor
(external)
An auditor who expresses an opinion on the financial

statements in an auditors report but does not work
for the company.
Internal auditor
An auditor who supervises the preparation of the

financial statements, is responsible for internal
control and is employed by the company.
Shareholders
People who own the company.
South African Revenue The government department to which the company

Services (SARS)
must pay income tax on the profits, and VAT when due.
Documents relating to companies

Concept
Explanation
Auditors report
This is an opinion given by a qualified person on whether the financial statements are
reliable or not.
Qualified
auditors report
When the auditors find the financial statements acceptable EXCEPT for some aspects that
need to be changed, fixed or investigated.
Unqualified
auditors report
When the auditors find the financial statements acceptable in ALL respects.
Disclaimer
When the auditors are not prepared to express an opinion on the financial statements
(because they are too unreliable).
Balance Sheet
This statement reflects the assets, liabilities and net worth (owners equity of the company).
Cash Flow
Statement
This shows the flow of cash in a company (money coming in and money going out).
Income Statement
This statement shows the profit or loss made from business operations (income and
expenses).
Tax assessment
This is issued by SARS to confirm the amount of income tax which the company has to pay
based on profits.
Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
Further concepts relating to companies

Concept
Explanation
Authorised share capital
The maximum number of shares a company can sell.
Dividends
That portion of the profits (after tax) which has been approved to be shared among
the shareholders (total dividends = interim + final).
Interim dividends
Dividends that are paid to the shareholders during the year.
Final dividends
Dividends that are declared (recommended) to the shareholders at the end of the
financial year.
Income tax
Tax the company pays to SARS on its profits.
Issued share capital
The number of shares that have actually been sold to shareholders. Use number of
issued shares to calculate dividends.
Limited liability
The liability of the shareholders is limited to their investment in the company (they
cannot lose their personal assets).
Par value (nominal

value)
The price at which the first shares were issued.
Provisional tax
Payments made to SARS during the year based on estimated profits (every 6
months).
Retained income
A portion of the profits after tax that are not paid out to the shareholders in
dividends but kept (retained) for future growth of the company.
Share premium
The extra amount that a company charges for its shares over and above the par
value.
Shareholders earnings
Net profit after tax.
Shareholders for
dividends
The amount still owing to shareholders for dividends declared but not yet paid.
Some acronyms (abbreviations) used in companies

AGM
Annual General Meeting
CA
Chartered Accountant
GAAP
Generally Accepted Accounting Practice
IFRS
International Financial Reporting Standards
JSE
Johannesburg Securities Exchange
SAICA
South African Institute for Chartered Accountants
SAIPA
South African Institute for Professional Accountants
GAAP concepts
Concept
Explanation
Business entity rule
The finances of the company are kept separate from that of the shareholders.
Going concern
Financial statements are prepared with the understanding that the company will
continue operating in the future.
Historical cost
All assets are recorded at their original cost price.
Matching
Income and expenses must be recorded in the correct financial year (e.g. sales and
cost of sales).
Materiality
All important items must be shown separately in the financial statements

(e.g. directors fees).
Prudence
Figures used in financial statements should be realistic (conservative).
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
2.2 Company General Ledger accounts

a)
b)
c)
d)
SARS (income tax) CR

Shareholders for dividends
Income tax
Dividends on ordinary shares
(ordinary share dividends)
e) Appropriation account
SARS
(income
NB!
tax)
implies a
liability owing to SARS.
E. G.
Hint
Worked example 1
Use the following information to complete

the ledger accounts given on the answer
sheet for Kwik Fix Ltd for the financial
year ended 30 June 2011.
Information
These are the

most commonly
asked company ledger
accounts.
To calculate the number

of issued shares, use
this figure and divide it
by the par value.
1 000 000 R2 =
500 000 shares
Kwik Fix Ltd financial year ended 30 June 2011

1
1 July 2010
At the beginning of the year, the company had the following

opening balances:
Ordinary share capital (par value R2 each)
Retained income
SARS (income tax)
R1 000 000
110 000
9 000
130 000
23 July 2010
Paid the amounts owing to SARS and the shareholders.
31 December 2010
31 December 2010
A first provisional tax payment of R112 500 was made to SARS half-way through
the financial year.
An interim dividend of 15 cents per share was paid to shareholders.
30 June 2011
30 June 2011
30 June 2011
30 June 2011
A second provisional tax payment of R120 000 was made to SARS at the end of
the financial year.
Final dividends of 30 cents per share were declared at the AGM but have not yet
been paid to the shareholders.
After the completion of the audit, the income tax figure for the year was determined
as R240 000. This was calculated on a net profit figure of R800 000.
Show the closing transfers to the final accounts.
Notes below refer to the information above and to the ledger accounts below ( 1 8 ):
1
The balances for SARS (income tax) and shareholders for dividends are the amounts that were not paid
last year and need to be paid this year. The retained income balance at the beginning of the year is
transferred to the appropriation account.
The amounts owing to SARS and the shareholders from last year are now being paid.
3
5
The first provisional tax payment is always made half way (6 months) into the financial year and the
second provisional tax payment is made at the end of the financial year.
The interim dividend is paid during the year.
The final dividend is declared (not paid) at the end of the financial year.
7
8
The income tax figure for the year is the amount of tax the company owes calculated on the net profit for
the year. This needs to be compared to the provisional tax payments made to see whether the company
owes SARS more tax (liability) or whether SARS owes the company (asset). The net profit of R800 000 is
calculated in the profit and loss account and transferred to the appropriation account.
The final accounts include the trading account, profit and loss account (not covered in this example) and
the appropriation account.
Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
General Ledger of Kwik Fix Ltd

These numbers refer to the
explanations on the previous page.
Dr
Balance Sheet section

SARS (income tax)
Cr
2010 July
23
Bank 2
CPJ
9 000
2010 July
Balance 1
b/d
9 000
2010 Dec
31
Bank 3
CPJ
112 500
2011 Jun
30
Income tax 7
GJ
240 000
2011 Jun
30
Bank 5
CPJ
120 000
Balance
c/d
7 500
249 000
249 000
2011 Jul
Balance 1
b/d
7 500
The income tax assesment was more than the provisional payments.
Therefore the balance is on the credit side, making it a liability (trade and other payables).
Dr
2011 Jun
Nominal accounts section

INCOME TAX
30
SARS (Income
Tax) 7
Dr
GJ
240 000
2011 Jun
Cr
30
Appropriation 8

SHAREHOLDERS FOR DIVIDENDS
GJ
Cr
2010 July
23
Bank 2
CPJ
130 000
2010 July
Balance 1
b/d
130 000
2011 Jun
30
Balance
c/d
150 000
2011 Jun
30
Dividends on
ordinary shares 6
GJ
150 000
280 000
Dr
The R150 000 is

the final dividend
and is still owing to
the shareholders.
This is a liability
(trade and other
payables).
280 000
2011 Jul
240 000
Balance
b/d
150 000
Nominal accounts section

DIVIDENDS ON ORDINARY SHARES
2010 Dec
31
Bank 4
(500 000 0.15)
CPJ
75 000
2011 Jun
30
Shareholders for
dividends 6
GJ
150 000
2011 Jun
30
Cr
Appropriation 8
GJ
225 000
(500 000 0.30)

225 000
Dr
2011 Jun
225 000
Final accounts section

APPROPRIATION ACCOUNT
30
Income tax 8
GJ
240 000
Dividends on
ordinary shares 8
Retained income
(end)
GJ
225 000
GJ
445 000
2011 Jun
Cr
30
Profit & loss 7
GJ
800 000
Retained income
(start) 1
GJ
110 000
910 000
910 000
The amount of profit (after paying income tax and dividends) the company decides to keep for future
growth (usually the balancing figure). This gets transfered back to the retained income account.
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
Practice task 1
Use these blank accounts to
practise doing the example
on your own. Once you have
completed the task, compare
your answer to the worked
example on page 9.
Photocopy this
page before you fill it
in and use it to keep
practising, practising,
practising!
General Ledger of Kwik Fix Ltd

SARS (income tax)
SHAREHOLDERS FOR DIVIDENDS
Nominal section
INCOME TAX
DIVIDENDS ON ORDINARY SHARES
Final accounts section

10

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
2.3 Preparation of Financial Statements

for Companies
Income Statement
Use the following steps to prepare an Income Statement from a

pre-adjustment trial balance:
1. Enter the pre-adjustment trial balance figures from the nominal
section onto the answer sheet next to the detail.
2. Read each adjustment:
a) If necessary calculate the adjustment amount.
b) Decide on which account is to be debited and which account is
to be credited.
c) On your answer sheet reflect a (+) or a () in respect of each
adjustment next to the already entered pre-adjustment figure.
i) Outstanding/accrued amounts will be added (+) and prepaid/
received in advance amounts will be subtracted ().
3. When all the adjustments have been done, calculate your final
figures and write them in the column.
Remember a preadjustment trial balance

refers to a trial balance
that is NOT final and
requires adjustments
(entries) to be made to
finalise the figures to be
used in the preparation
of the annual Financial
Statements.
Look at the format

you have been given.
Do you notice any missing
details? Fill them in. THESE

ARE EASY MARKS!
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
11
E. G.
Worked example 2
Example adapted from November 2011 NCS exam paper

Required
Prepare the Income Statement for the year ended 30 June 2011.
[52]
Information
1. ANEESA LTD

PRE-ADJUSTMENT TRIAL BALANCE AS AT 30 JUNE 2011
Balance Sheet Accounts Section
DEBIT
CREDIT
Ordinary share capital

Retained income
684 460
Mortgage loan: Joy Bank
804 500
Land and buildings
2 097 000
Vehicles
814 000
Equipment
616 000
Accumulated depreciation on vehicles
294 800
Accumulated depreciation on equipment
341 000
Trading stock
Bank
Petty cash
Debtors control
This amount is the
provisional tax payments.
2 820 000
955 000
15 000
313 100
3 300
396 000
Creditors control
SARS (income tax)
487 300
261 800
Provision for bad debts

Fixed deposit: Broad Bank (8% p.a.)
18 000
495 000
Nominal Accounts Section

Remember to subtract
debtors allowances from
sales.
Sales
Debtors allowances
Cost of sales
10 500 000
145 200
7 487 000
Rent income
176 880
Interest income (on fixed deposit)
26 630
Bad debts recovered

Directors fees
Audit fees
Salaries and wages
Packing material
Marketing expenses
This is the interim
dividend. DO NOT include
on the Income Statement!
12

Chapter 2 Companies
LO2 AS1
2 300
840 000
73 800
660 000
23 100
480 000
Sundry expenses
63 770
Bad debts
12 000
Ordinary share dividends
404 800
16 155 870
16 155 870
Mind the Gap

Accounting
2. Adjustments
A. A physical stock-taking on 30 June 2011 revealed the following
inventories on hand:
Trading stock
R902 150
Packing material
R4 260
B. Directors fees of R22 500 are outstanding at the end of the
financial period.
C. Make provision for outstanding interest on a fixed deposit. This
investment has been in existence for the entire year. Interest is
not capitalised.
D. A debtor who owes us R32 000 has been declared insolvent.
His estate paid 40 cents in every rand and this has been
correctly recorded. The remaining balance must be written off as
irrecoverable.
E. Provision for bad debts must be adjusted to 5% of debtors.
F. The rent included R14 520 for July 2011. Adjust accordingly.
G. Make provision for depreciation as follows:
New equipment to the value of R48 000 was purchased on
1 September 2010. This has been correctly recorded.
Vehicles at 15% p.a. on cost price.
Equipment at 10% p.a. on the diminishing balance method.
H. The loan statement received from Joy Bank on 30 June 2011
reflected the following:
R
Balance at the beginning of the financial year
Repayments during the year
Interest capitalised
Balance at the end of the financial year
I.
Income tax for the year, R150 285.
Mind the Gap

Accounting
1 125 000
458 000
?
804 500
Capitalised means
the interest is
added onto the
loan. You need to
calculate this figure.
Chapter 2 Companies
LO2 AS1
13
Answers to worked example 2 (see pages 12-13)

1. ANEESA LTD: INCOME STATEMENT FOR THE YEAR ENDED
30 JUNE 2011
Sales (10 500 000 3 145 200 3)
1 0354 800
Cost of sales (7 487 000)
(7 487 000)
Gross profit
164 660
162 360
Rent income (176 8803 14 5203 3)

Bad debt recovered (2 300)
Gross operating income
(2 392 600)
Directors fees (840 0003 + 22 5003)
862 500
Audit fees (73 800)
73 800
Salaries and wages (660 000)
660 000
Packing material (23 1003 4 2603)
18 840
Marketing expenses (480 000)
480 000
Sundry expenses (63 770)
63 770
Bad debts (12 0003 +19 20033)
Provision for bad debts adjustment

(18 8403 18 0003)
Depreciation
V: 122 1003
E: 4 000 + 22 70033
33
679 460
Interest expenses/finance cost3

(458 000 + 804 500 1 125 000) or
(1 125 0003 458 0003 804 5003)
Net profit after tax
52 850
39 600
Interest income3 (26 6303 + 12 9703)
Income tax3
840
639 860
(137 500)
FORMAT
Note where
these 3 items
appear on the
Income Statement
541 960
Profit before tax

I
Always show
your calculation
work in brackets
for part marks.
148 800
Profit before interest expenses/finance cost3

H
This is the total of the

operating expenses.
REMEMBER to subtract
this from gross
operating income.
31 200
Operating profit
C
2 300
3 032 460
Operating expenses
B
NB!
2 867 800
Other operating income

F
FORMAT
It is VERY
important
to know the format of
the Income Statement!
(150 285)
391 675
[52]
The letters in this column refer to the explanations on
the next page.
14

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
2. Explanations of each adjustment.

A
Trading stock:
The physical stocktaking of R902 150 is less than the amount in the preadjustment trial balance of R955 000. This means that there is a trading
stock deficit of R52 850 (R955 000 R902 150).
trading stock deficit = expense item on Income Statement
Packing material:
The amount on hand is subtracted from the pre-adjustment trial balance
amount.
Directors fees are outstanding and therefore get added to the preadjustment figure.
Interest on fixed deposit = R495 000 8% = R39 600 for the year.
All preNB!
adjustment
trial balance
figures have been entered
in bold on the Income
Statement before entering
the adjustments.
The difference must be added to the pre-adjustment trial balance figure.
Calculation of bad debts:

The estate paid 40 cents; therefore 60 cents in every rand must be written
off. R32 000 0,6 = R19 200. This must be added to the pre-adjustment
figure.
Provision for bad debts adjustments calculation.

Calculate the final debtors amount taking adjustment D into account:
R396 000 R19 200 = R376 800
5% of R376 800 = R18 840
Provision for bad debts must be adjusted to R18 840. It is currently
R18 000. The amount of R840 by which it must be adjusted must be shown
in the Income Statement as an expense.
Rent was received in advance and therefore must be subtracted from the
pre-adjustment figure.
Depreciation on vehicles: 814 000 15% = R122 100

Depreciation on equipment:
New equipment
Bought on 1 September. The cost of the new equipment must be subtracted
from the equipment balance.
R616 000 R48 000 = R568 000
10% of R48 000 10 12 = R4 000
Old equipment
PLEASE NOTE:
Depreciation is normally
an involved calculation
affecting both vehicles and
equipment. For this reason
many marks are awarded for
the depreciation figure. Show
all your workings so that even
if one or two of your figures
are wrong, you can still
get some marks for
calculating correctly.
Using the diminishing balance method, subtract the accumulated

depreciation from the cost price (excluding the new equipment) to determine
carrying value.
R568 000 R341 000 = R227 000
10% of R227 000 = R22 700
Depreciation is recorded as an expense in the Income Statement:
R122 100 + R22 700 + R4 000 = R148 800
To calculate the missing

figure on the loan
statement:
Loan: Joy bank
Bank CPJ 458 000 Balance b/d 1 125 000

R1 125 000 R458 000 Balance c/d 804 500 Int. on loan GJ 137 500
R804 500
1 262 000

1 262 500
= R137 500 OR
Balance b/d 804 500
Interest on loan = interest
expense
Income tax for the year is subtracted from the net profit before tax
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
15
Photocopy this blank

Income Statement and use
it to practise doing worked
example 2 again on your own.
Once you have completed the
task, compare your answer
to the worked example on
the previous pages.
Practice task 2
ANEESA LTD: INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2011
Sales
Cost of sales
Gross profit

Operating expenses
Operating profit
Profit before tax
[52]
16

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
E. G.
Worked example 3
Balance Sheet and notes

Use the following steps to prepare a Balance Sheet from the
given information:
1. Enter the figures from the information given onto the answer sheet
next to the details.
2. Read the additional information:
a) If necessary calculate the adjustment amount.
b) Decide on which account is to be debited and which account is
to be credited.
c) On your answer sheet reflect a (+) or a () in respect of each
item next to the already entered pre-adjustment figure.
3. When all the additional information has been considered, calculate
the final figures and write them in the column.
Look at the
format you have been
given. Do you notice any
missing details? Fill them
in. THESE ARE
EASY MARKS!
Example adapted from November 2009 NCS exam paper

You are provided with information relating to Qwando Limited for the
financial year ended 30 June 2011.
Required
1. Prepare the retained income note.
2. Prepare the Balance Sheet on 30 June 2011.
[16]
[38]
Information
1. The following figures were taken from the financial records of the
financial year ended 30 June 2011.
R
Ordinary share capital (see information 2 below)
2 400 000
Share premium
248 000
Retained income (on 1 July 2010)
490 000
Shareholders for dividends (see information 4 below)
Fixed deposit at Supa Bank (see information 5 below)
60 000
Mortgage Bond from Supa Bank (see information 7 below)

Fixed/tangible assets (book value)
?
4 021 000
Debtors control
45 000
Creditors control
85 200
Creditors for salaries
12 300
Provision for bad debts (see information 6 below)

SARS (income tax provisional tax payments)
?
400 000
SARS (PAYE)
6 650
Expenses payable (accrued)
7 200
Income receivable (accrued)
7 950
Bank (favourable balance)

Trading stock
Mind the Gap

Accounting
The accumulated
depreciation has already
been subtracted.
Book value = cost
accumulated depreciation.
28 450
129 600
5 600
Chapter 2 Companies
LO2 AS1
17
Use the
issued
shares to
calculate the dividends.
NB!
2. The authorised share capital consists of 1 000 000 ordinary shares

with a par value of R3.

On 1 January 2011, 100 000 ordinary shares were issued to the
public at a premium of 80 cents each. This has been correctly
recorded and is included in the figures above.
3. The net profit before tax for the year ended 30 June 2011 was
calculated as R1 250 000. No entry for income tax at a rate of 30%
of the net profit has been made.
4. Dividends were as follows:
Interim dividends of 20 cents per share were paid on
31 December 2010.
Final dividends of 35 cents per share were declared on 30 June
2011.
5. One third of the total fixed deposits matures on 31 August 2011.
6. Provision for bad debts must be adjusted to 5% of debtors.
7. The loan statement from Supa Bank on 30 June 2011 reflects the
following:
SUPA BANK
LOAN STATEMENT ON 30 JUNE 2011
Balance on 1 July 2010
384 000
Interest charged
The monthly capital

repayments on the loan
will remain constant until
the loan has been paid in
full on 30 June 2019.
57 600
Monthly instalments in terms of the loan agreement

(12 R8 800)
(These monthly instalments include interest on the capital
repayments of the loan)
105 600
Balance on 30 June 2011
336 000
Answers to worked example 3 (see page 17)

RETAINED INCOME
Balance on the last day of the previous
year
3
Total dividends (interim
and final) are shown here.
Net profit after tax for the period3

(1 250 000 30%)
Ordinary share dividends3
4
2&
4
18

Chapter 2 Companies
LO2 AS1
490 000
33
875 000
(420 000)
Paid3 (interim)
(700 00033 shares 20c3)
140 000
Recommended3 (final)
(800 0003 shares 35c3)
280 000
Balance on the last day of the current year

945 000
[16]
Mind the Gap

Accounting

FORMAT
QWANDO LIMITED
BALANCE SHEET ON 30 JUNE 2011
ASSETS
NON CURRENT ASSETS
Fixed/tangible assets (4 021 000)
4 061 000
3 4 021 000
Financial assets
5
Fixed deposit: Supra Bank

(60 0003 20 0003)
3 40 000
CURRENT ASSETS

(45 0003 + 7 9503 2 2503 + 25 000)33

(28 4503 + 20 000 )
3 135 200
3 75 700
48 450
TOTAL ASSETS
4 320 350
EQUITY AND LIABILITIES

CAPITAL AND RESERVES
2
Ordinary share capital (2 400 000)
Share premium (248 000)
3 593 000
NON-CURRENT LIABILITIES
288 000
Mortgage loan: Supa Bank

(336 0003 48 00033)
288 000
CURRENT LIABILITIES
439 350
Trade and other payables

(85 2003 + 12 3003 + 6 6503 + 7 2003)
7
Current portion of loan
TOTAL EQUITY AND LIABILITIES
If the notes
are not required, show
all your calculation
work in brackets on
the Balance Sheet
3 248 000
945 000
Amount owed by SARS

to the business. This
implies the business
overpaid its taxes to
SARS.
3 2 400 000
Retained income (see note on page 18)
Fixed assets are always

shown at book value on
the Balance Sheet.
259 350
Inventories
(129 6003 + 5 6003)
6
NB!
It is VERY
important
to know the format of the
Balance Sheet and notes!
3 111 350
3
3
280 000
48 000
This is the final

dividend declared at the
end of the year.
4 320 350
[38]
The numbers in this column refer to the explanations on
the next page.
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
19
All given
figures in
information
1 (see page 17) have been
entered in bold before
entering the information
2 to 7.
NB!
Remember there was

a change in the issued
share capital during the
year and, as a result, it
increased by 100 000.
Explanations of each adjustment

2
Share capital and premium:

As the new issue of shares has been properly recorded, no changes
were required to the ordinary share capital and share premium figures
provided in information 1.
Net profit after tax must be calculated by subtracting income tax from
net profit before tax. This must be entered in the retained income note.
Tax calculation = (R1 250 000 30% = R375 000)
Net profit after tax = R1 250 000 R375 000 = R875 000)
Dividends:
Calculate the number of shares at the beginning of the year before new
shares were issued:
Ordinary share capital par value = R2 400 000 R3 = 800 000
shares
100 000 shares were issued during this year; therefore shares at the
beginning of the year:
800 000 shares 100 000 shares = 700 000 shares
Calculation of interim/paid dividends = 700 000 20 cents = R140 000
Calculation of final/declared dividends = 800 000 35 cents =
R280 000
Total dividends = R140 000 + R280 000 = R420 000
Calculation of short term portion of fixed deposit:

The portion of the fixed deposit that will be received within the next
12 months must be subtracted from the financial assets and shown
under cash and cash equivalents under current assets on the Balance
Sheet.
(1/3 of R60 000 = R20 000)
Provision for bad debts is calculated at 5% of debtors control:

5% of R45 000 = R2 250.
Provision for bad debts must be subtracted from trade and other
receivables.
Repayments of the capital amount of the loan that will be made in the
next 12 months must be subtracted from the non-current liabilities and
shown under current liabilities as a current portion of loan.
R105 600 (total repayments) R57 600 (interest) = R48 000 (capital
portion of repayments for the year.
[16]
20

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
Practice task 3 (continued)

RETAINED INCOME
Photocopy this blank

Balance Sheet and use it to
practise doing the worked
example 3 again on your own.
Once you have completed the
task, compare your answer
to the worked example
on pages 19 and 20.
Balance on the last day of the previous year
Balance on the last day of the current year

QWANDO LIMITED
BALANCE SHEET ON 30 JUNE 2011
ASSETS
NON CURRENT ASSETS
Fixed/tangible assets
Financial assets
Fixed deposit: Supra Bank
CURRENT ASSETS
TOTAL ASSETS
CAPITAL AND RESERVES
NON-CURRENT LIABILITIES
Mortgage loan: Supa Bank
CURRENT LIABILITIES
[38]
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
21
Some important
notes to the
Financial Statements
FORMAT
NB!
It is VERY
important to know
the format of the
notes to the Financial Statements. Some
of them are explained below.
TANGIBLE/FIXED ASSETS
AB=C
Land &
Buildings
Vehicles
(B) = 0
(B)
(B)
(E)
(E)
(E)
(F) = 0
(F)
(F)
(I) = 0
(I)
(I)
Carrying value at beginning of year

Cost
Accumulated depreciation
Total
Movements
Additions
LAND AND BUILDINGS
ARE NOT DEPRECIATED.
A zero will always be
shown in these blocks.
Disposals at carrying value

Depreciation
Carrying value at end of year

Cost
C+DEF=J
OR
HI=J
The total
carrying
value gets
transferred to
the Balance
Sheet.
TRADE & OTHER RECEIVABLES

Net trade debtors
Trade debtors
(L)
SARS (income tax)
Expenses prepaid
Income accrued (receivable)
P
Q
22

Chapter 2 Companies
LO2 AS1
KL=M
Amount overpaid to
SARS.
M+N+O+P=Q
Transfer Q to the
current assets section
in the Balance Sheet.
Mind the Gap

Accounting
TRADE & OTHER PAYABLES

Trade creditors
Expenses accrued (payable)
Income received in advance
Dividend declared but not yet

paid (final dividend).
SARS (income tax)
Amount still owing to SARS.
Creditors for salaries
Gross salaries less deductions.
Unemployment insurance fund
Pension fund
Medical aid fund
Z
AA
Mind the Gap

Accounting
Deductions + contributions.
AA: Total transferred to

current liabilities section of
the Balance Sheet.
Chapter 2 Companies
LO2 AS1
23
NB!
FORMAT
It is
VERY
important to know the
format of the Cash Flow
Statement and notes!
2.4 Cash Flow Statements

Purpose of a Cash Flow Statement
The Income Statement shows the result of business operations (net profit).
The Balance Sheet shows the financial position of the business on a
specific day (ie how much the business is worth).
Neither of them shows where the business gets its funds from or how the
funds are used.
The Cash Flow Statement is prepared for this purpose and shows where
the funds are coming from and how they are used.
2.4.1 Terminology
Concept
Definition
Cash inflow
Money coming into the business. This amount

does NOT have brackets (e.g. sale of shares).
Cash outflow
Money going out of the business. This amount

HAS brackets (e.g. bought a fixed asset for cash).
All the information needed for a Cash Flow Statement and notes can be
found on the Income Statement, Balance Sheet and notes.
Hint
Cash Flow Statements

focus on all aspects of
CASH surrounding a
business. Remember CASH
IS KING for Cash Flow
Statements.
E. G.
Worked example 4
Example: Preparation of
the Cash Flow Statement
Note
Certain figures have been

given on the answer sheet
(in bold). In order to calculate
the missing figures A to L, refer
to additional information provided
below.
Required
Prepare the Cash Flow Statement
(all relevant notes have been
done for you).
[15]
Additional Information
Remember we are looking for the flow of cash. This

means you will need to calculate the difference between
this years and last years figures, to determine the
figures to place on the Cash Flow Statement.
Extract from Balance Sheet

2012
2011
R450 000
R400 000
R50 000 Inflow
Ordinary share premium
R15 000
R10 000
R5 000 Inflow
Retained income
R17 000
Fixed deposit
R28 000
R23 000
(R5 000) (Outflow)
Loan from Beta Bank (interest is not

capitalised)
R74 000
R80 000
(R6 000) (Outflow)
Bank
R35 300
R10 040
R25 260 Inflow
R2 000
R2 000
Cash float
24

Chapter 2 Companies
LO2 AS1
Flow of cash
R9 000 This has no effect on a Cash

Flow Statement.
R0 No change
Mind the Gap

Accounting
Notes to the Cash Flow Statement

Note 1: Reconciliation between profit before tax and cash generated
from operations:
R
Profit before tax
30 000
Adjustments i.r.o. (in respect of):
21 200
Depreciation
12 000
Interest expense
9 200
Operating profit before changes in

working capital
51 200
Changes in working capital
5 000
(Increase)/Decrease in inventory
(3 000)
(Increase)/Decrease in debtors
5 600
Increase/(Decrease) in creditors
2 400
Cash generated from operations
56 200
Transfer this figure to

the Cash Flow Statement
(cash flow from
operating activities).
Note 2: Cash and cash equivalents
Make sure you use the

profit before tax from
the Income Statement. If
profit after tax is given,
remember to add back the
tax.
These figures are taken
DIRECTLY from the
Income Statement and
are ADDED to the profit
before tax to give you the
operating profit before
changes in working capital.
Also, depreciation is NOT a
cash expense.
Difference between last
years and this years
figures. Remember to
exclude amounts owed
to shareholders, accrued
interest and amounts owed
to or by SARS for income
tax.
ATTENTION:
Watch your
dates! Make
sure you are using the
figures from the correct
year.
NB!
Net change is calculated

as the difference
between last years and
this years figures.
Net
change
Bank
Cash float
2012
2011
25 260
35 300
10 040
2 000
2 000
25 260
37 300
12 040
These amounts come

DIRECTLY from cash and
cash equivalents on the
Balance Sheet.
Transfer these figures to the

Cash Flow Statement (net change
in cash and cash equivalents).
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
25
The notes for dividends paid

and tax paid can be done using either the
format given below or the ledger account
(not required in this question).
Last years shareholders

for dividends amount.
This figure is shown in
brackets.
Note 3: Dividends paid

Amount due at the beginning of the year
Total dividends for the year (interim + final)
Amount due at the end of the year (final)
(R4 500)
(R10 000)
R6 000
(R8 500)
Dividends paid
This is the total amount paid out

for dividends this year. This figure is
shown in brackets on the Cash Flow
Statement (cash flow from operating
activities)
NB!
Before you attempt a Cash Flow Statement

question, ensure that you can identify the
information that is given to you to determine if
you have to complete notes or simply show all
your working calculations.
Note 4: Taxation paid

Amount due at the beginning of the year
Total tax for the year
Tax paid
(R1 600)
(R13 500)
Amount due at the end of the year
R1 200
(R13 900)
This is the total amount paid out for tax

this year. This figure is shown in brackets
on the Cash Flow Statement (cash flow
from operating activities) as this was the
actual cash that was paid.
26

Chapter 2 Companies
LO2 AS1
This figure is shown in

brackets.
This years shareholders
for dividends amount. This
figure is NOT shown in
brackets.
Last years SARS income

tax amount. If the figure
is under trade and other
payables it will have
brackets. If the figure is
under trade and other
receivables it will not
have brackets.
The income tax figure
from the Income
Statement. This figure is
shown in brackets.
This years SARS income
tax amount. If the figure
is under trade and other
payables it will not have
brackets. If the figure is
under trade and other
receivables it will have
brackets.
Mind the Gap

Accounting
Cash Flow Statement for the year ended

NOTES
Cash flow from operating activities
Interest paid
R
24 960
3 56 200
(8 840)
Dividends paid
3 (8 500)
Income tax paid
3 (13 900)
Cash flow from investing activities
(48 700)
Purchase of fixed assets
(48 500)
Proceeds from sale of fixed assets
4 800
Increase of investment
33 (5 000)
Decrease of investment
Cash flow from financing activities

Proceeds from shares issued
(R50 0003 + R5 0003)
Proceeds from long-term loans
49 000
3 55 000
Payment of long-term loans
3 (6 000)
Net change in cash and cash equivalents
25 260
Cash and cash equivalents at the beginning of

the year
3 12 040
Cash and cash equivalents at the end of the year
3 37 300
Operating activities:
The most common source
of cash for a company.
It not only involves the
buying and selling of
stock, but also includes
paying creditors, receiving
money from debtors and
paying expenses.
Investing activities:
The activities that focus
on the buying and selling
of fixed assets and the
increasing and decreasing
of investments (e.g. fixed
deposits).
Financing activities:
How a company is funded
through loans and capital:
The issuing of shares
The obtaining of a loan
The repayment of a
loan
The letters in this column

refer to the explanations in
the table on page 28.
[15]
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
27
Explanations of A to L
A
Cash generated from operations interest paid dividends paid income tax paid = A
R56 200 R8 840 R8 500 R13 900 = R24 960

Inflow (Outflow) (Outflow) (Outflow)
Inflow
Cash generated from operations transferred from Note 1 (under notes to the Cash Flow Statement).
Dividends paid transferred from Note 3 (under notes to the Cash Flow Statement).
Income tax paid transferred from Note 4 (under notes to the Cash Flow Statement).
Purchase of fixed assets proceeds from sale of fixed assets increase in investment = E
R48 500 + R4 800 R5 000 = R48 700
(Outflow)
Inflow (Outflow) (Outflow)
This figure comes from the extract from the Balance Sheet and is calculated by finding the difference
between this years and last years figures:
R28 000 R23 000 = R5 000

(Outflow)
Increasing the fixed deposit is an outflow as money is moving out of the bank account and into the fixed
deposit account.
Proceeds from shares issued payment of long-term loans = G

R55 000 R6 000 = R49 000

Inflow (Outflow)
between Ordinary Share Capital + Ordinary Share Premium from this years and last years figures:
(R450 000 R400 000) + (R15 000 R10 000)

R50 000
+
R 5 000
= R55 000

Inflow
between this years and last years figures:
R74 000 R80000 = R6 000

(Outflow)
A E + G = J (R24 960 R48 700 + R49 000 = R25 260)

To verify this figure check the net change total in Note 2 (cash and cash equivalents) under notes to the
Cash Flow Statement.
This figure comes from the extract from the Balance Sheet, calculated by adding the bank figure and cash
float figure from last year i.e. 2011.
To verify this figure check the total of the bank and cash float figure for 2011 in Note 2 (cash and cash
equivalents) under notes to the Cash Flow Statement.
This figure comes from the extract from the Balance Sheet, calculated by adding the bank figure and cash
float figure from this year ie. 2012.
To verify this figure check the total of the bank and cash float figure for 2012 in Note 2 (cash and cash
equivalents) under notes to the Cash Flow Statement.
28

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
Practice task 4
Photocopy this
blank Cash Flow
Statement and use it
to practise doing the
worked example 4 again
on your own. Once you
have completed the task,
compare your answer to
the worked example on
pages 27 and 28.
Cash Flow Statement for the year ended

NOTES
Cash flow from operating activities

Interest paid
(8 840)
Dividends paid
Income tax paid
Cash flow from investing activities

(48 500)
Proceeds from sale of fixed assets
4 800
Increase of investment
Decrease of investment
Cash flow from financing activities

Proceeds from shares issued
Proceeds from long-term loans
Payment of long-term loans
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
[15]
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
29
2.5 Analysis and interpretation

of Financial Statements
Make
sure
you can
calculate these indicators.
See page 33 for formulae.
NB!
Area of analysis
Description
Related financial indicators
Profitability
How efficient is the company

in its normal operating
activities?
% gross profit on sales

% net profit on sales
% operating expenses on
sales
% operating profit on sales
% gross profit on cost of
sales (mark-up)
Liquidity
The ability of a company to

pay off its immediate (shortterm) debts.
Current ratio
Acid test ratio
Net current assets (net
working capital)
Turnover rate of stock
Debtors collection period
Creditors payment period
Average period of stock on
hand
Solvency
The ability of a company to

pay off all its debts.
Solvency ratio
Net assets
Return
Are the shareholders earning

a fair amount on their
investment?
% return on average
shareholders equity
Earnings per share
Dividends per share
Net asset value
Financial risk
Gearing
To what extent is the

company financed by loans
(borrowed money) compared
to its own capital?
Debt/equity ratio
% return on total capital
employed
F ollow these steps when commenting on the

financial indicators:
1. Consider what the question is asking you to analyse (e.g. liquidity).
Decide on the relevant financial indicator(s).
2. Name the financial indicator(s) giving figures or ratios or
percentages.
3. Compare the current years indicator(s) with that of the previous year.
Say whether it has increased or decreased.
4. If possible, provide a general comment.
30

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
Mind the Gap

Accounting
Chapter 2 Companies
LO2 AS1
31
Hint
Use point form

instead of long
sentences to comment.
Worked example 5: Comment on the

liquidity position of the company
E. G.
2010
2011
Current ratio
Financial indicator
1,3 : 1
2,1 : 1
Acid test ratio
0,6 : 1
1,4 : 1
Current ratio 3 has improved from 1,3 : 1 to 2,1 : 1 3

Acid test ratio 3 has also improved from 0,6 : 1 to 1,4 : 1 3
This company is in a good liquidity position and should be able to pay
its short-term debt easily. 3
[5]
E. G.
ATTENTION:
Watch your
dates! Make
sure you are using the
figures from the correct
year.
NB!

earnings per share (EPS) and dividends
per share (DPS) of the company
Financial indicator
2010
2011
Earnings per share (EPS)
35c per share
15c per share
Dividends per share (DPS)
25c per share
20c per share
EPS has declined from 35c to 15c per share. 3

DPS has declined from 25c to 20c per share. 3
In 2010 their EPS was 35c while the DPS was only 25c per share. This
means that the company retained 10c per share for future growth. 33
In 2011 they only earned 15c per share but gave the shareholders 20c
per share meaning that none of this years profits were retained. 33
[6]
E. G.

debt/equity ratio of the company
Financial indicator
Debt/equity ratio
2010
2011
0.6:1
0,4:1
Debt/equity ratio decreased3 by 0,2 from 0,6 : 1 to 0,4 : 1. 3

By repaying the loan the company has a lower financial risk. 3
[3]
E. G.

percentage return on shareholders
equity (ROSHE) of the company
Financial indicator
% return on shareholders equity (ROSHE)
2010
2011
18 %
24 %
ROSHE improved3 by 6 % from 18 % to 24 %.3

The shareholders should be pleased as a return of 24 % is higher
than an alternative investment (e.g. fixed deposit). 3

[3]
32

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
Formulae: Financial indicators

Students MUST know these formulae off by heart.
Financial indicator
NB!
How it is calculated - formula
Gross profit on cost of

sales (mark-up)
Gross profit on sales
Operating expenses on
sales
Operating profit on sales
Net profit after tax on

sales
Solvency ratio
7
8
Net assets (shareholders

Total assets Total liabilities
equity)
Current ratio
Current assets : Current liabilities
Acid-test ratio
10
Turnover rate of stock
11 Period for which enough

stock is on hand (stock
holding period)
12 Debtors average
collection period
13 Creditors average
payment period
14
Debt/equity ratio
15 Return on equity
(shareholders equity)
16
17
18
19
Answer shown as/in
Gross profit 100
Cost of sales 1
Gross profit 100
Sales 1
Operating expenses 100

Sales 1
Operating profit 100
Sales 1
Net profit after tax 100

Sales 1
Total assets : Total liabilities
%
%
%
%
%
Ratio ( : 1)
Rands
Ratio ( : 1)
(Receivables + cash) : Current liabilities

OR
(Current assets inventories) : Current liabilities
Cost of sales
Average stock
Average stock 365
Cost of sales
1
Mind the Gap

Accounting
Times per year

Number of days
Average debtors 365
Credit sales 1
Average creditors 365
Credit sales
1
Non-current liabilities : Shareholders equity
Number of days
Number of days
Ratio ( : 1)

100
Average shareholders equity 1

Return on total capital
Net profit before tax + interest on loans
100
employed
Average shareholders equity + average loans 1
Earnings per share
Net profit after tax 100
Number of issued shares 1

Dividends per share
Interim & final dividends 100

Net asset value per share
Shareholders equity 100
NB!
Ratio ( : 1)
%
%
Cents
Cents
Cents
OTHER IMPORTANT FORMULAE:

To calculate the selling price (SP):
Shareholders equity =
100 + mark-up
SP = CP

100
+ Ordinary share premium

+ Retained income
To calculate the cost price (CP):

100

CP = SP

100 + mark-up
Chapter 2 Companies
LO2 AS1
33
E. G.
Worked example 9
Example: Calculation of financial indicators (this question

shows some of the basic financial indicators that will help
you earn easy marks).
You are provided with information relating to Glebo Limited for the year
ended 30 June 2011.
Required
Use the given information to calculate the following financial indicators
for 2011.
[31]
1. % gross profit on cost of sales (mark-up)
These calculations use

figures taken from the
Income Statement ONLY.
2. % net profit on sales

3. % operating profit on sales
4. Current ratio
5. Acid-test ratio
These calculations use

figures taken from the
Balance Sheet ONLY.
6. Debt/equity ratio
7. Solvency ratio
8. Net asset value per share
This calculation uses

figures taken from BOTH
the Income Statement and
the Balance Sheet.
9. Earnings per share
Information
Glebo limited
Extract from Income Statement for the year ended
30 june 2011
2011
Sales
9 000 000
Cost of sales
5 625 000
Operating profit
1 423 200
Income tax
426 000
904 000
34

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
GLEBO LIMITED
BALANCE SHEET AS AT 30 JUNE 2011
2011
ASSETS
Non-current assets
4 626 000
Fixed assets
4 326 000
Financial assets
Current assets
Inventories (all trading stock)
Trade and other receivables (all trade debtors)
SARS (income tax)
TOTAL ASSETS
300 000
2 557 000
1 640 000
810 000
0
107 000
7 183 000

Ordinary shareholders' equity
4 123 000
Ordinary share capital (R2,00 par value)
2 200 000
Share premium
710 000
Retained income
4 213 000
Non-current liabilities
1 980 000
Mortgage loan: Jozi Bank (13% p.a.)

Current liabilities
Trade and other payables (all trade creditors)
SARS (income tax)
Bank overdraft
Current portion of loan
Mind the Gap

Accounting
1 980 000
1 080 000
705 000
32 000
275 000
0
68 000
7 183 000
Chapter 2 Companies
LO2 AS1
35
Answers to worked example 9 (see pages 34-35)

1.
(Sales cost of sales)
2.
Cost of sales
100 =
9 000 0003 5 625 0003

5 625 0003
= 3 375 000
= 60%3
5 625 000
Gross profit = sales

cost of sales
100
In order to get the
answer as a percentage,
multiply by 100.
100
Calculate % net profit on sales [3]

Sales
100 =

3.
[4]
Calculate % gross profit on cost of sales (mark-up)
904 0003
100
9 000 0003
= 10%3
Calculate % operating profit on sales
[3]
Operating profit
1 423 0003
100 =
100

Sales
9 000 0003

4.
= 15,8%3
Calculate current ratio
[3]
Current assets current liabilities

= 2 557 0003 1 080 0003
= 2,4 : 1 3
5.
Calculate acid-test ratio
[4]
(Current assets stock) current liabilities

= (2 557 0003 1 640 0003) 1 080 0003
= 917 000 1 080 000
= 0,85 : 13
6.
Calculate debt/equity ratio
When asked to calculate

a ratio, always show
your answer as x : 1
[3]
Non-current liabilities ordinary shareholders equity

= 1 980 0003 4 123 0003
= 0,48 : 13
36

Chapter 2 Companies
LO2 AS1
Mind the Gap

Accounting
Answers to worked example 9 (continued)

7.
[4]
Calculate solvency ratio

Total assets total liabilities
= 7 183 0003 (1 980 0003 + 1 080 0003 )
= 7 183 000 3 060 000
= 2,3: 13
8.
[4]
Calculate net asset value per share

par value of shares
Ordinary shareholders equity

4 123 0003
100 =
100
Number of shares issued
(2 200 0003 R 23)
= 374,8 cents per share3
9.
[3]
Calculate earnings per share
Multiply by 100 in order

to get the answer in
cents per share.

904 0003
100 =
100
Number of shares issued
(2 200 000 R 2) 3
= 82,2 cents per share3
Re-do
questions 1 9
on paper, for
extra practice.
Exams
Below is a list of suggested past examination
questions for extra practise:
Topic
Paper
Question
Accounting equation
November 2009
Auditors report
November 2010
4.4
Balance Sheet
February/March 2010
3.1
Balance Sheet
November 2010
4.3
Balance Sheet
February/March 2011
Cash flow statement
February/March 2010
Cash flow statement
November 2010
Cash flow statement
February/March 2012
GAAP concepts
November 2010
4.1
Income Statement
November 2008
4.1
Income Statement
November 2009
Income Statement
February/March 2012
Ratio analysis
February/March 2010
Ratio analysis
November 2010
Ratio analysis
February/March 2011
Keep going!
Mind the Gap
Accounting
Chapter 2 Companies
LO2 AS1
37
chapter
MANUFACTURING
The manufacturing process is divided into 3 departments:

Administration department
Office duties are performed in this
department and include financing
and investing activities.
Factory
Selling and distribution department
Raw materials are taken through

the manufacturing process in order
to produce finished goods.
This department is responsible for

the advertising, selling and delivery
of the finished goods to customers.
Related costs
Administration department
Accountants salary
Bookkeepers salary
Receptionists salary
Cleaning staff wages
Office stationery
Office rent
Insurance on office equipment
Depreciation on office equipment
Office telephone
38

Factory
Direct costs
Raw/direct materials
Factory workers wages/salaries
(direct labour)
Indirect costs/factory overheads
Factory foremans salary (indirect
labour)
Cleaning staff wages/salary
(indirect labour)
Indirect materials/consumable
stores
Factory rent
Factory maintenance
Factory insurance
Depreciation on factory equipment

LO3 AS1
Selling and distribution department

Sales managers salary
Sales representatives commission
Salary of deliverymen
Bad debts
Advertising
Stationery costs
Rent
Depreciation on delivery vehicle
Cellphone costs of sales staff
Mind the Gap

Accounting
3.1 Important concepts of manufacturing

Costs in the manufacturing process
Concept
Use mobile notes

to help you learn these
manufacturing concepts.
See page x for more
informaiton.
Explanation
Direct labour cost
Wages and salaries of those employees physically

making the product or operating the machines
making the product.
Direct/raw materials
cost
Raw materials that have been issued to the factory

and have been used to manufacture the finished
goods.
E.g. leather and rubber soles in the making of shoes.
Factory overhead costs All other costs involved in the manufacturing process
which increase the cost of producing the product.
Stocks in a manufacturing business

Concept
Explanation
Finished goods stock
Products that are completely finished and are ready

for sale.
Factory indirect
The indirect materials that have not yet been used
materials/consumable and are still available to be used, e.g. cleaning
stores stock
materials left over.
Raw materials stock
The raw materials left over that have not yet been
issued to the factory but are stored safely in the
warehouse for future use.
Work-in-process stock
Products that have not been completely turned into

finished goods and are still in the manufacturing
process.
NB!
It is important to understand that

costs can be further divided into:
fixed costs and variable costs.
Fixed costs
These are costs that do not change according to

number of products made. For example, the rent of
the factory plant will be the same no matter whether
1 000 units are made or 100 000 units are made.
Variable Costs
These costs will increase when production increases.

For example, the cost of raw materials used will
be far less if 1 000 units are made compared to if
100 000 units are made.
LO3 AS1
For exam purposes it will

be assumed that all factory
overhead costs and admin
costs will be fixed costs,
unless otherwise stated.
For exam purposes it will be
assumed that raw materials,
direct labour and selling
and distribution costs will
be variable costs, unless
otherwise stated.
Chapter 3 Manufacturing
39
3.2 Production Cost Statement

E. G.
Worked example 1
Example adapted from November 2010 NSC Exam Paper

You are provided with information (balances, transactions and
adjustments) relating to Fatima Manufacturers owned by Fatima Fala.
The business manufactures shoes.
This is direct materials
cost (see definition on
page 39).
Required
1. Calculate the value of the raw materials that were issued to
the factory for the year ended 28 February 2010.
2. Prepare the following notes to the Production Cost Statement
for the year ended 28 February 2010:
2a) Direct labour cost
2b) Factory overhead cost
3. Prepare the Production Cost Statement for the year ended
28 February 2010.
4. Using the figures in the Production Cost Statement you have
just prepared, calculate the following (show your workings):
4a) Raw materials cost per unit
4b) Total cost per unit
5. You are provided with the number of units produced and the
break-even point calculated for the past two years:
[6]
[5]
[16]
[12]
[3]
[3]
2010
2009
Break-even point
19 548 units
11 300 units
Number of units
produced
20 000 units
24 000 units
5a) Briefly explain what the term break-even point means.

5b) Explain whether Fatima should be concerned about the
break-even point for 2010. Quote figures to support
your answer.
[2]
[4]
Information
Fatima Manufacturers
1. OPENING BALANCES ON 1 MARCH 2009:
Raw materials stock
158 000
120 000
Consumable stores stock: Factory

Factory plant and equipment at cost
Accumulated depreciation on factory plant and equipment
40


LO3 AS1
R160 000
6 000
2 225 000
450 000
Mind the Gap

Accounting
2. SUMMARY OF TRANSACTIONS FOR THE YEAR ENDED

28 FEBRUARY 2010:
Purchases of raw materials on credit
R1 023 475
Carriage on purchases of raw materials
22 500
Consumable stores purchased for the factory
43 000
Cleaning materials purchased for the office
12 000
Factory plant and equipment purchased on

1 September 2009
250 000
Production wages
723 800
UIF contribution for factory employees

Salaries:
Factory foreman
150 000
Administration
400 000
250 000
Sales staff
Water and electricity
163 000
Sundry expenses: Factory
194 680
Administration
530 000
340 000
Sales department
3. CLOSING BALANCES ON 28 FEBRUARY 2010:

Raw materials stock
R259 125
122 900
142 500
Consumable stores stock: factory
7 000
4. ADDITIONAL INFORMATION AND ADJUSTMENTS:

a) No entry was made for the transport of raw materials by Pops
Carriers to the factory, R3 750.
b) No entry was made for the following in respect of the production
wages for the last week of February 2010. The entry was omitted
(left out) from the wages journal:

Gross wages
R6 200

Deductions: Unemployment Insurance Fund
62

PAYE
1 240

The employer contributes 1% to the UIF.
c) An amount of R4 200 was still outstanding on the water and
electricity account for February 2010. Sixty per cent (60%) of
all the water and electricity was used in the factory.
d) Depreciation on factory plant and equipment must be brought
into account at 10% per annum, according to the diminishing
balance method.
e) During the year 20 000 pairs of shoes were manufactured.
Mind the Gap

Accounting
Direct labour cost
LO3 AS1
41
Answers to worked example 1 (see pages 4041)

If there are any returns
of purchases (creditors
allowances), they would be
subtracted from purchases.
Only use
FACTORY
NB!
COSTS
on the
Production
Cost Statement. No
administration and selling,
and distribution costs
appear on this statement.
Production wages for the
year + gross wage figure in
adjustment B.
As per adjustment B, the
UIF contribution is 1% of
the R730 000 above.
Opening balance of
consumable stores stock
+ consumable stores
purchases - closing balance
of consumable stores stock.
R2 225 000 R450 000
= R1 775 000 10 %
= R177 500
R250 000 10 % 6/12

= R12 500
(Total water and electricity
already paid during the
year + the amount that
still has to be paid as
per adjustment C) only
the portion used in the
factory (60% as per
adjustment C).
42

1. Value of raw materials issued:
Direct Materials Cost

Opening balance of raw material stock
Add: Purchase of raw materials
R1 023 475 3
Add: Carriage on purchases of raw materials
R22 500 3
Add: Transport of raw materials (adjustment A)
R3 750 3
Less: Closing balance of raw material stock
(R259 125) 3
Equals: Raw materials issued to the factory
R950 600
[6]
2. NOTES TO THE PRODUCTION COST STATEMENT

2a
DIRECT LABOUR COST
Production wages (723 8003 + 6 2003)
UIF contribution
R
730 000 3
7 300
737 300
[5]
2b
FACTORY OVERHEAD COST
Salary of foreman
Consumable stores: factory
(6 0003 + 43 0003 7 0003)
R
150 000 3
42 000
Depreciation (177 50033 + 12 50033)
190 000
Water and Electricity (163 0003 + [4 2003 60%]3)
100 320
Sundry expenses: factory
194 680 3
677 000
[16]
Note
There are a number of costs that may need to be split between

factory, administration and selling, and distribution.
For example: water and electricity could be split in the ratio 3 : 2 : 1.

LO3 AS1
R160 000 3
Mind the Gap

Accounting
3. PRODUCTION COST STATEMENT OF FATIMA MANUFACTURERS

FOR THE YEAR ENDED 28 FEBRUARY 2010
It is VERY
important
NB!
to know
the format
of the Production Cost
Statement!
TOTAL
Direct materials cost3
Direct labour cost3
Prime/direct cost
This figure comes from the

answer you calculated in
part 1 of this question.
950 600
This figure comes from the

answer in the direct labour
note in part 2 of this
question.
737 300
Direct materials cost +

Direct labour cost =
Prime costs
1 687 900
This figure comes from

the answer in the factory
overhead cost note in part
2 of this question.
Factory overhead cost3
677 000
Total cost of production
2 364 900
Work-in process at the beginning of the year3
158 0003

opening balances at the
beginning of the financial
year.
2 522 900

closing balances at the end
of the financial year.
Work-in process at the end of the year3
Total cost of production of finished goods
(122 900)3
2 400 000
[12]
4. a) Raw materials cost per unit

R950 600 20 0003 units = R47,53 [3]
b) Total cost per unit

R2 400 000 20 0003 units = R1203
Mind the Gap

Accounting
[3]
This final figure provides

the accountant with the
total cost of making the
20 000 pairs of shoes
during the year (see
additional information E).
Direct materials costs
(see Production Cost
Statement) number of
shoes manufactured as per
additional information E.
of finished goods (see
Production Cost Statement)
number of shoes
manufactured as per
additional information E.
LO3 AS1
43
Do not be afraid
to give your own
opinion when answering
this type of question.
Note that there are

various possible answers
that could be accepted.
5. a) It tells you how many items you must make and sell

before you can start making a profit.33
[2]
b) Explanation:
Yes,3 she should be concerned as units produced is close3
to BEP; or Yes, as the BEP has increased significantly from the
previous year; or No, she is still exceeding the BEP.
Quoting of figures:
Compare 20 0003 units produced to BEP3 of 19 548 or
BEP is 97,7% of total units; or Compare BEP 19 548 to
11 300 of the previous year; or Compare units of 20 000
to 24 000 of the previous year affects BEP
NB!
44


LO3 AS1
[4]
Learn this! Formula to calculate breakeven point (BEP):
Total fixed costs

Selling price per unit - Variable cost per unit
Mind the Gap

Accounting
Practice task 1
Photocopy this
blank Production Cost
Statement and use it to
practise doing the worked
example 1 again on your
own. Once you have
completed the task,
compare your answer
to the worked example
on the previous
pages.
1. Production Cost Statement calculations:

Opening balance of raw material stock
Add: Purchase of raw materials
Add: Carriage on purchases of raw materials
Add: Transport of raw materials
Less: Closing balance of raw material stock
Equals: Raw materials issued to the factory
[6]
2. NOTES TO THE PRODUCTION COST STATEMENT
DIRECT LABOUR COST
[5]
[16]
Mind the Gap

Accounting
LO3 AS1
45
Re-do questions
4 and 5 on
paper, for added
practice.
3. PRODUCTION COST STATEMENT OF FATIMA MANUFACTURERS

TOTAL
Primed/direct cost
[12]
Exams
questions for extra practice:
Topic
Paper
Question
Costing calculations
and Production Cost
Statement
November 2008
Production Cost
Statement
November 2009
Costing calculations
February/March 2010
Multiple choice
November 2010
Costing calculations and

concepts
February/March 2012
3.1
2
Keep going!
46


LO3 AS1
Mind the Gap

Accounting
chapter
BUDGETS
Budgeting is an important tool for internal control in any business.

Budgets are prepared to forecast what will happen in the future.
4.1 Key concepts

Concept
Explanation
Purpose
Cash budget
A forecast of cash receipts and cash

payments.
To forecast future receipts and

payments.
Projected Income Statement
A forecast of income and expenses.
To forecast future profits or losses.
Debtors collection schedule
A schedule (plan) of how the business will To forecast receipts from debtors.
collect money from its debtors.
Creditors payment schedule
A schedule (plan) of how the business will To forecast payments to creditors.

pay its creditors.
Sales
a) A business main source of income is sales. These can be for cash or on
credit.
b) Cash sales are received immediately and will be entered as a receipt on
the cash budget in the month of sale.
c) The money from credit sales will be collected from debtors in the
future.
d) The cash and credit sales may need to be calculated from the given
information.
Use mobile notes to help

you learn these key budget
concepts. See page x for
more informaiton.
Mind the Gap

Accounting
Chapter 4 Budgets
LO4 AS1
47
4.2 Debtors collection schedule

ACTUAL SALES:
These are sales that
have taken place in the
months before the budget
period. A portion of the
credit sales may be collected
in the budget period.
BUDGETED SALES:
These are the estimated
sales for the
budget period.
Use the following steps when preparing a debtors collection schedule:

1. Calculate and enter the credit sales.
2. Take each month and insert the percentage that will be received in
that month.
3. Do the calculations using credit sales to work out the amount to be
received from debtors.
4. Total the columns for each month.
E. G.
This 3% is written off as

a bad debt and will not
form part of the debtors
collection schedule as no
cash will be received from
bad debts.
48

Chapter 4 Budgets
LO4 AS1
Worked example 1
Prepare the debtors collection schedule for July, August and September
2011 from the information below:
1. 60% of total sales are for cash.
2. Debtors are expected to pay as follows:
50% in the same month as the credit sale transactions subject
to a 10% discount
30% in the month following the credit sales transaction month
17% in the second month following the credit sale transaction
month
3% is expected to be written off
3. Total sales:
Actual
June 2011
R160 000
Budgeted
July 2011
R150 000
August 2011
R180 000
September 2011
R200 000
Mind the Gap

Accounting
Answer to worked example 1 (see page 48)

Although June is not in the budget period, some of
Junes credit sales will be collected in July and August.
Credit sales
July
August
September
June 2011
R64 000
30%
19 200
17%
10 880
July 2011
R60 000 50% 10%
27 000
30%
18 000
17%
10 200
Aug 2011
R72 000
50% 10%
32 400
30%
21 600
Sep 2011
R80 000
50% 10%
36 000
R46 200
Explanations
Step 1
R61 280
R67 800
First calculate
50% of the
credit sales and
then subtract
the 10% discount
from this figure
[50% 10% is
not 40%].
Step 2
Step 3
Calculate and enter credit sales.

Cash sales = 60%
Credit sales = 40%
Insert % to be collected in
each month.
Do the calculations to work out the amount

of credit sales collected in each month.
June: R160 000 40% =

R64 000
July: R150 000 40% = R60 000
August: R180 000 40% =
R72 000
Sept: R200 000 40% =
R80 000
See answer above.
June credit sales: No calculation as they

are not part of this collection period
July: R64 000 30% = R19 200
August: R64 000 17% = R10 880
July credit sales:
July: R60 000 50% = R30 000
R30 000 10% = R27 000
August: R60 000 30% = R18 000
Sept: R60 000 17% = R10 200
August credit sales:
August: R72 000 50% = R36 000
R36 000 10% = R32 400
Sept: R72 000 30% = R21 600
September credit sales:
Sept: R80 000 50% = R40 000
R40 000 10% = R36 000
Mind the Gap

Accounting
Chapter 4 Budgets
LO4 AS1
49
You will not

be expected to
complete a full
budget. However,
you will be expected
to analyse a cash
budget by completing
certain calculations
and answering
questions.
4.3 Analysis of cash budget

Worked example 2
E. G.
Example adapted from March 2012 NSC question paper

Feetfit Shoe Wholesalers
You are provided with an incomplete cash budget which had been prepared
for the three months ended 28 February 2012. This business is owned by
John Smith.
Required
No 6 contains a lot of
information. REMEMBER
to break it down into
sentences and work with
the information step by
step.
1. Calculate the figures indicated by AE in the cash budget.

[5]
2. The entertainment expenses were increased by 15% with effect
from 1 January 2012. Calculate the entertainment expenses for
January 2012 (F).[3]
3. The rent income increased from 1 January 2012. Calculate the %
increase in the rent income for January 2012.
[3]
4. All debtors pay after 30 days less 5% discount. Calculate the
expected receipts from debtors for January 2012 (G).
[6]
5. All stock sold during the month is replaced in the same month.
The mark-up on goods purchased is 50% on cost price. Calculate
the expected payments for the purchase of stock for February
2012 (H).[5]
6. As internal auditor, you discover that the actual entertainment
expenses for December 2011 amounted to R35 000. Further
investigations revealed that the owner went on a business trip during
December. His family accompanied him and part of their expenses
were included in the R35 000. State TWO points that should be
included in the internal auditors report to John Smith.
[4]
Information
DO NOT
waste time calculating
the ?. Only calculate
the figures asked
for.
Cash Budget
2011
December
2012
January
2012
February
EXPECTED RECEIPTS
Cash sales (80% of total sales)
432 000
420 000
360 000
Collections from debtors
109 250
99 750
9 000
9 810
9 810
Rent income
Asset disposal
Capital
Interest on fixed deposit

625 000
50

Chapter 4 Budgets
LO4 AS1
580 000
475 000
Mind the Gap

Accounting
Information (continued from page 50)

EXPECTED PAYMENTS
Purchases of stock (all for cash)
360 000
350 000
Entertainment expenses
10 000
Salaries and wages
55 000
55 000
Drawings
15 000
8 000
8 000
Repayment of loan
10 000
Telephone
Interest on loan
250
Fixed deposit
60 000
573 000
625 000
637 000
Cash surplus/shortage
52 000
(45 000)
Cash at the beginning of the month
43 000
Cash at the end of the month
95 000

1. Calculate the figures indicated by AE in the cash budget.
Explanation
A
Cash at the end of a month is the cash at the

beginning of the following month.
R95 000 at the end of December becomes the
cash at the beginning of January 2012 (A)
Cash surplus/shortage plus cash at the beginning
of the month = cash at the end of the month.
Shortage in January of (R45 000) plus cash at the
beginning of January R95 000 = cash at the end
of January 2012 = R50 000
Cash surplus/shortage is the expected receipts

total minus the expected payments total.
R475 000 R637 000 = a shortfall of R162 000
Cash at the beginning of a month is the cash at

the end of the previous month.
Cash at the end of January = R50 000
Cash at the end of a month is the surplus/

shortfall plus the cash at the beginning of that
month.
(R162 000) + R50 000 = (R112 000)
The letters in this column
refer to the explanations in
the table on page 50.
Mind the Gap

Accounting
Answer
R95 0003
R50 0003
(R162 000)3
R50 000
(R112 000)
[5]
Chapter 4 Budgets
LO4 AS1
51
2. Calculate the entertainment expenses for January 2012 (F).

R10 000 15% = R1 500

R10 0003 + R1 5003 = R11 500
[3]
Explanation to help you understand how to get to the

answer above:
The entertainment expenses increased by 15% from 1 January 2012.

Calculate the 15% on R10 000 (see cash budget figure for
December) = R1 500
Add the 15% (R1 500) to the December amount of R10 000.
R10 000 + R1 500 = R11 500
3. Calculate the % increase in the rent income for January 2012.

R8103 R9 0003 100 = 9% [3]
answer above:
Rent increased in January 2012.
Calculate the amount by which rent increased:
R9 810 (January 2012) R9 000 (December 2011) = R810.
The increase divided by the original amount in December = the

% increase
R810 R9 000 100 = 9%
4.

Calculate the expected receipts from debtors for January 2012 (G).
R432 000 80% = R540 000
R540 00033 20% = R108 00033 95%
= R102 6003 [6]
answer above:
All debtors pay after 30 days less 5% discount.
Calculate credit sales of the previous month if cash sales =

80% of total sales, then total sales = R432 000 80 100 =
R540 000 credit sales = R540 000 20% = R108 000
Payment = R108 000 5% = R102 600
52

Chapter 4 Budgets
LO4 AS1
Mind the Gap

Accounting
5. Calculate the expected payments for the purchase of stock for

February 2012 (H).

R360 0003 80%3 = R450 000

R450 0003 100 1503 = R300 000
[5]
answer above:
Calculate total sales for Feb (R360 000 80 100 =
R450 000)
Calculate cost of sales using mark-up of 50% on cost

(R450 000 100 150 = R300 000). This is the amount
of stock that will be bought.
6. State TWO points that should be included in the internal auditors

report to John Smith.

Any two valid points would be accepted.
The holiday expenses for his family should be part of
drawings and not shown as a business expense (business
entity rule). 33
It is unethical to use business funds for personal expenses. 33
His drawings for December 2011 are already more than that
of January 2012.
He has spent R25 000 more than the budgeted figure
(R35 000 R10 000).
The family holiday should not be shown as a business
expense as this has tax implications tax evasion is
illegal.[4]
NB!
Mind the Gap

Accounting
When credit purchases

are not given, we use the
cost of sales figure for
that month.
Re-do
questions 1
6 on paper,
for extra
practice.
It is important to mention in your answer to

this question that the owners actions were
unethical (dishonest).
Chapter 4 Budgets
LO4 AS1
53
4.4 Projected Income Statement

Hint
Depreciation and
bad debts will
be included in the
Projected Income
Statement but NOT
on the cash budget
because they are noncash items (i.e. they
do not affect the cash
flow of the business).
E. G.
Worked example 3
Example adapted from March 2010 NSC question paper

You are provided with the Projected Income Statement and additional
information relating to Helens Hair Stylists for the period April to June
2010. The business is owned by Helen Davids. Helen has also prepared a
cash budget for the same time period. The financial year-end is 31 March.
Required
Answer the questions which follow.
Information
HELENS HAIR STYLISTS:
PROJECTED INCOME STATEMENT FOR APRIL TO JUNE 2010
R
105 000
122 500
Cost of sales
50 000
60 000
70 000
Gross profit
37 500
45 000
52 500
122 000
122 000
162 000
Fee income from customers
120 000
120 000
160 000
2 000
2 000
2 000
OPERATING EXPENSES
95 350
120 072
127 372
Salary of hairdressing assistants
25 500
25 500
34 000
Wages of cleaner
3 400
3 672
3 672
Rent of premises
24 600
30 750
30 750
Consumable stores
14 400
14 400
19 200
Water & electricity
6 000
6 000
7 000
Telephone
2 200
2 200
2 200
Advertising
8 000
15 000
8 000
Motor vehicle expenses
1 400
5 600
5 600
Repairs & maintenance of equipment
3 500
3 500
3 500
Sundry expenses
2 300
2 300
2 300
Depreciation on vehicle
2 000
9 100
9 100
Depreciation on equipment
2 050
2 050
2 050
64 150
46 928
87 128
3 315
67 465
46 928
87 128
750
625
500
66 715
46 303
86 628
Interest income
Interest on loan
NET PROFIT
LO4 AS1
JUNE
87 500
OPERATING PROFIT
Chapter 4 Budgets
MAY
Sales of hair products
Sundry income
54

APRIL
Mind the Gap

Accounting
Additional information
1. Line of business:

Helen gave up her job to start this business in 2004. She invested
her life savings of R800 000 in this business. The business styles
hair for its customers. They also sell hair products to the public.
2. Employees:

Helen employs 3 hair stylists. She has planned to expand the
business by employing a fourth stylist from 1 June 2010. She also
employs a cleaner.
3. Business premises rented:

The rent is calculated on a fixed amount per square metre. She
currently rents 60 square metres, but will increase this floor space as
from 1 May 2010 due to expansion.
4. Fixed deposit:

The fixed deposit of R468 000 is for 12 months and will mature on
the 30 April 2010.
Questions
Refer to the Projected Income Statement to identify/calculate the following:

1. The monthly salary paid to each hair stylist.
(2)
2. The % increase in wages that the cleaner will receive during the
projected period.
(2)
3. The % interest rate on the fixed deposit.
(4)
4. The rental per square metre, and the number of additional square
metres she will rent from 1 May 2010.
(4)
5. As the internal auditor you compare the following projected figures
to the actual figures at the end of April. Provide four comments
that you would include in your internal auditors report in respect of
scenarios A, B and C below.
Projected April 2010
Actual April 2010
Telephone
2 200
4 150
Water & electricity
6 000
4 900
120 000
136 800
14 400
15 120
Fee income
Consumable stores
(8)
[20]
Mind the Gap

Accounting
Chapter 4 Budgets
LO4 AS1
55

1. Calculation of monthly salary paid to each hair stylist:

R25 500 3 = R8 50033

or R34 000 4 = R8 500
[2]
Explanation to help you understand how to get to the answer

above:
There are 3 hairstylists in April and May and 4 hairstylists in
June.
Therefore divide salary (April or May) by 3 hairstylists

(R25 500 3 = R8 500)
OR Divide salary (June) by 4 hairstylists (R34 000 4 = R8 500)
2. Calculation of the % increase in wages that the cleaner will receive

during the projected period:

272 3 400 100 = 8% 33[2]
above:
Calculate the increase in wages by deducting the wage of

May from the wage of April (R3 672 R3 400 = R272)
Calculate the % increase (R272 R3 400 100 = 8%)
3.

Calculation of % interest rate on the fixed deposit:

3 3153 468 0003 12 months3 100 = 8,5% 3
OR
R3 315 12 months = R39 780
39 780 100 = 8,5%
468 000
[4]

above:
Interest on fixed deposit = R3 315 (interest income in Projected
Income Statement)
Fixed deposit = R468 000 (see information No 4)
3 315

468 000
= 8,5%
100
1
12 (months)
4. Calculation of rental per square metre: 24 600 60 = R410 33

[2]
above:
Rent expense for April = R24 600 (see Projected Income Statement).
R24 600 is the amount paid for 60 square metres.
To calculate rental per square metre you have to divide the total
rent by 60.
R24 600 60 = R410
56

Chapter 4 Budgets
LO4 AS1
Mind the Gap

Accounting
Calculation of the number of additional square metres she will

rent from 1 May 2010: R30 750 R410 = 75 sq metres33 or
60 30 750 24 600 = 75 sq metres33
Increase = 75 60 = 15 sq metres33[2]
above:
Rent expense for May = R30 750 (see Projected Income Statement)
R30 750 R410 = 75 square metres
Hint
For internal
control purposes it
is important to compare
actual with budgeted
figures. In this way,
possible problems
relating to expenses
or income can be
corrected.
75 60 (original square metres) = 15 additional square metres

Redo questions
1 5 on paper,
for extra practice.
5. Provide four comments that you would include in your internal

auditors report in respect of scenarios A, B and C above.
A
Comment on telephone: The telephone costs are higher than the

expected amount by R1 950. 33
Comment on water and electricity: The water and electricity costs

are R1 100 less than the expected amount. 33
Comment on fee income and consumable stores: There was

a good increase3 in fee income of R16 8003 (R136 800
R120 000) which shows that the business is popular with its
customers.
The consumable stores (e.g. shampoos, conditioners) increased
slightly by R720 (R15 120 R14 400) because the business had
more customers. 33
[8]
NB!
When commenting on actual figures use the

following steps:
1. Compare actual with budgeted figures and

state whether the actual figure is more or
less than the budgeted figure.
2. Decide and state whether the expense or income item has been well
controlled or not (within budget or not).
Note: You will get a mark for steps 1 and 2. These are easy marks.
Mind the Gap

Accounting
Chapter 4 Budgets
LO4 AS1
57
Exams
Topic
Paper
Question
Projected Income
Statement
February/March 2009
Projected Income
Statement
February/March 2010
Cash budget
February/March 2011
Cash budget
February/March 2012
3
6
Keep going!
58

Chapter 4 Budgets
LO4 AS1
Mind the Gap

Accounting
chapter
RECONCILIATIONS
Reconciliation is a form of internal control where two sets of information

are compared and, when there are differences, these are corrected or
explained.
Creditors reconcilations
are not covered in this
study guide.
Bank reconciliation
Debtors reconciliation
The balance in the bank

account in the business
general ledger should be
the same as the balance
on the bank statement
received from the bank.
When these are not the
same, they need to be
reconciled.
The balance of the

debtors control account
should be the same as
the total of the debtors
list. When these are not
the same, they need to
be reconciled.
The balance of the

creditors control
account should be the
same as the total of
the creditors list. The
statements received
from the creditors must
match each creditors
balance in the business
books. When these are
not the same, they need
to be reconciled.
Use mobile notes to help you

learn these reconciliation concepts.
See page x for more information.
Mind the Gap

Accounting
Chapter 5 Reconciliations
LO5 AS1
59
5.1 Bank reconciliation

A
favourable
(positive)
bank
balance in the general
ledger is a debit BUT
on the bank statement
a favourable (positive)
balance is a credit.
NB!
The opposite is also true:

An unfavourable (negative)
bank balance in the
general ledger is a credit
BUT on the bank statement
an unfavourable (negative)
balance is a debit.
There are some reasons for the bank account balance in the General
Ledger and the bank statement not being the same.
Below are some suggestions on how to deal with the differences when
reconciling:
Scenario
Cash journals
(CRJ & CPJ)
Bank Reconciliation
Statement
Bank charges on bank

statement
Enter in the CPJ as bank

charges
No entry
Interest on overdraft
Enter in the CPJ as

interest expense
No entry
Interest received on current Enter in the CRJ as

account
interest income
No entry
Direct deposits
Enter in the CRJ (e.g.

rent income)
No entry
Stop order/debit order
Enter in the CPJ
No entry
Dishonoured cheque (R/D)
Enter in the CPJ
No entry
Post-dated cheques
received
No entry until date on

the cheque
No entry
Post-dated cheques issued
Has already been

recorded in the CPJ (no
entry needed)
Must be debited
as an outstanding
cheque
Cheques not yet presented

to the bank for payment
Has already been

recorded in the CPJ (no
entry needed)
Must be debited
as an outstanding
cheque
Outstanding deposit
Has already been

recorded in the CRJ (no
entry needed)
Must be credited
as an outstanding
deposit
Stale cheque (older than 6

months) not yet presented
to the bank for payment
Cancel in the CRJ
No entry
Lost cheque
Cancel in the CRJ
No entry
Mistake on bank statement
No entry
Correct in bank
reconciliation
statement
Too much in the CPJ

(overstated)
Enter difference in the

CRJ
No entry
Too little in the CPJ

(understated)
Enter difference in the

CPJ
No entry
Mistake in journals:
60

LO5 AS1
Mind the Gap

Accounting
5.2 Debtors reconciliation

These are the steps the bookkeeper will need to follow to correct differences
between the debtors control account and debtors list:
a) Check entries in the journals against the source documents.
b) Check casting (totalling) of journals.
c) Check posting from journals to general and debtors ledgers.
E. G.
Worked example 1
Example adapted from March 2012 NSC question paper.

Crystal Traders sells glassware for cash and on credit.
Required
Study the information provided and answer the questions that follow.
1. Calculate the correct closing balance of the debtors control account
on 31 March 2011.
[5]
2. Calculate the correct amounts owing by the following debtors of
Crystal Traders:
a) R Jansen
b) S Wonder
c) P Collins
[12]
Information
1. Balance of debtors control account on 31 March 2011 is R200 000
2. Balances per Debtors Ledger on 31 March 2011:
M Carey
R64 500
R Jansen
R41 200
S Wonder
R23 000
C Dion
R51 500
P Collins
TOTAL
R7 900
R188 100
3. The following errors and omissions were discovered and must be

corrected:
A. The debtors journal has been overcast by R2 600.
B. An invoice issued to S Wonder for R1 800 had not yet been
recorded in the books of Crystal Traders.
C. Stock sold on credit to P Collins was incorrectly charged to the
account of R Jansen, R8 300.
D. An invoice issued to P Collins for R6 000 had been posted to the
wrong side of his account.
E. A cheque of R13 500, originally received from R Jansen in
settlement of an invoice of R15 000, was returned by the bank
due to insufficient funds. No entries have yet been made.
F. Goods sold on credit to S Wonder for R5 800 were correctly
recorded in the debtors journal but incorrectly posted as
R8 500 to S Wonders account in the Debtors Ledger.
Mind the Gap

Accounting
Can you see that the

Debtors control account
and the Debtors Ledger
are not the same?
Overcast means that the

journal has been added up
incorrectly and the amount
is too big.
Undercast means that the
journal has been added up
incorrectly and the amount
is too small.
LO5 AS1
61
1. Calculate the correct closing balance of the debtors control account on 31 March 2011.

200 0003 2 6003 (A) + 1 8003 (B) + 15 0003 (E)
= 214 200 [5]
2. Calculate the correct amounts owing by the following debtors of Crystal Traders:
Workings
Answer
R Jansen
R41 200 + 15 00033 (E) 8 3003 (C) =
R47 900 3
S Wonder
R23 000 + R1 8003 (B) 2 70033 (F) =
R22 1003
P Collins
R7 900 + 12 00033 (D) + 8 3003 (C)
R28 200 3
[12]
3.
ERROR
A
B
Explanation
The debtors journal has been

overcast by R2 600.
The debtors control balance is R2 600 too much.
An invoice issued to S Wonder

for R1 800 had not yet been
recorded in the books of Crystal
Traders.
This was not recorded so it needs to be entered in the debtors control

account and in the account of S Wonder on the debtors list.
Stock sold on credit to P Collins

was incorrectly charged to the
account of R Jansen, R8 300.
This must be removed from R Jansen and added to P Collins on the debtors
list.
This must be deducted from the debtors control balance.
Debtors control (+R1 800)

S Wonder (+R1 800)
R Jansen (R8 300)

P Collins (+R8 300)
An invoice issued to P Collins for

R6 000 had been posted to the
wrong side of his account.
Correct it on P Collins account in the debtors list.

It should have been entered on the debit side but was entered on the credit
side.
Cancel the credit of R6 000 by debiting (+R6 000)
Record the correct entry on debit side (+R6 000)
62

A cheque of R13 500, originally

received from R Jansen in
settlement of an invoice of
R15 000, was returned by the
bank due to insufficient funds.
No entries have yet been made.
No entries were made.
Goods sold on credit to S Wonder

for R5 800 were correctly
recorded in the debtors journal
but incorrectly posted as R8 500
to S Wonders account in the
Debtors Ledger.
Debtors control account is correct.
LO5 AS1
This needs to be recorded in the debtors control account and in the

account of R Jansen in the debtors list.
Debtors control (+R13 500) bank amount
Debtors control (+R1 500) discount cancelled
R Jansen (+R15 000)
S Wonders account is incorrect and must be corrected.

It was entered in the Debtors Ledger as R8 500 instead of R5 800. Too
much was posted to the debit side of S Wonders account in the Debtors
Ledger. The difference of R2 700 must be credited (subtracted) from
S Wonders account.
Mind the Gap

Accounting
5.3 Debtors age analysis

The following are the steps to follow when drawing up a debtors age
analysis:
a) A debtors age analysis is drawn up in order to give details of which
debtors owe amounts and for how long this amount has been
outstanding.
b) When selling to debtors on credit a business will provide credit terms
e.g. debtors will need to pay within 30 days.
c) A business will need to follow up on debtors who do not adhere
to (meet) the terms by means of telephone calls, sending regular
statements or charging interest on overdue accounts.
E. G.
Worked example 2:
Debtors age analysis
Study the debtors age analysis below and answer the questions that
follow:
Total
Current
30-60 days 61-90 days
B Barney
R5 900
R1 800
R2 400
D Donald
R4 600
R1 400
R3 200
Z Ndlovu
R3 000
R3 000
R13 500
R6 200
Total
R5 600
More than
90 days
R1 200
R500
R1 200
R500
Credit terms
Debtors are given 60 days from statement date (end of the month) in
which to settle their debts.
Debtors settling within 60 days will be granted a discount of 10%.
Debtors older than 60 days are charged interest of 12.5% p.a.
This is the balance of the

debtors control account in
the general ledger.
Required
1. Which debtor(s) are not adhering to (meeting) the credit terms?

Why?(2)
2. If Z Ndlovu settled her account after receiving her statement, and
within the credit terms, how much would she be required to pay? (4)
3. If these were the only 3 debtors, what would the balance on
the debtors control account be?
(2)
4. Is this business controlling their debtors effectively?
Explain, quoting figures.
(4)
[12]
Mind the Gap

Accounting
LO5 AS1
63
Re-do questions 1 4 on
paper, for extra practice.
It is important
for you to answer
yes or no BUT it is your
explanation that will get
you the marks.
1. Which debtor(s) is/are not adhering to (meeting) the credit terms?

Why?

B. Barney3

He owes amounts for longer than the credit terms of 60 days. 3
[2]
2. If Z Ndlovu settled her account after receiving her statement,
and within the credit terms, how much would she be required
to pay?

R3 0003 10% (R300) 33 = R2 700 [4]
3. If these were the only 3 debtors, what would the balance on the
debtors control account be?

Total of debtors accounts = balance on debtors control
account.

R13 50033[2]
4. Is this business controlling their debtors effectively? Explain,
quoting figures.

The answer to this question could be yes or no.

Yes3, because only one of the 3 debtors are outstanding. 333
or

No3, because the amount outstanding for more than 60 days is
R1 700 out of the total of R13 500 owed by the debtors. 333[4]
Exams
Topic
Paper
Question
Bank reconciliation
February/March 2009
1.1
Bank reconciliation
November 2010
February/March 2009
1.2
Debtors control account and February/March 2010

Age analysis
Debtors reconciliation, age

February/March 2012
analysis and internal control
Keep going!
64

LO5 AS1
Mind the Gap

Accounting
chapter
INVENTORIES
6.1 Inventory systems
A business can decide which of the following two inventory systems to use
to record and control their inventory:
SYSTEM
IMPORTANT POINTS
Perpetual
a) Entries are made in a Balance Sheet account called trading

stock (an asset account) every time goods are bought and
sold.
b) Cost of sales needs to be calculated and recorded every
time goods are sold.
c) When stock is purchased the trading stock account is
debited with the cost price (the asset is increasing).
d) When stock is sold the trading stock account is credited
with the cost price (the asset is decreasing).
e) Any additional costs when purchasing stock are debited to
the trading stock account (e.g. carriage on purchases).
f) This system is better for the internal control of inventory.
Periodic
a) Businesses would decide to use this system when it is not

always feasible to calculate cost of sales every time goods
are sold.
b) Stock purchases are recorded in a nominal account called
purchases (an expense account).
c) Additional expenses when purchasing stock (e.g. carriage
on purchases) are recorded separately in a nominal
account called carriage on purchases (an expenses
account).
d) Cost of sales is therefore only calculated periodically by
using the formula:
Opening stock + purchases + carriage on purchases +
import duties + customs duties closing stock =
cost of sales.
Mind the Gap

Accounting
Hint
Inventories (trading
stock) are goods
that are bought in order
to be resold at a profit.
Stock is always recorded

in the books at cost price.
Chapter 6 Inventories
LO6 AS1
65
6.2 Inventory valuation methods

The business may
not change its stock
valuation method unless
the business has a very
good reason to do so
(e.g. the change
will ensure that the
inventory is better
valued).
A business can decide which of the following two stock valuation methods
to use in order to value its inventory:
method
IMPORTANT POINTS
FIFO
a) FIFO stands for First In First Out.

b) Businesses that sell goods which have a limited shelf life
(eg milk or cellphones) often prefer to use this system.
c) This means that the oldest stock is sold first and that the stock
left at the end will always be the most recently bought stock.
d) Under this method the stock on hand will be valued at the
most recent prices.
Weighted
average
a) Under this system the value of the stock on hand is not

calculated on the most recent prices because all prices on
stock purchased are averaged.
b) Weighted average is calculated by dividing the total cost of
stock purchased by the total number of units purchased.
c) Under this method the stock on hand will not be valued at the
most recent prices.
Worked example 1
E. G.
Example adapted from March 2011 NSC question paper.

You are provided with information relating to Energy World for the year
ended 28 February 2010. They sell energy drinks to retailers.
Required
Refer to the information relating to the energy drinks and calculate the
following:
1. Value of the closing stock using the FIFO and weighted-average
methods.[14]
2. Cost of sales using the FIFO and weighted-average methods.
[11]
3. Gross profit using the FIFO and weighted-average methods.
[6]
Information
Manager: Dirk
Product: Energy drinks

Units
Sales
Opening stock
66

LO6 AS1
Rand
Amount
2 720
R21,20
R57 664
320
R9,00
R2 880
Purchases
4 800
R58 560
April 2008
1 100
R10,50
R11 550
October 2009
2 500
R12,42
R31 050
January 2010
1 200
R13,30
R15 960
Closing stock
2 400
Mind the Gap

Accounting
1. Calculate the value of the closing stock using the FIFO and weighted-average method.
FIFO
WEIGHTED AVERAGE
(Jan 2010) 1 200 units R13,30 = R15 96033

(Oct 2009) 1 200 units R12,42 = R14 90433

2 400 units (closing stock)

= R30 864
The most recent stock bought is what is left
(closing stock).
Step 1 Opening stock = R2 8803

Purchases
= R58 5603

Total cost
= R61 4403
Weighted average = R61 440 (320 + 4 800 units)

= R61 4403 5 1203 units

= R123 per unit
Step 2 2 4003 units (closing stock) R12
= R28 800
Explanation of the calculations above

The closing stock is 2 400 units.
Step 1 is to calculate the weighted average by
dividing the total cost of stock purchased by the
Using the FIFO method means that 1 200 units
total number of units purchased.
bought in January 2010 and 1 200 units of the
2 500 units bought in October 2009 are left in Step 2 uses the weighted average to calculate the
stock, representing the closing stock of 2 400
value of the closing stock by multiplying the cost
units.
per unit by 2400.
[14]
2. Cost of sales using the FIFO and weighted-average method.
FIFO
WEIGHTED AVERAGE
320 units R9
= R 2 8803
1 100 units R10,50 = R11 5503
1 300 units R12.42 = R16 1463
Cost of sales
R30 5763
OR
Opening stock
R2 880
+ Purchases
R58 560
Closing stock
(R30 864)
= Cost of sales
R30 576
Step 1 3203 units + 4 8003 units 2 4003 units

= 2 7203 units sold
Step 2 2 720

units sold R12
= R32 640
(weighted
average)
Cost of sales

Using the FIFO method means that the oldest
stock has been sold first, that is 320 units
of opening stock + 1 100 units purchased in
April 2008 + 1 300 units of the 2 500 units
purchased in October 2009 making up the
total of 2 720 units sold.
Step 1 is the calculation of the number of units

sold.
Step 2 uses the weighted average to calculate
the value of the stock that has been sold, namely
2 720 units.
[11]
NB!
Mind the Gap

Accounting
The cost of sales is the cost price of all the

goods that have been sold.
LO6 AS1
67
3. Gross profit using the FIFO and weighted-average method.

FIFO
WEIGHTED AVERAGE
Gross profit = sales cost of sales
R57 6643 R30 576
= R27 088
R57 6643 R32 640
= R25 024

The sales figure was given in the question and is the same under both methods.
The cost of sales figures were calculated by you in question 2 on page 67.
You will notice that the gross profit figure is different under the 2 methods because the cost of sales was
calculated differently.
[6]
Re-do questions
1 3 on paper, for
extra practice.
Exams
Topic
Paper
Question
FIFO and weighted average
November 2009
FIFO and weighted average
February/March 2010
Weighted average calculations
November 2010
1.2
FIFO calculations
February/March 2012
1.2
Keep going!
68

LO6 AS1
Mind the Gap

Accounting
chapter
VALUE ADDED TAX
Value Added Tax (VAT) is the tax charged on goods and services supplied
and is charged at the current rate (standard rate) of 14%. VAT is an
important part of the income generated by the government to cover
government expenditure.
7
Use mobile notes
to help you learn these
key VAT concepts.
Who has to register as a VAT Vendor?

A person or business that supplies goods or services can register as a
vendor (trader).
All businesses with a turnover of more than R1-million must register as a
vendor (trader). This is COMPULSORY REGISTRATION.
Businesses with a turnover of less than R1-million can register if they want
to. This is VOLUNTARY REGISTRATION.
The benefits of registering as a VAT Vendor

The business is able to claim back the amount of VAT paid on goods and
services bought (VAT input).
Items on which VAT is not charged

Zero-rated items: Items charged at 0% VAT, but this can be changed by the
government at any time. Examples are fresh fruit and vegetables, brown
bread, milk, maize, rice, lentils and cooking oil.
VAT-exempt items: Items on which no VAT is charged. Examples are interest,
rates, export services, educational services and childcare services.
VAT input
VAT input is the VAT paid by a business on the purchases of goods and
services (which can be claimed back from SARS).
VAT output
VAT output is the VAT collected by the business on the sale of all goods and
services (which needs to be paid over to SARS).
Mind the Gap

Accounting
Chapter 7 Value Added Tax (VAT)
LO6 AS1
69
7.1 VAT calculations

VAT output VAT input = amount payable to SARS (see example 2, page 73)
VAT inclusive calculations:
When VAT is included in an amount
(see example 1 below) (VAT inclusive) the calculation for VAT will
14
be the amount

114
The
NB!
following
calculations
are very important.
LEARN THEM WELL!
VAT exclusive calculations:

When VAT is excluded (VAT exclusive)
(see example 1 below) the calculation for VAT will be
the amount
14

100
E. G.
Worked example 1: Trendy Suppliers
Trendy Suppliers uses a fixed mark up of 40% on cost. The business is

registered as a VAT vendor. The current VAT rate is 14%.
Calculate the following:
1. VAT charged by Trendy Suppliers on one dress.
2. Selling price of one dress exclusive of VAT.
3. VAT charged to the customer on one dress.
4. VAT charged by Trendy Suppliers on one pair of jeans.
5. Selling price of one pair of takkies inclusive of VAT.
[3]
[6]
[3]
[3]
[9]
Information
The following items were purchased during the month from Trendy
Suppliers.
100 dresses @ R285 each (VAT inclusive)
80 pairs of jeans @ R180 each (VAT exclusive)
60 pairs of takkies @ R110 per pair (VAT exclusive)
Answers to worked example 1

1. VAT charged by Trendy Suppliers on one dress.

2.

70

R285 3 14 3 = R35 3

114
Selling price of one dress exclusive of VAT.
Cost price = R285 3 R35 (VAT) = R250
Selling price = R250 140 3 = R350
100

LO6 AS1
[3]
Remember:
Inclusive is 14 114
Remember:
[6]
Mark up = 40% on
cost price
Mind the Gap

Accounting
Answers to worked example 1 (continued from

page 71)
3. VAT charged to the customer on one dress:

Selling price = R350 (as calculated in No 2 above)

VAT charged = R350 14 3 = R49

100
[3]
4. VAT charged by Trendy Suppliers on one pair of jeans:

R1803 14 3 = R25,203

100
[3]
5. Selling price of one pair of takkies inclusive of VAT:

Cost price = R110

Selling price = R1103 1403 = R1543 (exclusive of VAT)

100

14
3
VAT = R154 3
= R21,56

100

VAT inclusive amount = R154 + R21,56 = R175,56 [9]
Mind the Gap

Accounting
Remember:
Exclusive is 14 100
Remember:
Exclusive is 14 100
Re-do questions
1 5 on paper, for
extra practice.
LO6 AS1
71
Worked example 2: Mizi Stores
E. G.
Mizi Stores, owned by Mia Mizi, is registered for VAT.

Calculate the amount of VAT to be paid over to SARS for the period ending
28 February 2011.
[17]
Information for this period ending 28 February 2011
a) Total sales (cash and credit) (VAT inclusive)
b) New computer bought (for office use) (VAT inclusive)
c) Trading stock bought (VAT exclusive)
d) Credit notes issued to customers (VAT inclusive)
R60 000
R12 000
R20 000
R 1 500
Answers to worked example 2

VAT output
a) Total sales: 60 0003 14 3

114
VAT input
Re-do this
question on
paper, for extra
practice.
R7 368,423
b) New computer bought: 12 000 3 14 3

114
R1 473,683
c) Trading stock bought: 20 0003 14 3

100
R2 8003
d) Credit notes issued: 1 5003 14 3

114
R184,213
R7 368,423 R4 457,893
VAT payable to SARS:

R4 457,893
= R2 910,53
R7 368,423
Total VAT output Total VAT input = VAT payable to SARS
[17]
Exams

Topic
Paper
Calculations using
November 2010
Concepts and calculations
February/March 2012
Question
1.3
1.1
You are there,

well done!
72


LO6 AS1
Mind the Gap

Accounting
Appendix: P
ast Grade 12 exam papers
In this section you will find:
Grade 12 National Accounting Exam Paper from February/March 2012

(pages 74 - 83)
Grade 12 National Accounting Answer Book from February/March 2012

(pages 84 89)
Grade 12 National Accounting marking Memorandum from February/
March 2012 memorandum (pages 90 - 97)
Grade 12 National Accounting Exam Paper from November 2010
(pages 98 - 107)
Grade 12 National Accounting Answer Book from November 2010

(pages 108 117)
Grade 12 National Accounting marking Memorandum from November

2010 (pages 118 127)
Use these exam papers, answer books and marking memoranda to help you
prepare for your exams:
1. Before attempting either exams, photocopy both of the Answer Books
so that you can use them more than once. Remember: if you want to
succeed at Accounting, you must practise, practise, practise!
2. Answer the questions in the Accounting exam paper from 2012. Write
your answers in the Answer Book from 2012. Make sure you take a
break before doing the same with the Accounting exam paper from 2010
(use the Answer Book from 2010 to record your answers).
3. Treat them as real exams by preparing yourself as if these were
real exams, so have pens, pencils, an eraser and a calculator with you.
Time yourself so you complete each paper within the 3 hours that is
allocated to it.
4. This exercise is meant to test your own knowledge so dont cheat
yourself by looking up the answers in the memo before youve finished
each exam.
5. Use the memoranda to check whether or not your answers are
correct. Note where you have got answers wrong these are the
sections of the curriculum on which you need to do more work. Go back
to your textbooks and to the relevant sections of this study guide, and
spend time learning the sections for which you got the lowest marks.
6. When you feel you have improved your knowledge in the areas you were
weakest in in your first attempt, go through each exam again, using
your photocopied Answer Books to record your answers. Check the memo
again to see if youve improved.
7. And remember: Accounting success depends on practise, practise,
practise. Repeat this exercise as often as you can so that you fly in
your year-end exams!
Mind the Gap

Accounting
Appendix
73
74

2
NSC
Appendix
Workings must be shown in order to achieve part-marks.
Non-programmable calculators may be used.
You may use dark pencil or blue/black ink to answer the questions.
3.
4.
5.
Please turn over
A special ANSWER BOOK is provided in which to answer ALL the questions.
2.
Copyright reserved
Answer ALL the questions.
DBE/Feb.Mar. 2012
1.
Read the following instructions carefully and follow them precisely.
INSTRUCTIONS AND INFORMATION
Accounting
Mind the Gap
Accounting
3
NSC
DBE/Feb.Mar. 2012
Mind the Gap
Accounting
Appendix
Copyright reserved
Learning outcomes covered:

LO2 Managerial accounting
AS3
Analyse and interpret a Cash Budget
LO3 Managing resources
AS5
Ethics
AS6
Apply internal control and audit processes
Please turn over

LO1
Financial accounting
AS4
Reconciliation and interpretation
LO3
Managing resources
AS6
QUESTION 6: 30 marks; 20 minutes
Debtors' Reconciliation and

Internal Control
Topic of the question:

LO1
AS5
Final accounts, financial statements and
analysis and interpretation of financial
statements
Cash Budget and Business

Ethics

LO1 Financial accounting
AS1
Concepts
AS5
Financial statements
AS6
Audit reports
LO3 Managing resources
AS3
Asset disposal
AS5
Professional bodies
Appropriation Account,
Cash Flow Statement, Ratios
and Interpretation

LO1
AS1
Manufacturing concepts
LO2
Managerial accounting
AS2
Production Cost Statement
AS2
Unit costs and break-even point
LO3
Managing resources
AS6
Company Concepts, Fixed Asset

Note, Financial Statements and
Audit Report
Manufacturing
VAT and Inventory Valuation

LO1
AS1
Concepts
AS7
VAT
LO3
Managing resources
AS4
Calculate and validate inventories
AS6
Use the information in the table below as a guide when answering the
question paper. Try NOT to deviate from it.
6.
Accounting
4
NSC
(40 marks; 25 minutes)
DBE/Feb.Mar. 2012
In the ledger, a (debit/credit) balance on the (VAT Input/

VAT Output/VAT Control) Account reflects the final amount that
must be paid to SARS.
1.1.4
An item of stock is sold for R39 900, including VAT. The amount of
VAT on this item is R
(6)
Refer to the mark-up % calculated above. Comment on whether

this mark-up % has been beneficial to Mzansi Traders in 2011.
Note that in the previous financial year the gross profit was
R400 000 and the mark-up % was 75%.
1.2.4
Please turn over
(5)
Use the figures calculated above to calculate the mark-up % on

cost achieved.
(9)
Calculate the following for the year ended 31 December 2011:

Cost of sales
Gross profit
You may prepare a Trading Account to assist you in these
calculations.
1.2.2
1.2.3
(6)
Calculate the value of the closing inventory according to the FIFO

method on 31 December 2011.
(2)
(2)
(4)
(2)
(2)
(2)
1.2.1
REQUIRED:
You are provided with information relating to Mzansi Traders owned by Thami
Mzansi. This business sells one type of cellular phone and their financial year
ends on 31 December. The business uses the FIFO method to value their
stock and they use the periodic inventory system.
INVENTORY VALUATION
1.1.6
An item of stock is purchased for R26 200, excluding VAT.

The amount of VAT on this item is R
VAT collected by a business on the sale of goods and services is

regarded as (VAT input/VAT output).
1.1.3
1.1.5
In South Africa, VAT is levied at %.
The letters 'VAT' stand for
1.1.2
1.1.1
Complete the following statements by writing down the missing words or

figures. (For QUESTIONS 1.1.3 and 1.1.4 choose from the words given in
brackets.)
REQUIRED:
VAT
Copyright reserved
1.2
1.1
QUESTION 1: VAT AND INVENTORY VALUATION
Accounting
75
76

Appendix
5
NSC
No. of units
450
280
Per unit
R530
?
Total value
R238 500
?
No. of
units
600
900
500
200
2 200
Cost price
per unit
R550
R600
R530
R620
Total
purchases
R330 000
R540 000
R265 000
R124 000
R1 259 000
Carriage
per unit
R30
R30
R30
R30
Total
carriage
R18 000
R27 000
R15 000
R6 000
R66 000
2 270 units at R900 each = R2 043 000
Sales of cellular phones:
Please turn over
Mzansi Traders were not happy with the price of the purchases on
30 June 2011. Therefore they returned 100 cellular phones to the supplier.
The supplier credited them with the cost price of each item, excluding the
carriage.
Returns of cellular phones:
Date
2011
30 April
30 June
30 Sept.
30 Nov.
Totals
During the financial year ended 31 December 2011, the following stock items
were purchased:
Purchases of cellular phones:
Date
1 January 2011
31 December 2011
40
DBE/Feb.Mar. 2012
The stocks were as follows at the beginning and end of the financial year:
Inventories of cellular phones:
Copyright reserved
4.
3.
2.
1.
INFORMATION:
Accounting
7
NSC
DBE/Feb.Mar. 2012
direct labour cost.

administration cost.
indirect labour cost.
raw material cost.
Direct labour cost + factory overhead cost

Direct labour cost + direct material cost
Direct material cost + factory overhead cost
Selling cost + administration cost
Indirect labour
Office telephone
Salesperson's salary
Advertising
A
B
C
D
Prime cost number of units produced

Total cost of production number of units produced
Total fixed cost x number of units produced
Total fixed cost number of units produced
Fixed cost per unit is calculated as follows:
A
B
C
D
Which ONE of the following is regarded as a factory overhead?
A
B
C
D
Prime cost is calculated as follows:
A
B
C
D
The wages paid to the factory cleaner will be classified as
Please turn over
Calculate the value of direct labour cost that would appear in the Production
Cost Statement for the year ended 28 February 2011.
Refer to Information C below.
2.1.4
2.1.3
2.1.2
2.1.1
Four options are provided as possible answers to the following questions.

Choose the correct answer and write only the letter (AD) next to the question
number (2.1.12.1.4) in the ANSWER BOOK, for example 2.1.5 D.
MULTIPLE-CHOICE QUESTIONS
Copyright reserved
2.2
2.1
REQUIRED:
The information below was extracted from the financial records of Easy Wear
Manufacturers which is owned by Miriam Naidoo. The business manufactures one
style of tracksuits. The financial year ends on 28 February 2011.
QUESTION 2: MANUFACTURING
Accounting
(5)
(8)
Mind the Gap
Accounting
Mind the Gap
Accounting
Appendix
DBE/Feb.Mar. 2012
The unit cost of production (per tracksuit)
2.3.2
There has been no theft in this business. Give TWO examples of

how the wastage could have occurred and in each case, advise
Miriam on how to solve the problem.
2.4.2
Refer to Information D. Calculate the break-even point for the 2011

financial year.
The break-even point for 2010 was 2 250 units. Should Miriam be
satisfied or dissatisfied with the break-even point for 2011
calculated above? Explain.
2.5.1
2.5.2
BREAK-EVEN POINT
Calculate the number of metres of raw material fabric that appear

to be wasted during the production process.
2.4.1
Refer to Information B. Miriam asks you to investigate the control over raw
materials.
The total production cost of finished goods
2.3.1
TOTAL
COST
Please turn over
Opening stock
R28 750
Purchases
R456 960
Raw materials issued to factory
R403 000
for production
Closing stock
2 950 metres
R82 710
Usage:
Miriam has done a study of the manufacturing process and
discovered that they need 3,6 metres of fabric to manufacture one
tracksuit.
NUMBER OF
METRES OF
FABRIC
1 150 metres
17 920 metres
16 120 metres
Number of tracksuits produced this year
Raw material:
4 500 units
4 200 units
Number of tracksuits produced last year
Production:
Copyright reserved
B.
A.
8
NSC
Refer to Information B and D. The business produced 4 200 tracksuits during

the year. There was no work-in-process at the beginning or at the end of the
year. Calculate the following:
INFORMATION:
2.5
2.4
2.3
Accounting
(4)
(6)
(8)
(6)
(3)
(5)
9
NSC
R125 000
R72 000
1
1
?
R 317 100
?
?
Fixed costs:
Factory overhead cost
Administration cost
R892 500
?
?
Variable costs:
Direct material cost
Direct labour cost
Selling and distribution
cost
Selling price
2011
Total
R1 470 000
180 hours
(each
employee)
-
R75,50
R53,50
R22,00
R212,50
?
?
Please turn over
R73,54
R53,04
R20,50
R39,10
R184,60
R63,30
R82,20
2010
Per unit
R350,00
R70
Rate per
hour
45
DBE/Feb.Mar. 2012
Overtime (year)
Hours
2011
Per unit
R350,00
R65 000
per employee
Analysis of total costs and unit costs:
Employees in the
production
process
Factory foreman
Salesperson
Details
Total cost of
employment,
including
benefits for
the year
Number of
employees
Miriam employs the following individuals:
Copyright reserved
D.
C.
Accounting
77
78

Appendix
DBE/Feb.Mar. 2012
(2)
A company is a legal entity and therefore its financial affairs are

independent of the financial affairs of the shareholders.
The independent auditors are responsible for setting up internal

control measures of a company.
3.1.3
3.1.4
the
from
the
Pre-adjustment
Ordinary share capital (R10 per share)

Fixed deposit
Vehicles
Equipment
Accumulated depreciation on vehicles
Trading stock
Debtors' control
Mortgage loan from Quick Bank (12% p.a.)
Sales
Debtors' allowances
Cost of sales
Rent income
Interest on mortgage loan
Directors' fees
Audit fees
Salaries and wages
Consumable stores
Bank charges
Sundry expenses
Bad debts
Figures extracted
28 February 2012
Trial
Please turn over
3 200 000
280 000
780 000
350 000
468 000
105 000
325 000
65 000
3 700
440 000
2 900 000
18 500
1 650 000
200 700
126 000
315 000
30 000
372 000
62 500
7 200
30 000
1 500
on
ended
Balance
year
Complete the Fixed Asset Note on 28 February 2012.
for
3.2.2
Statement
Prepare the Income

28 February 2012.
3.2.1
REQUIRED:
You are provided with information relating to Prime Limited for the year ended
28 February 2012.
INCOME STATEMENT AND FIXED ASSETS
(2)
Net current assets are also referred to as net working capital.
3.1.2
(16)
(46)
(2)
(2)
Shareholders' earnings are equal to net profit before tax.
3.1.1
Copyright reserved
1.
10
NSC
Indicate whether the following statements are TRUE or FALSE:
CONCEPTS
INFORMATION:
3.2
3.1
QUESTION 3: COMPANY REPORTING
Accounting
11
NSC
F.
1 890
10 500
840
Deductions
Pension
Fund
160
UIF
420
80
Contributions
Pension
UIF
Fund
The rent income was increased by R900 per month from

1 November 2011. The tenant has not yet paid the rent for February 2012.
Income tax is calculated at 30% of the net profit.
J.
K.
Please turn over
Provide for depreciation as follows:
On vehicles at 20% p.a. on cost
On equipment at 15% p.a. on the diminishing balance method

New equipment for R32 000 was purchased on 1 September 2011.
This purchase has not been recorded.
I.
H. A vehicle was sold on 31 December 2011 for R95 500. The details from
the fixed asset register were:
Cost price, R180 000
Accumulated depreciation at the beginning of the financial year,

R72 000
Depreciation rate at 20% p.a. on cost

This sale has not been recorded.
NOTE: All contributions are recorded as part of salaries and wages.
PAYE
Gross Salary
G. The details of an employee, T Shube, who had been employed on

1 February 2012, was omitted from the Salaries Journal for February. The
details of his salary were as follows:
Provision for bad debts must be adjusted to R3 200.

The interest on the loan for February 2012 has not yet been entered and
no payment for February has been made. Interest is capitalised.
E.
The following entries appeared on the February Bank Statement but had
not yet been recorded in the books of the company:
Bank charges, R3 600
A direct deposit by a debtor which had been written off as a bad debt
in the previous financial year, R1 900
C.
The account of H Howard, a debtor, must be written of as irrecoverable,

R1 000.
The stocktaking also revealed that the value of consumable stores used
was R60 000.
B.
D.
Trading stock on hand according to a physical stocktaking on

28 February 2012 amounted to R318 500.
DBE/Feb.Mar. 2012
A.
ADJUSTMENTS AND ADDITIONAL INFORMATION
Copyright reserved
2.
Accounting
Mind the Gap
Accounting
Mind the Gap
Accounting
Explain why it is important for an independent auditor to belong to

a professional body like SAICA.
3.3.3
(2)
(6)
(2)
80
Please turn over
Name TWO persons other than the shareholders who would be

interested in the audit report and give a reason for their interest.
3.3.2
DBE/Feb.Mar. 2012
Explain what the role of the independent auditor is.
12
NSC
3.3.1
AUDIT REPORT:
Copyright reserved
3.3
Accounting
DBE/Feb.Mar. 2012
FINANCIAL STATEMENTS OF A COMPANY (60 marks; 40 minutes)
14
NSC
(4)
The Chief Executive Officer (CEO) feels that it would be a good idea to
increase the loans next year. Quote TWO financial indicators (actual ratios or
percentages) to support his opinion.
4.6
Appendix
Sales
Operating expenses for the year
Operating income for the year
Depreciation on equipment
Depreciation on vehicles
Interest expense
Net profit before tax
Income tax
Please turn over
9 900 000
2 475 000
3 597 000
99 000
115 500
148 500
?
916 550
Extract from Income Statement for the year ended 31 December 2011
Copyright reserved
1.
INFORMATION:
(12)
Would the shareholders be happy with the returns, earnings and dividends for
the year ended 31 December 2011? Explain. Quote THREE financial
indicators (actual ratios or percentages) or figures to support your comments.
4.5
(6)
(3)
Comment on the operating efficiency of the company for the year ended
31 December 2011. Quote TWO financial indicators (actual ratios or
percentages) relating to the Income Statement to support your comments.
Debt-equity ratio
4.3.3
(4)
(3)
(15)
(13)
4.4
Solvency ratio
4.3.2
Calculate the following financial indicators on 31 December 2011:
4.3
% operating expenses on sales
Refer to the incomplete Cash Flow Statement provided in Information 8.

Calculate only the missing figures indicated by (a) to (e) in the Cash Flow
Statement of Ambrosio Ltd on 31 December 2011. The other missing figures
are NOT required.
4.2
4.3.1
Prepare the Appropriation Account of Ambrosio Ltd on 31 December 2011.
4.1
REQUIRED:
You are provided with information relating to Ambrosio Limited for the year ended
31 December 2011.
QUESTION 4:
Accounting
79
80

Appendix
15
NSC
5 692 500
?
?
681 000
-
5 953 000
?
660 000
?
?
8 031 000
6 673 000
5 478 000
1 195 000
TOTAL ASSETS


Retained income
8 031 000
R4 620 000
858 000
R5 478 000
The directors declared dividends as follows:
Interim dividends of 33 cents
Final dividends of 20 cents
Please turn over
(Point 5: See next page.)
New shares were issued at the beginning of the financial year.
Dividends:
2 310 000 ordinary shares on 1 January 2011

390 000 ordinary shares issued on 1 January 2011
2 700 000 ordinary shares on 31 December 2011
Shares issued:
915 750
198 000
758 000
7 301 250
1 039 500
600 000
(Mortgage loan: Viva Bank (14% p.a.)
Trade and other payables
Bank overdraft
4 620 000
528 000
5 148 000
7 301 250
2010
2011
DBE/Feb.Mar. 2012
ASSETS
Tangible/Fixed assets
Financial assets
Inventories
Balance Sheet on 31 December 2011
Copyright reserved
4.
3.
2.
Accounting
16
NSC
2011
4 950 000
495 000
508 000
2010
4 537 500
429 000
726 000
DBE/Feb.Mar. 2012
?
540 000
?
758 000
2011
2011
?
11,3%
21,3%
?
35,5%
78 cents
53 cents
47,0%
?
1,7 : 1
1,1 : 1
Operating expenses on sales

Operating profit on sales
Net profit after tax on sales
Debt-equity ratio
Return on average shareholders' equity
Earnings per share
Dividends per share
Return on capital employed
Solvency ratio
Current ratio
Acid-test ratio
Please turn over
0,2 : 1
37%
85 cents
60 cents
44,2%
3,4 : 1
1,3 : 1
0,6 : 1
2010
18%
14%
26,8%
The following financial indicators were calculated for the past two years:
FINANCIAL INDICATORS:
Trade creditors
SARS (Income tax)
2010
397 650
485 100
33 000
915 750
Vehicles were sold at carrying value during the year. These have been
correctly recorded. The cost price of these vehicles was R350 000 and
the accumulated depreciation was R247 500 at the date of disposal.
New equipment was purchased during the year.
Land and buildings were bought during the year.
Trade and other payables include the following:
The following changes took place in terms of tangible/fixed assets:
Land and buildings

Equipment at carrying value
Vehicles at carrying value
Tangible/Fixed assets:
Copyright reserved
7.
6.
5.
Accounting
Mind the Gap
Accounting
Mind the Gap
Accounting
17
NSC
Net change in cash equivalents

Cash equivalents beginning of year
Cash equivalents end of year
Cash effects of financing activities

Proceeds of issue of shares
Repayment of long-term loan
Cash effects of investing activities

Proceeds of sale of fixed assets
Change in financial assets
Cash effects of operating activities

Interest paid
Dividends paid
Income tax paid
CASH FLOW STATEMENT ON 31 DECEMBER 2011
Copyright reserved
8.
Accounting
(e)
(d)
(198 000)
825 000
(439 500)
385 500
(b)
(c)
?
(631 750)
?
(148 500)
(a)
?
542 250
Please turn over
60
DBE/Feb.Mar. 2012
18
NSC
DBE/Feb.Mar. 2012
All stock sold during the month is replaced in the same month. The
mark-up on goods purchased is 50% on cost price. Calculate the
expected payments for the purchase of stock for February 2012.
5.1.5
Please turn over
Explain how the owner would react to this article.

If the allegations are true, how should the owner address the
problem?
This could affect the Cash Budget in several ways in future.
Explain why the owner, John Smith, should be concerned
about this.
According to an article in the local newspaper, allegations are

made that Feetfit Shoe Wholesalers are polluting the area by
dumping their waste in a nearby field.
All debtors pay after 30 days less 5% discount. Calculate the

expected receipts from debtors for January 2012.
5.1.4
5.1.7
The rent income increased from 1 January 2012. Calculate the

% increase in the rent income for January 2012.
5.1.3
As internal auditor, you discover that the actual entertainment

expenses for December 2011 amounted to R35 000. Further
investigations revealed that the owner went on a business trip
during December. His family accompanied him and part of their
expenses was included in the R35 000. State TWO points that
should be included in the internal auditors' report to John Smith.
The entertainment expenses were increased by 15% with effect

from 1 January 2012. Calculate the entertainment expenses for
January 2012.
5.1.2
5.1.6
Calculate the figures indicated by AE in the Cash Budget.
5.1.1
REQUIRED:
You are provided with an incomplete Cash Budget which had been prepared
for the three months ended 28 February 2012. This business is owned by
John Smith.
FEETFIT SHOE WHOLESALERS
Copyright reserved
5.1
QUESTION 5: CASH BUDGET AND BUSINESS ETHICS
Accounting
(3)
(2)
(2)
(4)
(5)
(6)
(3)
(3)
(5)
Appendix
81
82

Appendix
Copyright reserved
Cash surplus/shortage
Cash at the beginning of the month
Cash at the end of the month
EXPECTED PAYMENTS
Purchases of stock (all for cash)
Entertainment expenses
Salaries and wages
Telephone
Drawings
Repayment of loan
Interest on loan
Fixed deposit
EXPECTED RECEIPTS
Cash sales (80% of total sales)
Collections from debtors
Rent income
Asset disposal
Capital
Interest on fixed deposit
Cash Budget
INFORMATION:
Accounting
52 000
43 000
95 000
573 000
360 000
10 000
55 000
?
15 000
10 000
250
625 000
432 000
109 250
9 000
?
2011
December
19
NSC
(45 000)
A
B
Please turn over
C
D
E
637 000
60 000
625 000
?
580 000
?
?
?
?
8 000
?
?
475 000
350 000
?
55 000
?
8 000
360 000
99 750
9 810
2012
February
420 000
?
9 810
2012
January
DBE/Feb.Mar. 2012
20
NSC
(TEMBA)
R360 000
(ALFRED)
R270 000
R170 000
(KATY)
BRANCH NO. 3
Monday to
Sunday
Days worked per week
Copyright reserved
7
10
R40 000
Rent expense for the month

(dependant on size of shop)
Business hours per day
60 days
Period of stock on hand
Number of shop assistants employed
R10 000
Advertising
Monday to
Friday
R20 000
120 days
R10 000
R36 000
(TEMBA)
R28 000
(ALFRED)
Returns from customers for the month
BRANCH
NO. 2
BRANCH
NO. 1
Please turn over
Monday to
Sunday
10
R20 000
20 days
R5 000
R34 000
(KATY)
BRANCH
NO. 3
Apart from the differences in sales, identify ONE problem in relation to each
branch. Quote figures to support the problem identified. In each case, offer
Philip advice on how to solve the problem.
BRANCH NO. 2
BRANCH NO. 1
Philip notices that the sales for the three branches are as follows:
REQUIRED:
He is concerned that the branches are not running effectively and he provides
you with the following figures for the month of February 2012.
(12)
45
DBE/Feb.Mar. 2012
Feetfit Shoe Wholesalers sells their products to Shoe Connect Stores owned
by Philip Frame. Philip has THREE different branches that are managed by
Alfred, Temba and Katy.
PROBLEM-SOLVING
INFORMATION:
5.2
Accounting
Mind the Gap
Accounting
22
NSC
DBE/Feb.Mar. 2012
Accounting
Mind the Gap
R Jansen
S Wonder
P Collins
R65 100
Appendix
Copyright reserved
R64 500
R41 200
R23 000
R51 500
R7 900
R188 100
Balances per Debtors' Ledger on 31 March 2011:
2.
M Carey
R Jansen
S Wonder
C Dion
P Collins
TOTAL
Balance of Debtors' Control Account on 31 March 2011, R200 000
1.
Please turn over
Explain TWO measures a business can introduce to improve the

collection of funds from debtors.
R78 000
MORE THAN 90
DAYS
6.4.2
R22 800
6190
DAYS
Is Crystal Traders controlling their debtors effectively? Explain,

quoting figures to support your answer.
R35 300
R201 200
3060
DAYS
6.4.1
CURRENT
TOTAL
At the end of February, the debtors' age analysis reflected the following:
INFORMATION:
6.4
The correct amounts owing by the following debtors of Crystal

Traders:
6.3.2
6.3
The correct closing balance of the Debtors' Control Account on

31 March 2011
Explain TWO processes the bookkeeper should follow if he/she discovers a

difference between the Debtors' Control Account and the Debtors' List from
the Debtors' Ledger.
6.2
6.3.1
Explain why the Debtors' Control Account should correspond with the
Debtors' List.
6.1
REQUIRED:
Crystal Traders sells glassware for cash and on credit. Although their credit terms are
60 days, they budget on the expectation that 80% of debtors will meet these terms.
QUESTION 6: DEBTORS' RECONCILIATION AND INTERNAL CONTROL

Accounting
(4)
(3)
(12)
(5)
(4)
(2)
23
NSC
Stock sold on credit to P Collins was incorrectly charged to the account

of R Jansen, R8 300.
C.
F.
E.
D.
TOTAL:
Goods sold on credit to S Wonder for R5 800 were correctly recorded in

the Debtors' Journal but incorrectly posted as R8 500 to S Wonder's
account in the Debtors' Ledger.
A cheque of R13 500, originally received from R Jansen in settlement of

an invoice of R15 000, was returned by the bank due to insufficient
funds. No entries have yet been made.
An invoice issued to P Collins for R6 000 had been posted to the wrong
side of his account.
An invoice issued to S Wonder for R1 800 had not yet been recorded in
the books of Crystal Traders.
B.
The Debtors' Journal has been overcast by R2 600.
A.
300
30
DBE/Feb.Mar. 2012
The following errors and omissions were discovered and must be corrected:
Copyright reserved
3.
Accounting
83
84

Appendix
Copyright reserved
TOTAL
QUESTION
INITIAL
This answer book consists of 16 pages.
MARKS
SPECIAL ANSWER BOOK
FEBRUARY/MARCH 2012
GRADE 12
ACCOUNTING
NATIONAL SENIOR CERTIFICATE
EXAMINATION NUMBER
CENTRE NUMBER
Please turn over
MOD.
1.1.6
1.1.5
1.1.4
1.1.3
1.1.2
1.1.1
Copyright reserved
Calculate gross profit.
1.2.2 Calculate cost of sales.
Please turn over
14
DBE/Feb.Mar. 2012
Complete the statements by writing down the missing words or

figures. (For QUESTIONS 1.1.3 and 1.1.4 choose from the words
given in brackets.)
2
NSC Answer Book
1.2.1 Calculate the value of the closing inventory according to the

FIFO method on 31 December 2011.
1.1
QUESTION 1
Accounting
Mind the Gap
Accounting
3
NSC Answer Book
Mind the Gap
Accounting
Copyright reserved
40
TOTAL
MARKS
1.2.4 Refer to the mark-up % calculated above. Comment on whether

this mark-up % has been beneficial to Mzansi Traders in 2011.
Note that in the previous financial year the gross profit was
R400 000 and the mark-up % was 75%.
Please turn over
DBE/Feb.Mar. 2012
1.2.3 Use the figures calculated above to calculate the mark-up % on

cost achieved.
Accounting
Calculate the unit cost of production (per tracksuit).
2.3.2
Appendix
Copyright reserved
Calculate the number of metres of raw material fabric that

appear to be wasted during the production process.
Calculate the total production cost of finished goods.
2.3.1
2.4.1
Calculate the value of direct labour cost that would appear in

the Production Cost Statement for the year ended
28 February 2011.
2.1.4
2.1.3
2.1.2
2.1.1
Please turn over
DBE/Feb.Mar. 2012
Choose the correct answer and write only the letter (AD)
next to the question number (2.1.12.1.4).
4
NSC Answer Book
2.2
2.1
QUESTION 2
Accounting
85
86

Appendix
Copyright reserved
45
TOTAL
MARKS
The break-even point for 2010 was 2 250 units. Should Miriam
be satisfied or dissatisfied with the break-even point for 2011
calculated above? Explain.
2.5.2
ADVICE
Refer to Information D. Calculate the break-even point for the

2011 financial year.
2.
1.
EXAMPLES
Please turn over
DBE/Feb.Mar. 2012
There has been no theft in this business. Give TWO examples

of how the wastage could have occurred and in each case,
advise Miriam on how to solve the problem.
5
NSC Answer Book
2.5.1
2.4.2
Accounting
6
NSC Answer Book
3.1.4
3.1.3
3.1.2
3.1.1
Copyright reserved
Cost price
Carrying value end of year
Depreciation
Disposals (31 December 2011)
Additions
Movements
Cost price
Carrying value beginning of year
FIXED ASSETS
3.2.2 NOTES TO FINANCIAL STATEMENTS
(468 000)
Vehicles
Indicate whether the statements are TRUE or FALSE:
3.2.1 See next page.
3.1
QUESTION 3
Accounting
Mind the Gap
Accounting
16
Please turn over
(105 000)
Equipment
DBE/Feb.Mar. 2012
7
NSC Answer Book
Accounting
Mind the Gap
Copyright reserved
3.2.2 See previous page.
Profit before tax
Operating profit before interest
Directors' fees
Audit fees
Salaries and wages
Consumable stores
Bank charges
Sundry expenses
Bad debts

Operating expenses
Rent income
Gross profit
Sales
Cost of sales
Appendix
Please turn over
46
DBE/Feb.Mar. 2012
3.2.1 PRIME LTD

INCOME STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2012
Accounting
8
NSC Answer Book
Copyright reserved
80
TOTAL
MARKS
Please turn over
3.3.3 Explain why it is important for an independent auditor to

belong to a professional body like SAICA.
DBE/Feb.Mar. 2012
3.3.2 Name TWO persons other than the shareholders who would be
interested in the audit report and give a reason for their
interest.
3.3.1 Explain what the role of the independent auditor is.
Accounting
87
88

Appendix
2011
Dec.
31
9
NSC Answer Book
Calculate the %
31 December 2011.
(e)
(d)
(c)
(b)
(a)
operating
expenses
on
sales
Mind the Gap
Accounting
3
Please turn over
on
15
13
DBE/Feb.Mar. 2012
Calculate only the missing figures indicated by (a) to (e) in the

Cash Flow Statement of Ambrosio Ltd on 31 December 2011.
31
Copyright reserved
4.3.1
4.2
2011
Dec.
4.1
QUESTION 4
Accounting
10
NSC Answer Book
Please turn over
DBE/Feb.Mar. 2012
Comment on the operating efficiency of the company for the

year ended 31 December 2011. Quote TWO financial indicators
(actual ratios or percentages) relating to the Income Statement
to support your comments.
Calculate the debt-equity ratio on 31 December 2011.
Calculate the solvency ratio on 31 December 2011.
Copyright reserved
4.4
4.3.3
4.3.2
Accounting
Mind the Gap
Accounting
11
NSC Answer Book
60
TOTAL
MARKS
Please turn over
The CEO feels that it would be a good idea to increase the

loans next year. Quote TWO financial indicators (actual ratios
or percentages) to support his opinion.
Quoting of financial indicators or figures:
Explanation:
Opinion:
12
DBE/Feb.Mar. 2012
Would the shareholders be happy with the returns, earnings

and dividends for the year ended 31 December 2011? Explain.
Quote THREE financial indicators (actual ratios or percentages)
or figures to support your comments.
Copyright reserved
4.6
4.5
Accounting
12
NSC Answer Book
Appendix
89
Please turn over
Calculate the expected payments for the purchase of stock for

February 2012.
Calculate the expected receipts from debtors for January 2012.
DBE/Feb.Mar. 2012
Calculate the % increase in the rent income for January 2012.
Calculate the entertainment expenses for January 2012.
Calculate the figures indicated by AE in the Cash Budget.
Copyright reserved
5.1.5
5.1.4
5.1.3
5.1.2
5.1.1
QUESTION 5
Accounting
90

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
91
92

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
93
94

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
95
96

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
97
98

2
NSC
Appendix
Workings must be shown in order to achieve part-marks.
Non-programmable calculators may be used.
You may use dark pencil or blue/black ink to answer the questions.
3.
4.
5.
Please turn over
A special ANSWER BOOK is provided in which to answer ALL the questions.
2.
Copyright reserved
Answer ALL the questions.
DBE/November 2010
1.
Read the following instructions carefully and follow them precisely.
INSTRUCTIONS AND INFORMATION
Accounting
Mind the Gap
Accounting
Accounting
3
NSC
DBE/November 2010
Cash Flow Statement,

Interpretation and Asset
Disposal

LO1
AS4 Reconciliation and interpretation
LO3
Managing resources
AS6 Apply internal control and audit processes
Please turn over

LO1
AS1 Concepts
LO2
AS3 Analyse and interpret a cash budget
LO3
Managing resources
AS6 Apply internal control and audit processes

LO1
AS5 Final accounts, financial statements and
statements
LO3
AS3 Asset disposal

LO1
AS1 Concepts
AS5 Final accounts, financial statements and
statements
AS6 Audit reports
LO3
AS5 Professional bodies

LO1
A1
Concepts manufacturing
LO2
AS2 Production Cost Statement
AS2 Unit costs and break even
Company Concepts, Financial

Statements, Ratios and Audit
Reports
Manufacturing

LO1
AS3 Accounting equation
AS7 Apply VAT principles
LO3
Managing resources
AS4 Calculate and validate inventories
Bank Reconciliation and Internal

Control
Analysis of Transactions
Inventory Valuation and VAT
Use the information in the table below as a guide when answering the
question paper. Try NOT to deviate from it.
Copyright reserved
Mind the Gap
Cash Budgets
6.
Accounting
4
NSC
DBE/November 2010
Please turn over
Income tax for the year was brought into account (the amount
exceeds the provisional tax paid).
5.
A premium was charged and received on new shares issued.
3.
A final dividend was declared.
An interim dividend was paid.
2.
4.
An amount owing to SARS for income tax at the end of the

previous year was paid.
1.
TRANSACTIONS:
Show the effect of the following transactions on the accounting equation. The
bank balance is favourable at all times. The first transaction has been
completed as an example. Where there is no effect on A, O or L you must
reflect an '0'.
REQUIRED:
You are provided with information relating to Bhato Traders.
ANALYSIS OF TRANSACTIONS
Copyright reserved
1.1
This question consists of THREE independent questions.
QUESTION 1: ANALYSIS OF TRANSACTIONS, INVENTORY VALUATION AND

VAT
Accounting
(16)
Appendix
99
100

Appendix
5
NSC
DBE/November 2010
Transactions for the month:
INFORMATION:
275
Handbags on hand on
28 February 2010
Copyright reserved
(C)
?
(D)
Please turn over
R225
(15)
R1 050
R105
R60 000
R30 000
(B)
(A)
TOTAL
VALUE
10
Nil
Nil
R4 000
CARRIAGE
ON
PURCHASES
R1 050
R120
R120
R105
R125
VALUE
PER
UNIT
10
500
250
260
1 010
Handbags sold during the

month
Handbags returned to
suppliers during the month
26 February 2010
Handbags bought during the

month
7 February 2010
22 February 2010
25 February 2010
Handbags on hand on
1 February 2010
NUMBER
OF
HANDBAGS
ON HAND
250
Study the information below and provide the missing figures as indicated by
(A) to (D). Show workings to earn part-marks.
REQUIRED:
The business uses the periodic method of inventory and the weighted
average method of valuing inventory.
The following information was extracted from the accounting records of

Bags 4U. Bags 4U buys and sells one type of ladies' handbag.
INVENTORY (STOCK) VALUATION
INFORMATION
1.2
Accounting
6
NSC
Calculate the VAT on net purchases of trading stock for

February 2010.
Calculate the amount of VAT that would be reflected on the
invoices that were issued to the debtors during February 2010.
1.3.2
1.3.3
b/d
DJ
Sundry
accounts
28
DAJ
CJ
b/d
Balance
Cost of sales
Creditors'
control
Balance
GJ
28
28 Input VAT
Feb.
2010
28
141 930
85 000
Feb.
2010
Journal
28 Credits
(Bad debts)
Cost of sales
Cost of sales
Creditors'
control
28 Output VAT
DEBTORS' CONTROL
1 200
80 000
Feb.
122 000 2010
TRADING STOCK
9 780
VAT CONTROL
BALANCE SHEET ACCOUNTS SECTION
GENERAL LEDGER OF MANGO SUPERMARKET
456
65 000
83 000
8 000
31 024
(3)
(3)
(3)
40
Please turn over
GJ
CRJ
DJ
CAJ
GJ
The following Ledger Accounts were extracted from the General Ledger of
Mango Supermarket.
INFORMATION:
Calculate the VAT payable to SARS or receivable from SARS.

State whether the amount is payable or receivable.
VAT is calculated at 14%.
DBE/November 2010
1.3.1
REQUIRED:
Mango Supermarket is a registered VAT vendor.

All goods are sold at 50% on cost.
VAT
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Feb.
2010
Feb.
2010
Feb.
2010
1.3
Accounting
Mind the Gap
Accounting
8
NSC
DBE/November 2010
Accounting
Mind the Gap

(3)
Explain what was wrong with the procedures in the accounting

department which led to this type of fraudulent activity.
2.4.3
Appendix
Copyright reserved
Please turn over
The provisional totals in the journals for October 2010 before reconciling to
the bank statement are: CRJ R510 000 and CPJ R463 600
3.
6 200
13 400
9 100
30 700
30 000
12 400
17 000
The balance on the Bank Statement is R40 092 (favourable) on

31 October 2010.
Balance per Bank Statement

Outstanding deposits for cash sales:
Dated 28 September 2010
Dated 30 September 2010

Outstanding cheques:
502 (dated 19 April 2010)
613 (dated 24 September 2010)
614 (dated 27 September 2010)

Balance per bank account
At the end of the previous month, 30 September 2010, the following items
appeared in the Bank Reconciliation Statement:
2.
1.
INFORMATION:
(3)
Explain why the rule of prudence will be used in accounting for the
fraudulent activities in the books and the financial statements.
2.4.2
Refer to Information numbers 4 and 8 below.
2.4
(10)
(2)
Prepare the Bank Reconciliation Statement on 31 October 2010.
2.3
(10)
It appears that Top Dog Traders will not be able to recover all
amounts, or part of the amounts, lost due to the fraudulent
activities of Joe Cryme. If you were the owner of this business,
what steps would you take against Joe Cryme? Provide TWO
steps.
Calculate the correct totals in the Cash Receipts Journal (CRJ) and Cash
Payments Journal (CPJ) for October 2010.
2.2
(2)
2.4.1
Why does a business prepare a Bank Reconciliation Statement each month?
2.1
REQUIRED:
Top Dog Traders employs Joe Cryme to write up the books, do the bank deposits and
issue cheques. You are required to assist as internal auditor.
QUESTION 2: BANK RECONCILIATION AND INTERNAL CONTROL

Accounting
DBE/November 2010
No. 652 R3 800 (dated 15 November 2010)

No. 655 R1 300
A deposit of R12 700 for cash sales.
Please turn over
The following items appeared in the October CRJ and CPJ, but not on the
Bank Statement:
Copyright reserved
10.
Cheque No. 633 was reflected in the CPJ as R2 630, but on the Bank
Statement it was reflected as R6 230. The amount on the Bank Statement is
correct.
9.
A direct deposit of R5 500 from a tenant was reflected on the Bank

Statement.
7.
As internal auditor you also detected that cheque No. 642 for R18 000
appeared on the Bank Statement, but not in the CPJ. The bookkeeper, Joe
Cryme, forged the signatures and used the funds for personal benefit.
A dishonoured cheque was reflected on the Bank Statement, R1 700. This

was originally received from a debtor in payment of his account.
6.
8.
The October Bank Statement reflected bank charges of R1 310 and interest
of R102 on the favourable bank balance.
From the bank reconciliation for September 2010 only the outstanding deposit
of R12 400 and cheque No. 614 appeared on the October Bank Statement.
The R30 000 reflected on the deposit slip, dated 28 September, was never
deposited into the bank account by Joe Cryme. He cannot account for the
whereabouts of the cash.
9
NSC
5.
4.
Accounting
30
101
102

Appendix
10
NSC
DBE/November 2010
3.1.4
3.1.3
3.1.2
3.1.1
direct labour cost.

factory overhead cost.
administration cost.
raw materials cost.
Prime costs number of units produced

Total costs of production number of units produced
Total fixed costs number of units produced
Total fixed costs x number of units produced
Packing material
Insurance
Telephone
Stationery
Fixed costs
Number of units produced
Variable costs
Selling price per unit Fixed cost per unit
Fixed costs
Selling price per unit Variable cost per unit
Variable costs
Fixed cost per unit
Please turn over
(4 x 2)
In order to calculate the break-even point, the following calculation

will be used:
A
B
C
D
Which ONE of the following items will NOT be regarded as an

administration cost?
A
B
C
D
Fixed costs per unit are calculated as follows:
A
B
C
D
The wages paid to a factory cleaner will be classified as ...
Four options are provided as possible answers to the following questions.

Choose the answer and write only the letter (A D) next to the question
number (3.1.1 3.1.4) in the ANSWER BOOK, for example 3.1.5 D.
Copyright reserved
3.1
QUESTION 3: MANUFACTURING
Accounting
(8)
11
NSC
DBE/November 2010
Give a possible reason, other than price changes, for the

change in EACH of the unit costs provided above.
(b)
Please turn over
Explain whether Fatima should be concerned about the

break-even point for 2010. Quote figures to support your
answer.
2009
R54,30
R51,70
R30,25
11 300 units
24 000 units
(a)
2010
R48,30
R37,38
R34,32
19 548 units
20 000 units
You are provided with unit costs and the break-even point
calculated for the past two years.
3.2.4
Raw materials cost per unit

Direct labour cost per unit
Factory overhead cost per unit
Break-even point
Number of units produced
Prepare the Production Cost Statement for the year ended

28 February 2010.
3.2.3
Direct labour cost

Factory overhead cost
Prepare the following notes to the Production Cost Statement for

the year ended 28 February 2010:
3.2.2
Calculate the value of the raw materials that were issued to the
factory for the year ended 28 February 2010. (You may prepare
the Raw Materials Stock Account to assist with your calculation.)
3.2.1
REQUIRED:
You are provided with information (balances, transactions and adjustments)

relating to Fatima Manufacturers owned by Fatima Fala. The business
manufactures shoes.
Copyright reserved
3.2
Accounting
(6)
(3)
(10)
(5)
(16)
(7)
Mind the Gap
Accounting
12
NSC
Accounting
Mind the Gap

R
160 000
158 000
120 000
6 000
2 225 000
450 000
DBE/November 2010
Copyright reserved
Raw materials stock

3. CLOSING BALANCES ON 28 FEBRUARY 2010:
Purchases of raw materials on credit

Carriage on purchases of raw materials
Consumable stores purchased for the factory
Cleaning materials purchased for the office
Factory plant and equipment purchased on 1 September 2009
Production wages
UIF Contribution for factory employees
Salaries:
Factory foreman
Administration
Sales staff
Water and electricity
Sundry expenses: Factory
Administration
Sales department
Please turn over
R259 125
?
142 500
7 000
R1 023 475
22 500
43 000
12 000
250 000
723 800
?
150 000
400 000
250 000
163 000
194 680
530 000
340 000
2. SUMMARY OF TRANSACTIONS FOR THE YEAR ENDED 28 FEBRUARY 2010:
Raw materials stock

Factory plant and equipment at cost
Accumulated depreciation on factory plant and equipment
1. OPENING BALANCES ON 1 MARCH 2009:
INFORMATION:
Accounting
13
NSC
No entry was made for the following in respect of the production

wages for the last week of February 2010. The entry was omitted
from the Wages Journal:
C.
The shoes are sold at R198 per pair.
H.
Please turn over
During the year 20 000 pairs of shoes were manufactured.
F.
The shoes are sold at a mark-up of 65% on cost.
Depreciation on factory plant and equipment must be brought into

account at 10% per annum, according to the diminishing balance
method.
E.
G.
An amount of R4 200 was still outstanding on the Water and

Electricity Account for February 2010. Sixty per cent (60%) of all
the water and electricity was used in the factory.
D.
R6 200
62
1 240
During the physical stocktaking of raw materials on

28 February 2010, a calculation error was made. 6 000 articles at
15c each were taken into account at 50c each on the stock lists.
This must be corrected.
B.
Gross wages
Deductions: Unemployment Insurance Fund
PAYE
The employer contributes 1% to the UIF.
No entry was made for the transport of raw materials by Pops

Carriers to the factory, R3 750.
DBE/November 2010
A.
ADDITIONAL INFORMATION AND ADJUSTMENTS:
Copyright reserved
4.
Accounting
55
Appendix
103
104

Appendix
DBE/November 2010
B assets are recorded at the original

purchase price unless otherwise
stated
Going concern
International Financial
Reporting Standards
(IFRS)
Good corporate
governance
Limited liability
4.1.2
4.1.3
4.1.4
4.1.5
Please turn over
Prepare the Balance Sheet on 28 February 2010. (ALL workings must be

shown in brackets the notes are NOT required.)
4.3
Copyright reserved
Prepare the Appropriation Account in the General Ledger of Modjaji Limited.
E guidelines for the preparation of

financial statements of companies
to ensure a degree of consistency
(5 x 2)
D financial statements are prepared

on the assumption that the
company will continue operating for
the foreseeable future
C the ethical and responsible manner

in which a company is managed
and directed by its major
stakeholders, including directors
and shareholders
COLUMN B
A the liability of shareholders is limited
to the amount of capital invested in
the company
COLUMN A
Historical cost
4.1.1
Concepts relating to companies are listed in COLUMN A and explanations are

listed in COLUMN B. Choose an explanation from COLUMN B that matches
a concept in COLUMN A. Write only the letter (A E) next to the question
number (4.1.1 4.1.5) in the ANSWER BOOK.
REQUIRED:
The information below was extracted from the financial records of Modjaji
Limited.
MATCHING ITEMS COMPANY CONCEPTS
COMPANY CONCEPTS, FINANCIAL STATEMENTS, RATIOS AND

AUDIT REPORTS
15
NSC
4.2
4.1
QUESTION 4:
Accounting
(37)
(9)
(10)
DBE/November 2010
Copyright reserved
3.
3.2
3.1
Please turn over
The assessment received from SARS reflects income tax of

R103 200 for the financial year.
The directors declared a final dividend of 10 cents per share

on 28 February 2010.
The following adjustments must still be considered:
The company has an authorised share capital of 2 000 000 shares

with a par value of R2 each.
459 000
344 000
FINAL ACCOUNTS SECTION

Trading account (gross profit)
Profit and Loss Account (net profit)
2.
80 000
NOMINAL ACCOUNTS SECTION

Ordinary share dividends (interim)
R1 750 000
50 000
26 000
235 200
2 106 500
61 200
52 000
2 500
81 300
54 500
12 500
80 000
1 100
95 000
11 500
The following balances/totals appeared in the General Ledger on

28 February 2010:
16
NSC
BALANCE SHEET ACCOUNTS SECTION

Share premium
Retained income (1 March 2009)
Long-term loan: Oka Lenders
Fixed assets at carrying value (1 March 2009)
Trading stock
Debtors' control
Provision for bad debts (1 March 2009)
Creditors' control
Bank debit
Cash float
Fixed deposit at Leakage Bank (matures in 2013)
Deposit: Water and electricity
SARS: Income tax debit
ML Pension Fund
1.
INFORMATION:
Accounting
Mind the Gap
Accounting
Mind the Gap
Accounting
DBE/November 2010
Packaging material on hand on 28 February 2010, R4 600

Provision for bad debts at 5% of net debtors
Insurance prepaid, R1 000
Depreciation on fixed assets, R32 400
An adjustment to the Rent Income Account (The total on the
Rent Income Account was R101 500 which included rent for
March and April 2010 rent was increased by R900 from
1 October 2009.)
The loan from Oka Lenders was originally received on

1 September 2008. The loan is to be repaid in equal monthly
instalments over 5 years. The first instalment was paid on
30 September 2008.
The net profit of R344 000 was arrived at after the following items
were taken into account:
17
NSC
Why is it important for an external auditor to be 'independent'?
Why is it important for an external auditor of a public company to

be a member of a professional body, such as SAICA?
You have been appointed as the external auditor of Modjaji

Limited. The managing director, Tom Burke, has asked you to
reflect his directors' fees of R3,6 million under Salaries and Wages
in the Income Statement. Would you agree to his request? Give a
reason.
4.4.2
4.4.3
4.4.4
Please turn over
What is an external (independent) auditors' report?
4.4.1
EXTERNAL AUDITOR'S REPORT:
Copyright reserved
4.4
5.
4.
Accounting
65
(3)
(2)
(2)
(2)
STATEMENT,
18
NSC
INTERPRETATION AND ASSET

DBE/November 2010
Appendix
(3)
(6)
An existing shareholder is disappointed with the price of R5,60 at which the

new shares were sold. Quote a financial indicator to support this opinion and
comment on it.
A friend of yours is not interested in buying shares in this company. Quote
figures for TWO financial indicators, other than those discussed above, to
support his opinion and comment on EACH.
5.8
5.9
Please turn over
(8)
Comment on the liquidity position for 2010. Quote THREE relevant financial
indicators (actual ratios or figures) to support your answer.
5.7
Copyright reserved
(4)
Comment on the debt-equity ratio and the return on average capital

employed. Quote the figures of these financial indicators and comment on
EACH.
(5)
Return on average capital employed
5.5.3
5.6
(3)
Debt-equity ratio
5.5.2
(3)
Earnings per share
5.5.1
Calculate the following financial indicators for 2010:
(6)
The directors made some significant decisions in the past year which
affected the cash position of the company. List THREE of these significant
decisions. Quote figures to support your answer.
5.4
5.5
(18)
(15)
Complete the Cash Flow Statement for the year ended on 30 June 2010.
(Some of the amounts have already been entered in the ANSWER BOOK.)
Complete the Note for Fixed (Tangible) Assets on 30 June 2010.
5.2
(9)
5.3
Prepare the Asset Disposal Account on 31 December 2009 in the General

Ledger.
5.1
REQUIRED:
You are provided with information and a partially completed Cash Flow Statement
relating to Okuhle Limited, a public company.
The financial year-end is on
30 June 2010. The authorised share capital of the company is 500 000 shares. New
shares were issued on 1 July 2009.
QUESTION 5: CASH FLOW

DISPOSAL
Accounting
105
106

Appendix
2010
89 200
310 000
93 000
2010
2 753 800
1 900 000
248 000
605 800
2 764 000
420 000
?
280 000
(Cr) 9 000
53 200
Debt : Equity ratio

Return on average capital employed
Return on shareholders' equity
Earnings per share
Dividends per share
Net asset value per share
Current ratio
Acid test ratio
Stock turnover rate
Period of stock on hand
Debtors' collection period
Creditors' payment period
2010
?
?
8,3%
?
24 cents
725 cents
1,9 : 1
1,2 : 1
6 times
60 days
15 days
42 days
The following financial indicators have been calculated:
Copyright reserved
3.
Income Statement
Interest on loan
Net profit before tax
Income tax
Balance Sheet
Ordinary share capital (par value R5)
Ordinary share premium
Retained income
Land and buildings
Equipment at cost
Loan (16%)
SARS (Income tax)
Please turn over
2009
0,3 : 1
19%
16%
105 cents
60 cents
703 cents
0,3 : 1
0,2 : 1
9 times
40 days
32 days
30 days
2009
104 000
420 000
126 000
2009
2 460 000
1 750 000
230 000
480 000
4 139 000
300 000
135 000
650 000
(Dr) 6 400
38 500
The following totals were extracted from the financial statements on

30 June 2010:
2.
DBE/November 2010
Equipment bought on 30 June 2007 for R40 000 was sold for cash on
31 December 2009 at carrying value. New equipment was purchased on
1 February 2010 for R160 000. Depreciation on equipment is written off at
15% p.a. on cost price.
19
NSC
1.
INFORMATION:
Accounting
80
20
NSC
DBE/November 2010
The % increase in Steffi Smit's salary in October 2010

The mark-up % that is applied on the sale of refreshments (Note
that refreshments are sold for cash only and are replaced in the
month of sale.)
The amount invested in the fixed deposit on 1 September 2010
(Note that the interest rate is 8% p.a. A portion of the fixed deposit
matures on 31 October 2010.)
Interest on the fixed deposit for November 2010
6.1.2
6.1.3
6.1.4
6.1.5
(6)
(7)
What TWO aspects of the marketing strategy could be improved?

Give figures to support your answer and make suggestions for
EACH.
Has Steffi Smit been successful in the collection of fee income?
Explain by quoting figures to support your opinion.
6.2.2
6.2.3
Please turn over
(4)
How many new customers did Piet expect to gain from the
marketing strategy in September 2010?
(3)
(3)
(3)
(2)
(2)
6.2.1
As internal auditor you are required to give Piet feedback on the marketing
strategy and fee collection.
The insurance figure for November 2010 (Note that the insurance
premium will increase by 6% on 1 November 2010.)
6.1.1
Copyright reserved
6.2
6.1
REQUIRED:
Each member pays a once-off admission fee of R1 000 and a subscription fee of R500
per month to belong to the gymnasium. Piet employs Steffi Smit to collect and control
the fee income.
You are provided with an extract from the Cash Budget of Parys Gymnasium. The
business is owned by Piet Nkosi.
QUESTION 6: CASH BUDGETS
Accounting
Mind the Gap
Accounting
Accounting
Mind the Gap
Appendix
7 000
0
0
5 250
15 200
0
285 000
27 360
30 000
640
Oct.
R
?
0
0
5 250
15 200
0
285 000
27 360
0
?
Nov.
R
?
18 000
6 000
14 700
42 400
?
855 000
76 320
30 000
?
Total
R
Jane
35
R5 250
R3 000
0
Chase
80
R12 000
R3 000
2
September
October
November
Total
Budgeted
R285 000
R285 000
R285 000
R855 000
Actual
R339 000
R323 000
R273 000
R935 000
38
Dan
113
R16 950
R3 000
ACTUAL FEE INCOME COLLECTED COMPARED TO BUDGET
Number of new contracts issued

Commission earned
Transport allowance paid
Number of contracts cancelled on
1 November 2010
Analysis of work done by the marketing team September
30
TOTAL: 300
40
Total
228
R34 200
R9 000
Piet asked you, as the internal auditor, to analyse the work done by the marketing
team. Your analysis is as follows:
Copyright reserved
3.
7 000
18 000
6 000
4 200
12 000
?
285 000
21 600
0
640
Sept.
R
DBE/November 2010
At the end of August Piet had 450 customers. Piet developed a new marketing
strategy to increase the number of customers significantly. He planned to employ
three people (Chase, Jane and Dan) at the beginning of September 2010 to market
the gymnasium and get new customers to sign contracts. He would pay them
commission of R150 for each new customer and a travel allowance.
MARKETING STRATEGY:
PAYMENTS:
Insurance
Commission paid
Transport allowance
Salary to Steffi Smit
Purchases of refreshments
2.
21
NSC
EXTRACT FROM CASH BUDGET FOR SEPT. 2010 TO NOV. 2010
RECEIPTS:
Joining fee (Admission fee)
Monthly fee collections (Subscriptions)
Sale of refreshments
Fixed deposit matured
Interest on fixed deposit (8% p.a.)
1.
INFORMATION:
Accounting
107
108

Appendix
Copyright reserved
TOTAL
QUESTION
INITIAL
This answer book consists of 19 pages.
MARKS
SPECIAL ANSWER BOOK
NOVEMBER 2010
GRADE 12
ACCOUNTING
NATIONAL SENIOR CERTIFICATE
EXAMINATION NUMBER
CENTRE NUMBER
Please turn over
MOD.
SARS Income tax
Bank
GENERAL LEDGER
ACCOUNT DEBIT
ACCOUNT CREDIT
2
NSC Answer Book
D:
C:
B:
A:
15
16
Please turn over
Show
DBE/November 2010
Provide the missing figures as indicated by (A) to (D).

workings to earn part-marks.
5.
4.
3.
2.
1.
NO.
Copyright reserved
1.2
1.1
QUESTION 1
Accounting
Mind the Gap
Accounting
3
NSC Answer Book
Mind the Gap
Accounting
Copyright reserved
40
TOTAL
MARKS
Please turn over
1.3.3 Calculate the amount of VAT that would be reflected on the

invoices that were issued to the debtors during February 2010.
1.3.2 Calculate the VAT on net purchases of trading stock for

February 2010.
State whether the amount is payable or receivable.

3
DBE/November 2010
1.3.1 Calculate the VAT payable to SARS or receivable from SARS.
Accounting
4
NSC Answer Book
510 000
463 600
CPJ
BANK RECONCILIATION STATEMENT ON 31 OCTOBER 2010
Correct totals
Provisional totals
CRJ
Appendix
109
10
10
Please turn over
Calculate the correct totals in the CRJ and CPJ for October 2010.
DBE/November 2010
Why does a business prepare a Bank Reconciliation Statement

each month?
Copyright reserved
2.3
2.2
2.1
QUESTION 2
Accounting
5
NSC Answer Book
110

Appendix
Copyright reserved
30
TOTAL
MARKS
Please turn over
2.4.3 Explain what was wrong with the procedures in the accounting
department which led to this type of fraudulent activity.
2.4.2 Explain why the rule of prudence will be used in accounting for the
fraudulent activities in the books and the financial statements.
DBE/November 2010
2.4.1 If you were the owner of this business, what steps would you take
against Joe Cryme? Provide TWO steps.
Accounting
3.1.4
3.1.3
3.1.2
3.1.1
6
NSC Answer Book
Copyright reserved
Please turn over
DBE/November 2010
3.2.1 Calculate the value of the raw materials that were issued to the
factory for the year ended 28 February 2010. (You may prepare the
Raw Materials Stock Account to assist with your calculation.)
3.1
QUESTION 3
Accounting
Mind the Gap
Accounting
7
NSC Answer Book
Mind the Gap
Accounting
R
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DIRECT LABOUR COST
3.2.2 NOTES TO THE FINANCIAL STATEMENTS
Accounting
Please turn over
16
DBE/November 2010
8
NSC Answer Book
Please turn over
Explain whether Fatima should be concerned about the

break-even point for 2010. Quote figures to support your
answer.
Copyright reserved
3.2.4 (a)
Prime cost
TOTAL
10
DBE/November 2010
3.2.3 PRODUCTION COST STATEMENT OF FATIMA MANUFACTURERS

Accounting
Appendix
111
112

9
NSC Answer Book
Appendix
Copyright reserved
Factory
overhead cost
per unit
Direct labour
cost per unit
55
TOTAL
MARKS
Please turn over
DBE/November 2010
Give a possible reason, other than price changes, for the

change in EACH of the unit costs provided above.
Raw materials
cost per unit
(b)
Accounting
10
NSC Answer Book
COLUMN A
28
4.1.5
4.1.4
4.1.3
4.1.2
4.1.1
2010
Feb.
28
Profit and loss
COLUMN B
Please turn over
344 000
10
DBE/November 2010
Choose an explanation from COLUMN B that matches a concept

in COLUMN A.
Copyright reserved
2010
Feb.
4.2
4.1
QUESTION 4
Accounting
Mind the Gap
Accounting
Accounting
11
NSC Answer Book
BALANCE SHEET AS AT 28 FEBRUARY 2010
MODJAJI LIMITED
Mind the Gap
Appendix
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Current liabilities
TOTAL ASSETS
Current assets
Non-current assets
ASSETS
4.3
Accounting
Please turn over
37
DBE/November 2010
12
NSC Answer Book
Copyright reserved
65
TOTAL
MARKS
Please turn over
4.4.4 You have been appointed as the external auditor of Modjaji

Limited. The managing director, Tom Burke, has asked you to
reflect his directors' fees of R3,6 million under Salaries and
Wages in the Income Statement. Would you agree to his
request? Give a reason.
4.4.3 Why is it important for an external auditor of a public company to

be a member of a professional body, such as SAICA?
DBE/November 2010
4.4.2 Why is it important for an external auditor to be 'independent'?
4.4.1 What is an external (independent) auditors' report?
Accounting
113
114

Appendix
Cost
Carrying value at end of year
Movements
15
Please turn over
160 000
300 000
(135 000)
4 139 000
Cost
165 000
4 139 000
Carrying value at beginning of year
Equipment
DBE/November 2010
Land and Buildings
2009
Dec. 31
ASSET DISPOSAL
13
NSC Answer Book
FIXED (TANGIBLE) ASSETS
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5.2
2009
Dec. 31
5.1
QUESTION 5
Accounting
(89 200)
(76 500)
(77 600)
Interest paid
Dividends paid
Income tax paid
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Cash equivalents end of year
Cash equivalents beginning of year
Net change in cash equivalents
Cash effects of financing activities
Please turn over
(1 295 000)
570 400
Cash effects of investing activities
327 100
18
DBE/November 2010
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2010
OKUHLE LIMITED
14
NSC Answer Book
Cash effects of operating activities
5.3
Accounting
Mind the Gap
Accounting
Mind the Gap
Accounting
15
NSC Answer Book
List THREE of these significant decisions.

support your answer.
Copyright reserved
5.5.3 Return on average capital employed
5.5.2 Debt-equity ratio
5.5.1 Earnings per share
5.4
Accounting
Appendix
5
Please turn over
Quote figures to
DBE/November 2010
16
NSC Answer Book
Financial indicators (actual ratios or figures):
Comment:
Please turn over
Comment on the liquidity position for 2010. Quote THREE

relevant financial indicators (actual ratios or figures) to support
your answer.
DBE/November 2010
Comment on the debt-equity ratio and the return on average

capital employed. Quote the figures of these financial indicators
and comment on EACH.
Copyright reserved
5.7
5.6
Accounting
115
116

Appendix
Copyright reserved
80
TOTAL
MARKS
Please turn over
A friend of yours is not interested in buying shares in this

company. Quote figures for TWO financial indicators, other than
those discussed above, to support his opinion and comment on
EACH.
5.9
DBE/November 2010
An existing shareholder is disappointed with the price of R5,60

at which the new shares were sold. Quote a financial indicator
to support this opinion and comment on it.
17
NSC Answer Book
5.8
Accounting
18
NSC Answer Book
invested
in
the
fixed
deposit
on
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Mind the Gap
Accounting
4
Please turn over
6.2.1 How many new customers did Piet expect to gain from the
marketing strategy in September 2010?
6.1.5 Calculate the interest on the fixed deposit for November 2010.
6.1.4 Calculate the amount

1 September 2010.
6.1.3 Calculate the mark-up % that is applied on the sale of

refreshments.
DBE/November 2010
6.1.2 Calculate the % increase in Steffi Smit's salary in October 2010.
6.1.1 Calculate the insurance figure for November 2010.
QUESTION 6
Accounting
19
NSC Answer Book
Mind the Gap
Accounting
Copyright reserved
30
TOTAL
MARKS
TOTAL: 300
6.2.3 Has Steffi Smit been successful in the collection of fee income?
Explain by quoting figures to support your opinion.
DBE/November 2010
6.2.2 What TWO aspects of the marketing strategy could be improved?

Give figures to support your answer and make suggestions for
EACH.
Accounting
Appendix
117
118

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
119
120

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
121
122

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
123
124

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
125
126

Appendix
Mind the Gap
Accounting
Mind the Gap

Accounting
Appendix
127
The Mind the Gap study guide series assists you to make the leap by studying
hard to achieve success in the Grade 12 exam.
This publication is not for sale.

Copyright Department of Basic Education www.education.gov.za
Call Centre 0800 202 933

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Department of Basic Education 2012

Department of Basic Education 2012

First published by the Department of Basic Education in 2012

Department of Basic Education 2012

Matsie Angelina Motshekga, MP

Matsie Angelina Motshekga, MP

Department of Basic Education 2012

Department of Basic Education 2012

1.1 Basic concepts................................................................................. 1

2.1 Concepts relating to companies..................................................... 6

3.1 Important concepts of manufacturing......................................... 39

4.1 Key concepts.................................................................................. 47

5.1 Bank reconciliation ....................................................................... 60

6.1 Inventory systems.......................................................................... 65

7. Value Added Tax (VAT)..........................................................69

7.1 VAT calculations............................................................................. 71

Appendix: Past Grade 12 exam papers................................... 74

Department of Basic Education 2012

Dear Grade 12 learner

Overview of the Accounting

There is one exam of 3 hours for 300 marks.

Department of Basic Education 2012

How to use this study guide

Pay special attention

Hints to help you

Refers you to past

A checklist from the exam guidelines for Accounting has been

Look out for

Look out for

The activities are based on exam-type questions. Cover the answers

Use this study guide

Department of Basic Education 2012

Top 10 study tips

Have all your materials ready before you begin studying

Be positive. Make sure your brain holds onto the information

Take a walk outside. A change of scenery will stimulate your

Break up your learning sections into manageable parts. Trying to

Teach your concepts to anyone who will listen. It might feel

Repetition is the key to retaining information you have to learn.

pencils, pens, highlighters, paper, etc.

you are learning by reminding yourself how important it is to

learning. Youll be surprised at how much more you take in after

with short, constructive breaks.

strange at first, but it is definitely worth reading your revision

whenever you can.

Keep going dont give up!

Sleeping at least 8 hours every night, eating properly and

Department of Basic Education 2012

Question words to help you answer questions

What is required of you

Examples of question words

1. Fixed/tangible A This increases profit and therefore increases

C Amounts owing that will take longer than 12 months

D Assets which are expected to be kept for a long

E The value (net worth) of the business at any point in

F Amounts owing that will be paid back within 12

G Assets which are expected to be converted into cash

You must put a

Department of Basic Education 2012

Study skills to boost your learning

1. Fold an A4 paper into

3. Write the definition of

1. Fold an A4 paper into

3. Write the definition of

Mind the Gap

Chapter 1 Basic Accounting Concepts