Accounting 1 Free State

September Classes

GRADE 12

ACCOUNTING

SPRING CLASSES - 2021

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Accounting 2 Free State
September Classes
QUESTION 1: DEBTORS' RECONCILIATION – DBE MARCH 2018

1.1 DEBTORS' AGE ANALYSIS

The information below relates to Witbank Hardware.

REQUIRED:

1.1.1 Explain why the debtors' age analysis is an effective internal control (2)
measure. State ONE point.

1.1.2 Explain TWO different problems highlighted by the debtors' age (6)
analysis. In EACH case, provide the name of a debtor and figure(s).

INFORMATION:

A. Debtors are granted 30 days to settle their accounts.

B. Debtors' age analysis on 31 October 2017:

CREDIT AMOUNT CURRENT 30 60 90

DEBTORS
LIMIT OWING MONTH DAYS DAYS DAYS
Z Zulu 6 000 5 000 2 100 2 900
P Botha 3 500 4 200 3 800 400
M Valley 7 000 1 450 500 950
S Walker 13 000 12 500 1 000 3 000 4 500 4 000
O Klein 3 000 3 000 1 900 1 100
26 150 9 300 6 300 5 600 4 950
100% 36% 24% 21% 19%

1.2 DEBTORS' RECONCILIATION

Information from the records of Amber Traders for November 2017 is

presented. Some errors and omissions were noted. See information B.

REQUIRED:

1.2.1 Calculate the correct Debtors' Control Balance on (7)

30 November 2017. Show figures and indicate '+', '–' or 'No change'
at EACH adjustment.

1.2.2 Calculate the correct total of the debtors' list on 30 November 2017. (10)

INFORMATION:

A. Balances on 30 November 2017 before errors and omissions:

(i) Debtors' Control, R25 700

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Accounting 3 Free State
September Classes

(ii) Debtors' list:

DEBIT CREDIT
L Nkosi R5 700
S Muller R11 100
M Welthagen R1 900
B Sandleni R15 900
R32 700 R1 900

B. Errors and omissions:

(i) The total of the Debtors' Journal was undercast by R2 700.

(ii) Interest of R350 must be charged on the overdue account of

S Muller.

(iii) An amount of R3 100 received from L Nkosi was incorrectly recorded

as R1 300 in the Cash Receipts Journal and posted as such to the
General Ledger and the Debtors' Ledger.

(iv) Trading stock returned by B Sandleni was posted to the wrong side of
his Debtors' Ledger Account, R1 200.

(v) No entry was made for a credit sales invoice issued to M Welthagen,
R1 500.

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QUESTION 2: DEBTORS' RECONCILIATION AND AGE ANALYSIS – DBE JUNE 2017

2.1 Indicate whether the following statements are TRUE or FALSE. Choose the
answer and write only 'true' or 'false' next to the question number (2.1.1–2.1.3) in
the ANSWER BOOK.

2.1.1 The balance in the Debtors' Control Account should equal the total of the
debtors' list.

2.1.2 Bad debts will be recorded in the Debtors' Allowances Journal.

2.1.3 The source document for the debtor’s journal is the original invoice. (3)

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Accounting 4 Free State
September Classes
2.2 MIZZY BOUTIQUE

The Debtors' Control Account and debtors' list for February 2017 prepared by the
bookkeeper contained errors/omissions.

REQUIRED:

Use the table provided to indicate corrections that must be made to the Debtors' (13)
Control Account and the debtors' list.

Provide figures and a plus (+) or minus (–) sign for each correction.

INFORMATION:

A.
Debtors' Control Account Debtors' List
Balance/Total R37 710 R39 490

B. Errors or omissions to be corrected:

(a) No entry was made for an invoice for R7 440 issued to G Gwen.
(b) A receipt for R9 400 issued to debtor B Crawley was recorded
correctly in the relevant journal. It was posted incorrectly as R4 900
to his Debtors' Ledger Account.
(c) An invoice for R1 360 issued to A Naidoo was correctly recorded in
the DJ. It was posted in error to the wrong side of her account in the
Debtors' Ledger.
(d) A EFT for R1 350 received from D Zulu was recorded in the CRJ and
posted to the Debtors' Control Account and Debtors' Ledger
accordingly. D Zulu's account was previously written off.
(e) A credit note for R720 issued to W Wallace was recorded in the DAJ
as R270 and posted as such.
(f) Credit sales to J Taylor for R1 950 was not recorded.

2.3 GLENDALE TRADERS

The debtors' age analysis on 30 April 2017 is provided. Credit terms are 30 days.

REQUIRED:

2.3.1 Explain how a debtors' age analysis can assist with internal control over (2)
debtors.

2.3.2 Calculate the percentage of total debts exceeding the credit terms. (4)

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Accounting 5 Free State
September Classes
2.3.3 Explain ONE problem (with figures) relating to EACH of the following
debtors:
● D Pillay
● W Patel (4)
2.3.4 Explain TWO problems (with figures) relating to debtor D Gouws. (4)

INFORMATION:
DEBTORS' AGE ANALYSIS ON 30 APRIL 2017:

CREDIT AMOUNT CURRENT 30 60 90

LIMIT OWING MONTH DAYS DAYS DAYS
R R R R R R
D Pillay 10 000 11 800 1 980 9 820
D Gouws 14 000 13 450 4 100 3 902 5 448
Z Ngosi 2 800 2 550 2 550
W Patel 14 000 11 192 9 112 2 080
P Peters 5 000 2 608 1 408 1 200
41 600 7 488 17 472 14 560 2 080
100% ? ? ? ?

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QUESTION 3: RECONCILIATION, AGE ANALYSIS – DBE NOVEMBER 2016

Simply Traders sell goods for cash and on credit.

REQUIRED:

3.1 Simply Traders have the telephone numbers of all their debtors. What other (4)
information should they obtain before allowing customers to open accounts?
State TWO points with a reason in EACH case.

3.2 Refer to Information A, B and C.

Calculate:

● The correct closing balance of the Debtors' Control Account on 31 October (6)
2016
● The correct amounts owing by debtors: (12)
- J Ramsay (D2)
- W Smith (D3)
- C Prince (D5)

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September Classes
3.3 Refer to Information D.
● Calculate the percentage of debtors complying with the credit terms. (4)
● Explain TWO measures to improve collection from debtors. (4)

INFORMATION:

A. Balance of the Debtors' Control Account on 31 October 2016, R179 500

(before adjustments).

B. Debtors' list on 31 October 2016:

DEBTORS FOLIO AMOUNT

M Coley D1 R60 200
J Ramsay D2 37 500
W Smith D3 19 500
D Cummings D4 42 000
C Prince D5 3 900
TOTAL R163 100

C. The following errors and omissions must be taken into account:

(a) An invoice for R2 500 issued to W Smith was not recorded in the
books of Simply Traders.

(b) The total of the Debtors' Allowances Journal was posted to the
Debtors' Control Account as R20 100 instead of R21 000.

(c) An invoice for R4 300 issued to C Prince was posted incorrectly to

the account of J Ramsay.

(d) Stock for R5 100 sold to C Prince was treated as a return of goods
when posting it to the Debtors' Ledger Account of C Prince.

(e) Credit sales to J Ramsay for R8 500 was not recorded.

(f) An invoice for R3 600 issued to W Smith was recorded correctly in

the Debtors' Journal but posted as R6 300 to his account in the
Debtors' Ledger.

(g) The total for discount allowed in the CRJ was overstated by R500.

D. Debtors' age analysis on 30 September 2016:

30–60 61–90 MORE THAN

TOTAL CURRENT
DAYS DAYS 90 DAYS
201 200 35 300 23 300 76 700 65 900

The credit period is 60 days.

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Accounting 7 Free State
September Classes
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QUESTION 4: RECONCILIATION, AGE ANALYSIS MPUMALANGA - 2015

Seuss Dealers owner Theo Seuss, sells goods for cash and on credit to its customers.
Jim Grinch was appointed as the new credit controller at the beginning of the financial
year. The information presented below relates to the month of August 2015.

REQUIRED:

4.1.1 Explain why the Debtors’ Control account balance should agree with the (2)
Debtors’ List total.

4.1.2 Briefly explain how the preparation of a Debtors Age Analysis can assist the (2)
business in controlling their debtors.

4.1.3 Theo feels that the management of debtors has not been satisfactory since (8)
the appointment of the new credit controller. Provide Theo with FOUR key
points that confirms his suspicions.

Quote specific information from the Age Analysis (TWO points) and from the
Debtors Control account (TWO points).
Note: You do not have to take the errors and omissions into account when
answering 6.1.1.
4.1.4 Theo questioned Jim about the difference in the balance of the Debtors’ (15)
control account and the Debtors’ List total. An investigation of the records
showed that the posting to the Debtors’ Control account was correct, but that
posting errors influenced the Debtors’ List.

Prepare the correct Debtors’ List on 31 August 2015.

(Show workings with the relevant amounts in brackets to earn part-marks.)

INFORMATION:
A Credit limits and Credit terms:
All debtors are granted a credit limit of R15 000 and it is business policy that
all debtors are granted 30 days to settle their accounts.
B Debtors’ Age Analysis / List on 31 August 2015
Debtor Total Current 30 days 60 days 60 days +
H. Horton 28 300 15 300 3 900 2 200 6 900
L. Lorax 4 500 4 500
K. Knox 13 000 13 000
V. Vladikoff 9 800 7 800 2 000
M. Mooney 14 600 6 500 5 400 2 700
Total due 70 200 42 600 11 300 4 900 11 400
100% 61% 16% 7% 16%

C GENERAL LEDGER OF SEUSS DEALERS

Dr DEBTORS CONTROL Cr
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Accounting 8 Free State
September Classes
2015 56 2015 Bank & CR
Aug 1 Balance b/d 31 55 700
600 Aug discount J
Debtors DA
31 Sales DJ 71 200 2 900
allowances J
Journal Journal
debits GJ 500 credits GJ 4 500
(Correct
(Bad debts)
error)
Balance c/d 65 200
128 300 128 300
Sep 1 Balance b/d 65 200
D Errors and omissions that influenced the List of Debtors:

(i) Merchandise returned by K. Knox, R500, was posted to the wrong side

(ii) The account of L. Lorax was written off. The Debtors’Ledger of L.Lorax
was not updated.

(iii) Goods sold on credit to H. Horton for R5 600 was correctly recorded
in the Debtors’ Journal but incorrectly posted to his account in the
Debtors’ Ledger as R6 500.

(iv) Stock sold on credit to V. Vladikoff was incorrectly charged to the

Debtors’ Ledger account of H. Horton, R3 700.

(v) No entry was made in the Debtors’ Ledger account of M. Mooney for
credit sales of R1 400.

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QUESTION 5: DEBTORS AGE-ANALYSIS: EASTERN CAPE – 2019

5.1 DEBTORS AGE-ANALYSIS

The owner of Jumbo Traders, Sumi, approached you for assistance in

connection with managing the debtors.

REQUIRED:

5.1.1 Explain how the Debtors’ Age Analysis can assist with the control over
debtors. Provide ONE point. (2)

5.1.2 Calculate the average debtors’ collection period (in days) for the (5)
financial year ended 31 August 2019.
● Comment on whether the business should be satisfied with this. (2)

5.1.3 Refer to Information C:

Identify TWO different problems revealed by the Debtors’ Age Analysis. (6)
Quote evidence and/or figures. In each case, provide advice to improve
the internal control relating to the problem identified.

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Accounting 9 Free State
September Classes
INFORMATION:

A. The balance of the debtors’ control was R19 800 on 1 September 2018.

B. Total sales for the year amounted to R750 000.

40% of sales are for cash and the rest on credit.

C. DEBTORS’ AGE ANALYSIS ON 31 AUGUST 2019

Credit Policy: Debtors are granted 30 days in which to settle their debts.
NAME CREDIT TOTAL CURRENT 30 DAYS 60 DAYS 60 DAYS+
LIMIT MONTH
B. Botha R 8 000 R 6 000 R 6 000
C. Coma 30 000 32 000 11 574 R 3 000 R 3 710 R13 716
P. Pule 20 000 18 600 - 8 000 10 600
R. Rome 18 600 19 600 3 000 4 240 12 360
76 200 20 574 15 240 26 670 13 716
27% 20% 35% 18%

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QUESTION 6: DEBTORS' RECONCILIATION – FREE STATE JUNE 2016

The bookkeeper of Taylor Boutique presented you with the Debtors Control balance
and the Debtors’ List for May 2016.
REQUIRED:
6.1 Show the adjustments that must be made to correct the Debtors' Control
account in the General Ledger by showing the amounts with: (8)
+ for increase; – for decrease OR write 'no change'.

6.2 Prepare the correct Debtors' List on 31 May 2016. Show workings with the (12)
relevant amounts in brackets to earn part marks.

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Accounting 10 Free State
September Classes
INFORMATION:

A. On 31 May 2016, the balance on the Debtors Control account in the

general ledger was R21 900 (as provided by the bookkeeper).
B. Debtors' List on 31 May 2016 ( as provided by the bookkeeper)

Debit Credit
P Petty 5 100
M Thola 8 400
P Govendor 1 550
A Brand 11 300
24 800 1 550

C. The following errors and omissions were noted:

i) The total of the May 2016 Debtors' Journal was overcast by R1 750.
ii) Interest of R375 must still be charged on the overdue account of
M. Thola.
iii) No entry was made for an invoice issued to P Govendor, R1 300.
iv) An amount of R13 200 received from P. Petty was correctly recorded
in the Cash Receipts Journal but was posted as R12 300 to the
Debtors' Ledger account of P. Petty.
v) A cheque for R3 050 received from P. Petty was not recorded in the
Cash Receipts Journal.
vi) Merchandise returned by A Brand, R1 100, was posted to the wrong
side of his account in the Debtors' Ledger.

6.3 DEBTORS' AGE ANALYSIS

The information below relates to Vredefort Sportswear.
REQUIRED:

6.3.1 Refer to Information B.

As the internal auditor, what concerns would you have about Temba's job
description? Explain. (2)

6.3.2 Identify TWO debtors who could have their credit limits increased. (2)

● Provide a valid reason for your choice of debtors. (2)

6.3.3 Explain THREE different problems reflected by the Debtors' Age Analysis.
Provide relevant evidence to support your answer. (6)

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Accounting 11 Free State
September Classes
INFORMATION:

A. The business sells 80% of their stock on credit. Debtors are required to
settle their accounts by the end of the month following the sales transaction
month (30 days).

B. Temba, the bookkeeper, issues invoices and credit notes and collects cash
from debtors.

C. Debtors' Age Analysis on 31 August 2016:

CREDIT OUTSTANDING CURRENT

DEBTORS 30 DAYS 60 DAYS 90 DAYS
LIMIT BALANCE MONTH
M Michiel R11 000 R15 000 R2 800 R3 200 R4 450 R4 550
L Noge R4 800 R4 000 R2 100 R1 900
P Paul R3 000 R2 900 R2 900
C Christo R5 500 R5 100 R3 500 R1 600
I Taka R1 700 R1 550 R500 R1 050
R28 550 R11 800 R4 800 R6 350 R5 600
100% 41% 17% 22% 20%

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QUESTION 7: CREDITORS' RECONCILIATION

7.1 CREDITORS' RECONCILIATION

Ekasi Traders buys goods on credit from Thembeka Suppliers.

REQUIRED:

7.1.1 Use the table provided to indicate changes to the:

● Creditors' Ledger Account in the books of Ekasi Traders

● Creditors' Reconciliation Statement on 30 April 2021 (9)

7.1.2 Refer to Information C(c) about Invoice 395. It was discovered that the (4)
purchasing manager, Bradley, had taken these goods for his personal
catering business. The owner regards Bradley as a valued member of
staff and does not regard this as theft.

What should the owner say to Bradley regarding this incident? Explain
TWO points.

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Accounting 12 Free State
September Classes

INFORMATION:

A. Creditors' Ledger Account in the books of Ekasi Traders

THEMBEKA SUPPLIERS (CL6)

DEBIT CREDIT BALANCE
2021 1 Balance b/d R81 000
April 12 Invoice 220 97 200 178 200
EFT 40 500 137 700
18 Debit Note 702 10 300 127 400
Invoice 289 49 100 176 500
Invoice 333 30 000 206 500
24 Debit Note 877 9 700 216 200
25 Journal voucher 585 6 400 209 800
31 EFT and discount 92 600 117 200

B. Statement of account from Thembeka Suppliers

Ekasi Traders
225 Crocodile Road 25 April 2021
DEBIT CREDIT BALANCE
2021 1 Balance R81 000
April 12 Invoice 220 97 200 178 200
Receipt 742 40 500 137 700
18 Credit Note 791 13 100 124 600
Invoice 333 30 000 154 600
22 Invoice 395 12 500 167 100
24 Credit Note 888 9 700 157 400

C. Errors, omissions and other information:

(a) Invoice 289 was incorrectly reflected in the account of Thembeka
Suppliers in the Creditors' Ledger. These goods were purchased from
Thami Suppliers.
(b) Credit Note 791 was recorded incorrectly on the statement of account.
This relates to the correct entry for Debit Note 702 in the Creditors'
Ledger.
(c) Invoice 395 on the statement of account was for goods ordered by
Ekasi Traders.
(d) Thembeka Suppliers also purchased goods on credit from Ekasi
Traders. Ekasi Traders has transferred a debit balance from the
Debtors' Ledger (Journal voucher 585). Thembeka Suppliers will
include this on the next statement.
(e) The transaction on 24 April 2021 is for merchandise returned to
Thembeka Suppliers.
(f) The statement of account reflects transactions up to 25 April 2021.
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Accounting 13 Free State
September Classes

QUESTION 8
8.1 CREDITORS' RECONCILIATION
Claire Traders buys goods on credit from Mariti Suppliers.
REQUIRED:

8.1.1 Use the table provided to indicate changes to the: (13)

● Creditors' Ledger Account in the books of Claire Traders
● Creditors' Reconciliation Statement on 31 July 2018
8.1.2 The internal auditor insists that direct payments (EFTs) must be used (2)
to pay suppliers. Explain: (2)
● ONE reason to support his decision.
● ONE internal procedure to ensure control over this system
8.1.3 Refer to Invoice 301. It was discovered that the store manager, (4)
Vernon, had signed a fictitious order form and took the goods for
himself when they arrived. Besides dismissing Vernon, provide:
● ONE suggestion for action to be taken against him
● ONE suggestion to prevent this problem in future
INFORMATION:

A. Creditors' Ledger of Claire Traders

MARITI SUPPLIERS (CL5)
DEBIT CREDIT BALANCE
2018 1 Balance b/d 67 500
July 10 Invoice 209 81 000
EFT 33 750
17 Debit Note 674 8 640
Invoice 282 40 950
Invoice 301 25 000
21 Invoice 360 50 250
24 Debit Note 995 8 100
27 Journal Voucher 570 5 400
31 EFT and discount 77 190 147 820
B. Statement of account from Mariti Suppliers
MARITI SUPPLIERS
Claire Traders
25 July 2018
108 Kruger Road
DEBIT CREDIT BALANCE
2018 1 Balance 67 500
July 10 Invoice 209 81 000
Receipt 695 33 750
17 Credit Note 741 6 840
Invoice 301 25 000
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Accounting 14 Free State
September Classes
21 Invoice 360 20 250
24 Credit Note 811 8 100 145 060

C. Differences noted:
(a) The incorrect entry for Debit Note 674 in the Creditor's Ledger
Account of Mariti Suppliers relates to the correct Credit Note 741 on
the statement.
(b) Invoice 282 was incorrectly reflected in the account of Mariti
Suppliers in the Creditors' Ledger. The goods were purchased from
Genesis Suppliers.
(c) Invoice 360 was incorrectly recorded on the statement from Mariti
Suppliers.
(d) Mariti Suppliers also purchased goods on credit from Claire Traders.
Claire Traders has transferred a debit balance from the Debtors'
Ledger (Journal Voucher 570). Mariti Suppliers will offset this on the
next statement.
(e) The transaction on 24 July 2018 is for merchandise returned to
Mariti Suppliers.
(f) The statement reflects transactions up to 25 July 2018.

QUESTION 9: CREDITORS' RECONCILIATION

KZ Stores purchase goods on credit from Valley Ltd.

REQUIRED:

9.1 The bookkeeper, Litzie, says it is not necessary for her to prepare a Creditors' (4)
Reconciliation Statement because the creditors send monthly statements to the
business anyway. What would you say to her? State TWO points.

9.2 Use the table in the ANSWER BOOK to indicate how the relevant balances will (16)
change when preparing the creditors' reconciliation. Indicate the figure as well
as a + for increase and a – for decrease. The first transaction (Information A)
has been done for you.

INFORMATION:

The following balances are provided:

In the account of Valley Ltd in the Creditors'

R112 820 Credit
Ledger of KZ Stores on 30 September 2014:
On the statement received from Valley Ltd on
R182 150 Debit
25 September 2014:

The following errors and omissions were discovered during an investigation:

A. A payment by KZ Stores of R9 000 was omitted from the Creditors' Ledger

and the statement.

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September Classes

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Accounting 16 Free State
September Classes
B. An invoice for goods bought for R87 500 was reflected on the statement
from Valley Ltd but was not recorded by KZ Stores.

C. An invoice for R28 000 received from Valley Ltd was recorded correctly
by KZ Stores. The statement of account reflects it as R20 800.

D. KZ Stores had correctly recorded discount of R1 400 for early payment of

their account. This has not been reflected on the statement from Valley
Ltd.

E. The statement reflects interest of R630 on the overdue account.

Valley Ltd acknowledged that an error had been made and promised to
reverse the entry in the October 2014 statement.

F. A debit note for R2 100 issued to Value CC was incorrectly recorded in

the account of Valley Ltd by KZ Stores.

G. A credit note for R5 250 received from Valley Ltd for goods returned was
incorrectly recorded as an invoice by KZ Stores.

H. Goods purchased from Valley Ltd on 30 September 2014 for R4 600 were
recorded by KZ Stores. The statement from Valley Ltd is dated
25 September 2014.

9.3 Refer to Information B:

As the internal auditor of KZ Stores, you have detected that only R50 000 of
these goods were entered into the stock records by the storeman. The
remaining goods were ordered privately by J van Wyk, an employee in charge
of creditors.

9.3.1 Explain what action should be taken against J van Wyk. State TWO (4)
points.

9.3.2 What must the business do to prevent a similar incident in future? (6)
Explain THREE points.

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Accounting 17 Free State
September Classes
QUESTION 10: CREDITOR'S RECONCILIATIONS

10.1 CREDITORS’ RECONCILIATION:

Broad Stores purchase goods on credit from Ashes Ltd.
REQUIRED:

Use the table in the ANSWER BOOK to indicate how the relevant balances will
change when preparing the creditors' reconciliation. Indicate the figure as well
as (+) for increase and (–) for decrease. The first transaction has been done
for you. (18)
INFORMATION:
The following balances are provided

In the account of Ashes Ltd in the

Creditors' Ledger of Broad Stores on R114 485 Credit
31 August 2018:
On the statement received from Ashes Ltd on
R182 150 Debit
25 August 2018:

The following errors and omissions were discovered during an investigation:

A. A payment by Broad Stores of R9 500 was omitted from the
Creditors' Ledger and the statement of accounts.
B. An invoice for goods bought for R87 000 was reflected on the statement
from Ashes Ltd but was not recorded by Broad Stores.
C. An invoice for R28 000 received from Ashes Ltd was recorded correctly
by Broad Stores. The statement of account reflects it as R21 100.
D. Broad Stores had correctly recorded discount of R1 350 for early payment
of their account. This has not been reflected on the statement from Ashes
Ltd.
E. The statement of accounts reflects interest of R730 on the overdue
account. Ashes Ltd acknowledged that an error had been made and
promised to reverse the entry in the September 2018 statement.
F. A debit note for R2 000 issued to Value CC was incorrectly recorded in
the account of Ashes Ltd by Broad Stores.
G. A credit note for R5 350 received from Ashes Ltd for goods returned was
incorrectly recorded as an invoice by Broad Stores.
H. Ashes Ltd included returns of R1 215 on the statement. This was returns
by another client, Road Stores.
I. Goods purchased from Ashes Ltd on 31 August 2018 for R4 600 were
recorded by Broad Stores. The statement of accounts from Ashes Ltd is
dated 25 August 2018.

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Accounting 18 Free State
September Classes
QUESTION 11: COST ACCOUNTING NOVEMBER 2015

11.1 SNAZZY HANDBAGS

The information below relates to the financial year ended 30 September 2015.
The business manufactures one type of handbag.

REQUIRED:

Prepare the Production Cost Statement on 30 September 2015. Show ALL

workings. (21)

INFORMATION:

A. Figures provided by the bookkeeper on 30 September 2015:

R
Administration cost 380 000
Direct material cost 976 000
Direct labour cost 755 000
Factory overhead cost 442 080
Selling and distribution cost 219 200
Work-in-process: 1 October 2014 74 000
30 September 2015 ?
Total cost of production of finished goods 2 187 500

B. An internal audit revealed the following:

● Damaged raw material, valued at R17 000,that had been returned to the
supplier was omitted in the calculation of the direct material cost.

● The factory overhead cost total included the full amount of R62 400 for rent
expense. Only 2/3 of this expense must be allocated to the factory. The
remainder must be split equally between the office and the sales
department.

● The salary of a factory foreman on leave was not recorded. Details of his
salary are as follows:

Deduction for SARS: PAYE R2 560

Deduction for pension fund and UIF ?
Net salary R8 320

The employer's contribution for pension fund and UIF amounts to R1 920.
The business contributes on a rand-for-rand basis.

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Accounting 19 Free State 2020
Question Paper

11.2 HEALTHY LIFESTYLE COOKWARE

This business manufactures enamel pots.

REQUIRED:

11.2.1 Calculate the following for the financial year ended 31 August 2015:
● Variable cost per unit (3)
● Break-even point (5)
11.2.2 Explain why the owner should be concerned about the break-even point
and level of production. Provide TWO points. Provide figures. (4)

11.2.3 Identify ONE other problem relating to this business.

Provide figure(s). (2)

INFORMATION:

ENAMEL POTS
2015 2014
Number of units produced and sold 27 000 32 000
Total fixed cost R2 850 000 R2 660 000
Total variable cost R2 160 000 R2 080 000
Selling price per unit R175 R160
Selling price of competitor R170 R130
Break-even point in number of units ? 28 000
Total sales R4 725 000 R4 960 000

QUESTION 12: MANUFACTURING: November 2016

12.1 CONCEPTS

Give ONE cost category for each of the following descriptions by choosing a
cost category from the list below. Write only the cost category next to the
question number (5.1.1–5.1.4) in the ANSWER BOOK.

direct material cost; direct labour cost; factory overhead cost;

administration cost; selling and distribution cost

12.1.1 Salaries paid to office workers

12.1.2 Cost of raw materials used in the production process

12.1.3 Commission paid to salespersons

12.1.4 Rent paid for factory buildings (4 x 1) (4)

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Accounting 20 Free State 2020
Question Paper
12.2 GUGU MANUFACTURERS

You are provided with information relating to Gugu Manufacturers for the year
ended 29 February 2016. The business produces one style of handbag.

REQUIRED:

12.2.1 Calculate the:

● Direct labour cost (8)

● Direct material cost (6)

12.2.2 Prepare the Production Cost Statement. (8)

12.2.3 The owner is concerned about the production level in 2016.

● Calculate the break-even point for 2016. (5)

● Explain whether the owner should be concerned or not. (3)
Provide figures.

12.2.4 The owner is not satisfied with the internal control of the raw material.

Calculate the following regarding the raw material (fabric):

● Metres of fabric stolen from the storeroom (5)

● Metres of fabric wasted in the factory (4)

Provide a strategy to improve the internal control in EACH case above. (2)

INFORMATION:

A. Workers involved in the manufacturing process:

NO. OF WAGE EARNINGS

WORKERS PER WORKER
Basic (normal wage) R40 per hour 1 920 hours
5
Overtime Basic rate + 75% 90 hours
NOTE:
Deductions: 8,5% of basic wage
Employer's contribution: 11,5% of basic wage

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B. Raw material (fabric):

Raw material purchased is kept in a storeroom before being issued to

the factory for production. Stock is valued according to the weighted-
average method.

Storeroom stock records:

TOTAL
METRES AMOUNT
(R)
Balance on 1 March 2015 1 350 131 500
Purchases: 5 400 584 000
May 2015 2 500 265 000
September 2015 2 900 319 000

Raw material issued to factory 5 500 ?

Stock balance on 29 February 2016 940 ?

C. There is no work-in-process stock.

D. Other costs for the financial year (after all the adjustments):

Factory overhead cost Fixed cost R343 340

Administration cost Fixed cost R226 660
Selling and distribution cost Variable cost R217 340

E. Additional information on 29 February 2016:

● 4 200 handbags were produced and sold at R450 each.
● Total sales amounted to R1 890 000.
● Total variable cost per unit was R300.
● 1,25 metres of fabric was used to make one handbag.

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QUESTION 13: MANUFACTURING NOVEMBER 2017

13.1 GEVEN MANUFACTURERS

The business produces wooden tables.

REQUIRED:

Prepare the following for the year ended 28 February 2017:

13.1.1 Production Cost Statement (14)

13.1.2 Abridged Income Statement (14)

INFORMATION:

A. Stock on hand:

28 FEBRUARY 2017 1 MARCH 2016

Work-in-process ? R160 000
400 tables,
1 200 tables at R280
Finished goods valued using
= R336 000
FIFO method

B. Production and sales for the year:

● 7 200 tables were produced at a unit cost of R330 each.

● 8 000 tables were sold for R4 080 000.

C. Costs (before adjustments):

Administration R148 400

Factory overheads R487 200
Direct materials R1 050 000
Direct labour ?
Selling and distribution R422 000

Adjustments:

● Payment to EZ Transport, R102 000, was incorrectly allocated to

Selling and Distribution. This was actually meant for delivering
wood to the factory.

● The cleaning contract for the year, R126 000, was shared between
Factory and Administration in the ratio 2 : 1. However, 80% should
have been allocated to Factory.

D. Prime cost: R1 800 000 (after adjustments)

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13.2 GYMWEAR MANUFACTURERS

Gymwear Manufacturers is owned by Jan Fiks. They produce shoes and shirts for gym
training. Jan requires assistance in interpreting his 2017 results. Note that one pair of
shoes comprises one unit.

REQUIRED:

13.2.1 Shirts: (4)

● Calculate the break-even point for shirts.

● Jan is not satisfied with the variable costs per unit, even though
the total variable costs per unit decreased by R6.

- Identify ONE variable cost (with figures) that has not been well
controlled. Give TWO possible reasons for this problem. (4)

- Explain why Jan might be concerned about the large

decreases in the other TWO variable costs. (4)

● Jan does not understand why the unit cost of production has (4)
increased when neither his fixed costs nor the variable costs have
increased. Explain why this is so. State ONE point (with figures).

13.2.2 Shoes:

● Calculate the % increase in the selling price of shoes. (3)

● Jan decided to improve the quality of the shoes and to export (4)
them. Explain how the direct material costs and the selling and
distribution costs were affected by this decision. Provide figures.

● Jan was concerned that the increase in price would have a (4)
negative impact on the business. Explain whether his concern was
justified. State TWO points.

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INFORMATION:

SHIRTS SHOES
2017 2016 2017 2016
Break-even point ? 11 522 3 842 4 317
Units produced and sold 16 100 25 000 7 750 6 500
Net profit R500 400 R620 000 R2 379 750 R1 183 000
Selling price per unit R302 R290 R1 640 R1 260
Selling price of competitors R310 R290 R1 100 R1 250
Total fixed costs (factory
R530 000 R530 000 R2 340 000 R2 340 000
overhead and administration)
Total fixed cost per unit ? ? R302 R360
Total variable costs per unit R238 R244 R1 031 R718
Direct material costs per
R92 R116 R456 R330
unit
Direct labour costs per unit R131 R100 R381 R360
Selling and distribution
R15 R28 R194 R28
costs per unit
Unit cost of production R242 R228 R1 100 R1 004

QUESTION 14: MANUFACTURING NOVEMBER 2018

14.1 Indicate whether the following statements are TRUE or FALSE. Write only 'true'
or 'false' next to the question numbers (1.1.1 to 1.1.3) in the ANSWER BOOK.

14.1.1 Bad debts are an administration cost.

14.1.2 Indirect labour is a factory overhead cost.
14.1.3 Rent expense is a fixed cost. (3)

14.2 KRIGE SHIRTS

The business manufactures shirts. The financial year-end is 31 July 2018.

REQUIRED:

14.2.1 Refer to Information C. (9)

Calculate direct labour cost.

14.2.2 Production Cost Statement for the year ended 31 July 2018 (12)

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INFORMATION:
A.
31 JULY 1 AUGUST
Work-in-progress stock balance 2018 2017
? R35 570

B. Raw materials issued to factory: R528 300

C. Direct labour:

Number of factory workers 4

Normal time expected per worker per year 1 960 hours
Normal time rate R90 per hour
Bonuses to workers: 12% of normal wages
NOTE: One worker worked only 1 680 hours and received a reduced
bonus of R12 146.

D. Factory overheads were calculated at R360 880 for the year. However,
this excludes insurance of R48 750 paid for the period 1 August 2017 to
31 August 2018. Insurance must be allocated to the factory,
administration and sales in the ratio 4 : 3 : 2.

E. Production for the year: 17 500 shirts at a cost of R95 per shirt

14.3 GEMMA'S MANUFACTURERS

This business manufactures security gates. The financial year-end is 31 August

2018.

REQUIRED:

14.3.1 Calculate the break-even point for the year ended 31 August 2018. (5)

14.3.2 Compare and comment on the break-even point and the production level
achieved over the last two years. Quote figures. (6)

14.3.3 Give TWO reasons for the increase in direct material cost. Suggest ONE
way to control this cost. (5)

INFORMATION FOR YEAR ENDED 31 AUGUST:

A.
2018 2017
COSTS TOTAL UNIT UNIT
AMOUNT COST COST
Direct materials 75 600 R180 R148
Direct labour Variable 105 840 R252 R244
Selling and distribution 60 900 R145 R136
TOTAL VARIABLE COST 242 340 R577
Factory overheads Fixed 67 200 R160 R156
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Administration 51 660 R123 R127

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B. Additional information:

2018 2017
Total sales R382 200 R475 200
Selling price per unit R910 R880
Units produced and sold 420 units 540 units
Break-even point ? 435 units

QUESTION 15: STOCK VALUATION (40 marks; 25 minutes)

15.1 CONCEPTS

Choose the correct word(s) from those given in brackets. Write only the
word(s) next to the question number (5.1.1 – 5.1.4) in the ANSWER BOOK.

15.1.1 The (specific identification/weighted-average) stock valuation

method is best suited for products of similar value purchased in large
quantities.

15.1.2 Cost of sales is determined at the point of sale in the (perpetual/

periodic) inventory system.

15.1.3 Stock valued according to the (first-in-first-out/weighted-average)

method determines stock on hand by recording the cost prices of the
most recent stock purchases.

15.1.4 In the periodic inventory system, carriage on goods purchased is (4)

recorded as an (expense/asset) to the business. (4 x 1)

15.2 You are provided with information relating to Gimme 10 Fitness Centre for the
year ended 31 December 2018. The business offers gym facilities for
registered members and also stock training shoes (takkies) and exercise vests
in the store. These goods are sold to members as well as the general public.

REQUIRED:

15.2.1 Calculate the following for the training shoes:

● The value of the closing stock using the specific identification method. (5)

● The cost of sales of the training shoes sold. (4)

● The gross profit earned on the sale of training shoes. (5)

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15.2.2 Calculate the following for the exercise vests:

● The value of the closing stock using the weighted average method. (8)

● The number of exercise vests missing. (4)

● The stock holding period (in days) using the average stock (7)

15.2.3 The owner of the gymnasium is concerned about the gymnasium and the
sports shop section. He wants to close down the business.

● Provide TWO reasons why he feels this way. Quote relevant facts and/or (4)
figures to support your answer.

● What advice would you offer the owner? Give TWO points. (4)

INFORMATION:

A. Stock records for the training shoes:

NUMBER OF PRICE PER UNITS
TOTAL COST
PAIRS PAIR SOLD
Opening stock (1 January 2018) 10 R900 R9 000 7
Total Purchases: 45 R42 660 23
● February 2018 15 R920 R13 800 11
● June 2018 12 R980 R11 760 5
● September 2018 18 R950 R17 100 7

B. Training shoes are sold at a fixed price of R1 500 each.

C. Stock records for the exercise vests:

NUMBER OF TOTAL AMOUNT

UNIT PRICE
UNITS (R)
Stock balance ( 1 January 2018) 260 R80 20 800
Stock Balance (31 December 2018) 370 ? ?

Purchases : 860 88 620

● March 2018 180 R92 16 560
● June 2018 160 R100 16 000
● August 2018 220 R98 21 560
● November 2018 300 R115 34 500
Total sales 730 92 400

● Total transport cost for the exercise vests amounted to R14 900 for the
financial year.

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D. Additional information about the gymnasium:

2018 2017
Number of members as per register 135 128
Resignations during the year 32 21
Fees per member per year R4 428 R4 320
Total fees received for the year R504 792 R496 800
New gym equipment purchased R120 000 R210 000
Wages/Allowances for personal trainers R57 600 R48 000

45

QUESTION 16: INVENTORY SYSTEMS AND VALUATION, INTERNAL CONTROL AND

PROBLEM SOLVING (50 marks; 30 minutes)

16.1 INVENTORY VALUATION

Percy Bicycles Inc. uses the specific identification method to value stock of bicycles.
Percy Masango owns the business

REQUIRED:

16.1.1 Give ONE difference between the perpetual stock system and the
periodic stock system (2)

16.1.2 Calculate the following on 30 April 2016, using the specific

identification method

The value of the stock on hand (closing stock) (8)

The cost of sales (5)

The gross profit (5)

16.1.3 Percy wants to change the stock valuation method of bicycles to the
weighted average method.

What advice would you offer him? Give TWO points. (4)

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INFORMATION:

A. Stock records of Bicycles

NUMBER OF COST TOTAL NUMBER

INFORMATION BICYCLES PRICE PURCHASES SOLD
Opening stock - 1 May 2015 70 R280 000 70
Purchases 640 R2 682 500 540
July 2015 245 R3 700 R906 500 218
December 2015 205 R4 400 R902 000 175
February 2016 190 R4 600 R874 000 147
● Note: 5 bicycles from the December purchases were defective and was returned to the
● suppliers.
● On 30 April 2016, there were 95 bicycles in stock.

B Bicycles are sold at a fixed selling price of R6 450 each.

16.2 Nosi Supplies sells school uniforms. You are presented with the stock records for
school uniforms. The business uses the weighted average method to value the
stock of school uniforms.

REQUIRED:

16.2.1 Calculate the value of the closing stock using the weighted average
method. (8)

16.2.2 Calculate the number of school uniforms missing. (5)

16.2.3 Give TWO points of advice to improve the internal control over stock. (4)

INFORMATION:
Stock records of school uniforms:

AMOUNT
UNITS
(R)
Opening stock 400 14 000
Purchases (less returns) 7 380 293 300
Closing stock 270 ?
Number of units/school uniforms sold 7 200 ?
Total carriage on purchases on school uniforms 19 460

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16.3 PROBLEM SOLVING

Best Computers sells one brand of computers. The owner, Martie Louw, has three
branches in different shopping centres (refer table below).

The annual figures from the three branches for the financial year ended 29 February
2016 were presented to Martie Louw.

REQUIRED:

Identify ONE problem in relation to each branch. Quote relevant figures. In each case,
offer Martie Louw advice to solve the problem. (9)

Bloem Mall Setloung Mall Vrede Mall

Kabi Abraham Rebecca
Number of computers available for sale 320 360 140
Number of computers sold during the
240 90 140
year
Closing stock 70 270 0
Selling price per computer R 12 000 R12 000 R12 000
Mark-up percentage 50% 100% 50%
Amount banked (deposited) during the R2 880 R1 560
R1 080 000
year 000 000

50

QUESTION 17: INVENTORIES (30 marks; 20 minutes)

17.1 INVENTORY VALUATION

Matrix Traders sell three different types of laptops: Lexus, Granite and Vision.
They use the periodic inventory system and the specific identification method to
value stock.

REQUIRED:

17.1.1 Explain the following valuation methods:

● FIFO (2)
● Specific identification (2)

17.1.2 Calculate the cost price per laptop on hand on 1 October 2015. (2)

17.1.3 Calculate the value of the closing stock on 30 September 2016. (9)

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INFORMATION:

The following information is in respect of the year ended 30 September 2016:

A. Opening stock:

COST PRICE
DATE MODEL UNITS TOTAL
PER UNIT
1 Oct. 2015 Lexus 118 ? R413 000

B. Purchases and returns:

COST PRICE
DATE MODEL UNITS TOTAL
PER UNIT
PURCHASES:
Dec. 2015 Granite 410 R3 750 R1 537 500
Mar. 2016 Vision 630 R4 650 R2 929 500
RETURNS:
Mar. 2016 Vision 20 R4 650 (R93 000)
Net purchases R4 374 000

C. Sales for the year:

MODEL UNITS AMOUNT

Lexus 118 R598 850
Granite 356 R2 229 375
Vision 502 R4 247 775
R7 076 000

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17.2 MANAGEMENT OF INVENTORIES

You are provided with information from the books of Kyle's Office Equipment for
the year ended 29 February 2016. The business sells office desks, chairs and
printers.

Kyle took certain decisions at the beginning of the 2016 financial year.

REQUIRED:

Provide relevant figures for ALL the questions below.

17.2.1 Desks:
● What decision did Kyle take regarding the selling price of the desks? (2)
● How has this decision affected the business? State TWO points. (4)
●

17.2.2 Chairs: (5)

Was it a good idea for Kyle to change to a cheaper supplier of chairs?
Explain TWO points.

17.2.3 Printers:
Kyle significantly reduced the selling price of printers in the 2016
financial year in response to a new competitor who sells the same model
at R1 200.

Based on the information below, provide TWO separate suggestions to

Kyle to improve the profit on printers in 2017.
(4)

INFORMATION:

DESKS CHAIRS PRINTERS

2016 2015 2016 2015 2016 2015
Orders received from
300 370 770 730 925 615
customers
Gross units sold 300 365 770 730 725 615

Returns by customers 0 5 90 0 15 15

Selling price R2 520 R1 920 R490 R714 R975 R1 326

Cost price R1 400 R1 200 R350 R510 R780 R780

Mark-up % 80% 60% 40% 40% 25% 70%

Gross profit R336 000 R259 200 R95 200 R148 920 R138 450 R327 600

Stock turnover rate 6,0 7,2 4,0 4,0 11,8 10,0

30

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QUESTION 18: INVENTORY VALUATION AND FIXED ASSETS

(45 marks; 30 minutes)

18.1 Choose a method in COLUMN B that matches the description in COLUMN A.

Write only the letters (A–E) next to the question numbers (5.1.1 to 5.1.4) in the
ANSWER BOOK.

COLUMN A COLUMN B
18.1.1 Assumes that stock is sold in A straight-line method
date order as purchased.
B weighted-average method
18.1.2 A unique value is assigned to
each stock item. C first-in-first-out method

18.1.3 Depreciation is constant over D diminishing-balance method

the useful life of the fixed asset.
E specific identification
18.1.4 Depreciation is calculated on method
the carrying value of the fixed
asset.
(4 x 1) (4)
18.2 PACKER'S SUITCASE SHOP

Charles Packer sells travel suitcases. The year-end is 30 June 2018.

REQUIRED:

18.2.1 Calculate the value of the closing stock on 30 June 2018 using the (5)
first-in-first-out (FIFO) method.

18.2.2 Charles suspects that suitcases have been stolen. Provide a

calculation to support his concern. (5)

18.2.3 Charles is concerned about the volume of stock on hand. (6)

● Calculate for how long his closing stock is expected to last.
● State ONE problem with keeping too much stock on hand and ONE (4)
problem with keeping insufficient stock on hand.

INFORMATION:

● Stock balances:

UNIT
UNITS TOTAL
PRICE
Opening stock 420 R2 175 R913 500
Closing stock 496 ?

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● Purchases, returns and carriage:

UNIT
UNITS TOTAL
PRICE
Purchases 3 155 R8 460 850
September 2017 850 R2 250 R1 912 500
December 980 R2 670 R2 616 600
March 2018 875 R2 930 R2 563 750
June* (see returns) 450 R3 040 R1 368 000

Returns* (from June purchases) 25 R3 040 R76 000

● Sales: 3 050 travel suitcases were sold at R4 200 each.

24

QUESTION 19: BUDGETING (40 marks; 25 minutes)

You are provided with information relating to Mayhem (Pty) Ltd.

REQUIRED:

19.1 Refer to Information G.

19.1.1 Identify TWO items that the bookkeeper recorded incorrectly in the Cash (2)
Budget.

19.1.2 Identify TWO items in the Cash Budget that would NOT appear in a (2)
Projected Income Statement.

19.2 Complete the Debtors' Collection Schedule for October 2016. (9)

19.3 Calculate the missing amounts indicated by (a) to (d) in the Cash Budget. (18)

19.4 The directors compared the budgeted figures to the actual figures for
September 2016.

BUDGETED ACTUAL
Sales R288 000 R489 600
Salaries: Salespersons R40 000 R12 000
Commission: Salespersons R0 R66 150
Packing material R14 400 R17 280

19.4.1 The directors changed the method of payment to the salespersons. (4)
Explain how this has benefitted the salespersons and the business.
Quote figures.

19.4.2 The directors are not concerned about the overspending on packing (5)
material. Explain why this is so. Quote figures or calculations.

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INFORMATION:

A. Projected Income Statement:

Information extracted for the three months ended 31 October 2016:

AUGUST SEPTEMBER OCTOBER

R R R
Sales 252 000 288 000 ?
Cost of sales ? (160 000) ?
Rent income ? ? 12 960
Discount received 3 600 4 000 ?
Depreciation 5 400 5 400 5 400
Bad debts 2 800 3 350 ?
Interest on loan 6 875 6 875 ?

B. Sales:
● Sales are expected to increase by 15% in October 2016.
● Credit sales comprise 60% of total sales.
● The mark-up percentage is 80% on cost.

C. Debtors' collection:
● 50% is collected in the month of sale.
● 40% is collected in the month following the month of sale.
● 7% is collected two months after the sale.
● 3% is written off as irrecoverable.

D. Purchases:
● All purchases of stock are on credit.
● Stock is replaced in the month of sale. A base stock is maintained.
● Creditors are paid two months after purchase, subject to a 4% discount.

E. Directors' fees:
● The business had three directors earning the same monthly fee.
● On 30 September 2016 one of the directors resigned.
● The remaining directors will receive an increase of 35% in their monthly fee
from 1 October 2016.

F. Loan:
● The loan was reduced by R52 800 on 30 September 2016.
● Interest at 12,5% p.a. is payable every month and is not capitalised.

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G. Extract from the Cash Budget prepared by the bookkeeper:

SEPTEMBER 2016 OCTOBER 2016

R R
RECEIPTS
Cash sales (a) 132 480
Cash from debtors 155 280 ?
Rent income 12 000 12 960
Discount received 3 600 5 600
Fixed deposit 56 000 0

PAYMENTS
Payments to creditors 156 000 (b)
Directors' fees 216 000 (c)
Salaries of salespersons 40 000 40 000
Repayment of loan 52 800 0
Interest on loan 6 875 (d)
Delivery expenses 27 500 27 500
Audit fees 60 000 0
Bad debts 3 200 3 600
Depreciation 17 400 17 400

40

QUESTION 20: CASH BUDGETS (35 marks; 20 minutes)

Donald May owns Breezy Traders that sell air-conditioner units. The budget period ends
on 31 October 2018.

REQUIRED:

20.1 Complete the Debtors' Collection Schedule for October 2018. (7)

20.2 Calculate the amounts indicated by (i) to (iii) in the extract from the Cash (9)
Budget.

20.3 Calculate the % increase in salaries of sales assistants for October 2018. (5)
Explain whether they should be satisfied with this increase.

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20.4 Refer to Information E.

A new competitor moved into the area during September 2018. Donald was not
aware of the competitor and did not take any action during September.

20.4.1 Explain the effect of the new competitor on any TWO items in the (4)
budget for September. Provide figures.

20.4.2 Identify TWO changes Donald implemented in October in response to (6)

the new competitor. Quote figures. Give ONE reason for EACH
change.

20.4.3 Explain why Donald feels that his decisions were successful. Provide (4)
TWO points (with figures).

INFORMATION:

A. Cash sales comprise 60% of total sales. Mark-up is 75% on cost.

B. Debtors pay as follows:

● 20% in the month of sales and receive 5% discount

● 55% in the month following the month of sales
● 22% two months after the month of sales

C. Stock sold is replaced in the month of sales. 50% of purchases are on credit.
Creditors are paid in the month following the month of purchases.

D. Extract from Cash Budget

SEPTEMBER OCTOBER
RECEIPTS
Cash sales (i) 630 000
Cash from debtors 369 340 ?
Rent income* 25 600 (ii)

PAYMENTS
Payments to creditors 276 000 (iii)
Salaries: Manager 32 400 40 500
Salaries: Sales assistants 92 400 102 102

*NOTE: Rent income will increase by 9% in October 2018.

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E. BUDGETED AND ACTUAL FIGURES FOR SEPTEMBER AND OCTOBER
SEPTEMBER OCTOBER
BUDGETED ACTUAL BUDGETED ACTUAL
Units to sell/sold 240 200 250 300
Selling price per unit R4 200 R4 200 R4 200 R4 200

Cash sales ? 336 000 630 000 378 000

Credit sales 403 200 504 000 420 000 882 000
Total sales 1 008 000 840 000 1 050 000 1 260 000
Cash purchases ? ? 300 000 252 000
Advertising 10 000 10 000 10 000 10 000
Delivery expenses 80 000 67 200 80 000 138 240
Commission on sales 30 240 25 200 31 520 46 080

Cash surplus/deficit 63 000 22 500 86 500 (12 700)

Cash: Beginning 98 000 98 000 161 000 120 500
Cash: End 161 000 120 500 247 500 107 800

35

QUESTION 21: CASH BUDGET AND INTERNAL CONTROL (40 marks; 25 minutes)

You are provided with information relating to Martin's Health Shop. The business sells a
health drink which has a shelf life of two months. The financial year of the business ends
on 30 September 2014. The newly appointed bookkeeper prepared a budget for the
three months ended 31 December 2014. The Cash Budget he presented is not
completely correct.

REQUIRED:

21.1 Refer to Information C: (4)

List FOUR items that should not have been placed in this Cash Budget.

21.2 Complete the Creditors' Payment Schedule for the period October to (9)
December 2014 by calculating the amounts indicated by an asterisk (*).

21.3 With reference to the prepared budget, calculate the following:

21.3.1 The total sales for September 2014 (3)

21.3.2 The percentage increase in rent income in December 2014 (3)
21.3.3 The salaries and wages amount for December 2014 (3)
21.3.4 The rate of interest on the loan (4)

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21.4 Answer the following questions.

21.4.1 Calculate the period for which enough stock is on hand (in days) on (6)
30 September 2014. Explain whether this is appropriate for the
business.

21.4.2 Calculate the mark-up percentage achieved for the year ended (4)
30 September 2014.

21.4.3 Comment on whether or not the change in the mark-up percentage (4)
has benefited the business. Give a calculation(s) to support your
opinion.

INFORMATION:

A. Figures extracted from the financial statements on 30 September 2013

and 2014:
2014 2013
Sales 1 780 600 1 680 000
Cost of sales 1 228 000 ?
Mark-up % ? 60%

B. It is business policy to maintain a stock base of R250 000 every month.

Stock sold each month is replaced in the same month.

C. CASH BUDGET PREPARED BY THE BOOKKEEPER FOR THE PERIOD

ENDED 31 DECEMBER 2014:
CASH RECEIPTS OCTOBER NOVEMBER DECEMBER
Cash sales 238 000 212 500 221 000
Receipts from debtors 40 500 42 000 37 500
Loan: Mali Bank - - 150 000
Discount received 1 350 1 400 1 400
Rent income 8 000 8 000 9 000
287 850 263 900 418 900
CASH PAYMENTS
Total cost of sales 185 000 170 000 175 000
Cash purchases of trading
111 000 102 000 105 000
stock
Bad debts 400 400 400
Salaries and wages 46 000 46 000 5.3.3
Interest on loan - - 1 125
Depreciation on equipment 8 200 8 200 8 200
Sundry cash expenses 18 000 18 900 ?
368 600 345 500 358 500
Cash surplus/deficit (80 750) (81 600) 60 400
Bank (opening balance) 45 000 (35 750) (117 350)
Bank (closing balance) (35 750) (117 350) (56 950)

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D. Credit sales amounts to 15% of total sales. Debtors are expected to pay in full in
the month following the month of sales.

E. 40% of all the trading stock was purchased on credit.

F. Creditors allow 60 days credit, but payments made within the month of purchase
receive 5% discount. Based on past experience, the business pays as follows:

● 10% within the month of purchase

● 75% in the month following the month of purchase
● 15% in the second month following the month of purchase

G. The loan will be received on 1 December 2014.

H. The union negotiated an 8,5% increase in salaries and wages. This will only be
effective from 1 December 2014.
40

QUESTION 22: BUDGETING (40 marks; 25 minutes)

The financial year-end of Carpets Galore (Pty) Ltd is 31 October 2019. Thembi Tsomi is
the sole shareholder and director.

22.1 Indicate amounts in the appropriate blocks for the Cash Budget and Projected
Income Statement for three months ending 31 January 2020.
● A printer costing R40 800 will be bought for cash on 30 November 2019.
Depreciation will be R680 per month.
● On 1 January 2020, R48 000 will be paid for a 12-month insurance contract.
● A loan of R100 000 will be received from Viva Bank on 31 December 2019. (11)
This will be repaid in equal instalments over 20 months, commencing on
31 January 2020. Interest at 12% p.a. is paid monthly and is not capitalised.

22.2 Refer to Information A: Debtors' Collection Schedule. (3)

Thembi is preparing projections for the period commencing 1 November 2019. (4)
Thembi does not grant discount for early payment.

Calculate the % of debtors:

● Who settle their accounts in the 2nd month following the credit sales transaction
month
● Written off as bad debts at the end of the 3 rd month following the credit sales
transaction month

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Accounting 42 Free State 2020
Question Paper
22.3 Refer to Information B: Projected Income Statement for September and
October.

22.3.1 Office workers are unhappy with the increase that Thembi gave them on (6)
1 October 2019. Explain what she should say to them. Provide TWO
points. Quote figures or a calculation.

22.3.2 Thembi pays her son, Jacob, to deliver and install carpets for customers. (4)
She budgets R2,80 per metre for this. Comment on the control of this
expense. Quote figures or a calculation.

22.3.3 A new competitor commenced trading in the area on 1 September 2019.

● Provide figures to illustrate the impact on sales in September. (2)
● Explain THREE decisions that Thembi took in October in response to
the new competitor. Quote figures or a calculation. (6)
22.3.4 Stock sold is replaced in the same month. 50% of the stock is bought on (4)
credit. Creditors are paid in the month following the purchases month to
receive a 5% discount.

Calculate the actual amount payable to creditors in November 2019.

INFORMATION:

A. Debtors' Collection Schedule for the period ending 31 January 2020:

CREDIT COLLECTIONS
SALES NOV. 2019 DEC. 2019 JAN. 2020
August R80 000 R17 600
September 90 000 67 500 R19 800
October 100 000 75 000 R22 000
November 120 000 90 000
R94 800 R112 000

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Accounting 43 Free State 2020
Question Paper
B. Information identified from the Projected Income Statement:

SEPTEMBER 2019 OCTOBER 2019

Projected Actual Projected Actual
Metres sold 5 000 m 3 800 m 5 000 m 6 000 m
Selling price per metre R100 R100 R100 R88
Cost price per metre R60 R60 R60 R60
Sales: cash R400 000 R310 000 R400 000 R132 000
: credit 90 000 70 000 100 000 396 000
Total sales 490 000 380 000 500 000 528 000
Cost of sales (300 000) (228 000) (300 000) (360 000)
Gross profit 190 000 152 000 200 000 168 000
Director's fees 50 000 50 000 50 000 40 000
Wages: Office workers 9 200 9 200 9 200 11 040
Salary: Salesperson 20 000 20 000 20 000 0
Commission:
0 0 0 52 800
Salesperson
Advertising 5 000 5 000 5 000 5 000
Packing materials 2 500 1 900 2 500 2 550
Delivery and installation
14 000 14 000 14 000 16 800
of carpets
Staff training 15 000 0 15 000 40 000

40

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