ACCOUNTING

GRADE 11

2020
 2 Accounting 2020 Gr11

QUESTION 3 (85 marks; 50 minutes)

PARTNERSHIP FINANCIAL STATEMENTS

Morowa and Rani are partners in the firm trading as Queen Traders. The accountant completed the
financial statements for the year. The net profit for the year amounted to R1 601 060.

REQUIRED:
3.1 MATCHING ITEMS –CONCEPTS

Concepts relating to partnerships 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 (3.1.1 – 3.1.5) in the ANSWER BOOK

COLUMN A COLUMN B
3.1.1 Income Statement A financial statements are prepared on
the assumption that the company will
continue operating for the foreseeable
future

3.1.2 Historical cost B a statement that reflects the profit or

loss of the business

3.1.3 Ethics C the financial position of the partnership

3.1.4 Balance Sheet D the responsible way of managing a

business

3.1.5 Going concern E assets are recorded at the original

purchase price unless otherwise stated (10)

3.2 Prepare the following notes to the Balance Sheet (Statement of Financial Position):
3.2.1 Current account of the partners (20)
3.2.2 Trade and other payables (25)
3.3 Complete the Balance Sheet (Statement of Financial Position) on 28 February 2015.
Where notes are not required, calculations must be shown in brackets for part
marks to be given. (30)

INFORMATION
QUEEN TRADERS
Extract from PRE-ADJUSTMENT TRIAL BALANCE ON 28 FEBRUARY 2015
Debit Credit
Balance Sheet Accounts Section
Capital: Morowa 1 800 000
Capital: Rani 1200 000
Current account: Morowa 250 000
Current account: Rani 11 000
Drawings: Morowa 576 000
Drawings: Rani 545 000
Fixed deposit: Encore Bank 200 000
Debtors’ control 111 200
Creditors control 239 600
Loan: Money Bank ?
 3 Accounting 2020 Gr11

ADJUSTMENTS

1. The following are some totals from the Notes to the financial statement:

Interest Income R 15 000

Interest Expense R 90 000
Inventories R243 000
Cash and Cash Equivalent R199 994

2. The carrying value of fixed assets at the end of the financial year amounted to R3 596 000.
3. The provision for bad debts must be adjusted to R3 324.
4. The interest on fixed deposit still owing amounted to R7 800.

5. Insurance prepaid is R26 400.

6. The rent income was received for March and April 2015. The rent Income increased by R1 600
from 1 September 2014. The rent Income received for the year amount to
R236 800.
7. The water and electricity account, R2 800, for February is still outstanding.
8. The details of an employee were left out of the Salaries Journal for February by mistake.
All payments will be made in March 2015. His details are as follows:
Gross Salary PAYE Pension Medical Aid UIF
R240 000 per annum R3 600 R1 500 R1 960. R200
The business contributes:
R1,50 to the pension fund for every R1 paid by the employee.
The business also contributes to the medical aid on rand for rand basis.
UIF: 1%
9. Interest on Loan has been Capitalised to the Loan amount.
Balance Beginning of Year R600 000
Bank (including interest) R330 000
Balance end of year R360 000
It is estimated that R240 000 of the capital portion will be paid for the next financial year.

10. Partnership Agreement

10.1 Each partner earned a salary of R480 000 p.a.
10.2 The partners earned interest of 10% p.a. on their capital balances.
10.3 Each partner was paid a bonus of R10 000 each.
10.4 The remaining profits/losses are shared between the partners according to the balances on their
capital accounts on 28 February 2015.
11. The net profit for the year after all the above adjustments have been taken into account amounted
to R1 601 060.
 4 Accounting 2020 Gr11

QUESTION 4 (50 marks; 30 minutes)

PARTNERSHIP: FIXED ASSETS AND RATIO ANALYSIS AND INTERPRETATION

The information below was obtained from the financial statements of Razzle Dazzle Traders. The
business is owned by two partners, Razzle and Dazzle.

REQUIRED:
4.1.1 Use the additional information below to complete the Fixed Asset Note to the Balance
Sheet on 28 February 2015. (22)
4.1.2 Prepare the Asset Disposal Account to record the sale of the Equipment. (8)
4.2 Calculate the following financial indicators:
4.2.1 Debt/Equity Ratio (3)
4.2.2 Percentage return earned by Razzle (5)
(Round of answers to one decimal point).
4.3 Do you agree with Razzle opinion that the business has a sound liquidity position?
Mention TWO financial indicators to support your answer. (5)
4.4 On the other hand Dazzle is not satisfied with her return on equity. Quote figures to
support why she feels this way. (3)
4.5 The business expanded their operations by making additions to the existing building. This
venture cost R600 000. By looking at the financial statements and the indicators, suggest
TWO different ways in which this project was financed. (4)

INFORMATION:
1. Information from the Balance Sheet on 28 February 2015.
FEBRUARY 2015 FEBRUARY 2014
Balance Sheet Accounts Section
Fixed Assets at carrying value 1 267 980 832 931
Financial Assets (8% p.a.) 480 000 260 000
Current Assets 340 680 372 779
TOTAL ASSETS 2 088 660 1 465 710

Owners’ Equity 1 603 740 904 530

Capital 1 425 000 975 000
Current Accounts 178 740 (70 470)
Non-Current Liabilities (Loan: Rand bank – 10.5% p.a.) 293 520 415 920
Current Liabilities 200 400 145 260
TOTAL EQUITY AND LIABILITIES 2 088 660 1 465 710

2. ADDITIONAL INFORMATION
2.1 FIXED ASSETS
• Depreciation is written off as follows:
▪ Vehicles at 15% p.a. on cost price.
▪ Equipment at 20% p.a. on diminishing balance method.
• During the year an invoice was received from Red Construction for the R600 000 for
additions to buildings.
• On 31 August 2014 equipment was traded in against new equipment which cost
R100 000 at a loss of R12 160. The equipment that was traded in was bought on 1
March 2012 for R80 000. The total accumulated depreciation on the date of sale for
the equipment sold amounted to R33 930.
 5 Accounting 2020 Gr11

2.2 CAPITAL ACCOUNT

RAZZLE DAZZLE
Balance at beginning of year – 28 February 2014 600 000 375 000
Contributions of capital during the year 225 000 225 000
Withdrawal of capital during the year 0 0
Balance at end of year - 28 February 2015 825 000 600 000

2.3 TOTAL EARNED BY EACH PARTNER

RAZZLE DAZZLE TOTAL
Salary 194 400 138 600 333 000
Interest on capital 47 250 22 500 69 750
Bonus to Partners 16 800 16 800
Share on profit 25 740 18 720 44 460
267 390 196 620 464 010

2.4 BALANCES ON CURRENT ACCOUNT

RAZZLE DAZZLE
Opening balance 1 March 2014 (74 070) 3 600
Closing balance 28 February 2015 51 120 127 620

2.5 The net profit for the year amounted to R464 010

2.6 FINANCIAL INDICATORS

NO. INDICATORS 2015 2014
1 % return earned by Razzle ? 18.5%
2 % return earned by Dazzle 15.7% 12.3%
3 Return on partners’ equity 37% 31%
4 Debt : equity ratio ? 0.5 : 1
5 Current ratio 1.7 : 1 2.6 : 1
6 Acid-test ratio 1.8 : 1 1.1 : 1
7 Debtors collection period 30 days 40 days
8 Creditors payment period 45 days 25 days
9 Gross profit percentage 50% 40%
10 Net profit percentage 25.8% 19.6%

QUESTION 5 (30 marks; 18 minutes)

 6 Accounting 2020 Gr11

MANUFACTURING LEDGER ACCOUNTS AND BREAK-EVEN POINT

5.1 From the list below, select only the THREE FIXED COSTS
Raw Materials Cost Direct labour costs
Salary Foreman Commission on sales: Sales Staff
Factory Rent Salary of the Accountant (3)

5.2 You are provided with information relating to Studio Manufacturers for the financial year
ended 28 February 2015
Prepare the following Ledger Accounts in the General Ledger:
5.2.1 Raw material Stock (10)
5.2.2 Work-in-Process Stock (8)
Some amounts have already provided on the answer sheet.

INFORMATION
1. Summary of transactions for the year ended 28 February 2014.
R
Office stationery purchased 13 050
Raw materials purchased for cash 750 000
Raw Material purchased on credit 474 000
Indirect materials purchased for cash 59 700
Carriage on purchases of raw materials cash 46 200
Sales of finished goods 4 560 000
Factory wages including contributions 644 247
Salaries: (including contributions) Factory Foreman 270 000
Administrative staff 330 000
Sales staff 297 000
Factory overhead costs ?

ADDITIONAL INFORMATION
1. Raw materials costing R48 000, purchased from Electronic Suppliers were returned on 28
February 2015. This transaction was not recorded.
2. Finished Goods stock ledger account is as follows:
Dr. Finished Goods Stock Cr.
2014 2015
Mar 01 Balance b/d 379 200 Feb 28 Cost of sales 2 703 000
2015 Work-in-process
Feb 28 stock 2 400 000 Balance c/d 76 200
2 779 200 2 779 200
2015
Mar 01 Balance b/d 76 200
5.3 During the year 10 845 identical items were manufactured.
5.3.1 Calculate the break-even point. (9)
R
Direct material costs 888 000
Direct labour costs 736 000
Factory overhead costs 803 000
Selling & Distribution cost 328 100
Administration cost 235 840
Cost of production of finished goods 2 420 000
Sales 4 338 000
Cost of sales 2 410 000
Selling price per unit R400
Variable cost per unit R180
 7 Accounting 2020 Gr11

QUESTION 3

This question consists of two independent questions based on Partnerships.

3.1 PARTNERSHIPS [32 Marks; 7 mins]

The information provided was drawn from the accounting records of Westridge Traders,
a partnership business owned by partners West and Ridge Their financial year ends
on 28 February 2015.

REQUIRED

3.1.1 You are required to match the example in the left-hand column with the appropriate
concept in the right-hand column
.
[Business Entity, Historical Cost, Prudence, Matching, Materiality, Going concern]

Examples of year-end adjustments Appropriate principle applied

A Trading stock is reflected at R23 500 in the financial
statements of the partnership. The trading stock will sell at
R35 250 in the next financial year
B Postage stamps purchased for R250 is recorded as Sundry
Expenses.
C One of the partners receives R1,5 million as part of his
inheritance. The amount is not recorded in the books o the
partnership
D The partnership has purchased dental equipment for R1,7
million. Technology is changing virtually every day. The
equipment will be useless to anyone in the future. Therefore
the partnership decides to depreciate it over its useful life time
of 8 years.
E The Income Statement of the partnership will reflect the
telephone account with the amount paid for the11 months and
the accrual amount.
F Land and Building is recorded in the Balance Sheet for R300
000 for the past 5 years. It was recently appraised at R2,3
million.
(10)

3.1.2 Appropriation account properly completed on 28 February 2015. (20)

3.1.3 Answer the following question:
West suggests that the interest on capital of 12 % p.a., as stipulated in the partnership
agreement, be reduced to 8 % p.a. for the next financial year so that the interest rate is
in line with current interest rates offered by commercial banks.
How would this decision affect the partners if the partners were to share in a remaining
loss? (2)
 8 Accounting 2020 Gr11

INFORMATION
1.
Balances as at 1 March 2011
Capital: West 1 500 000
Capital: Ridge 2 000 000
Current Account: West 250 000 Credit
Current Account: Ridge 300 000 Debit

2 Additional Information
1 On 1 September 2014 the partners equalised their capital contributions to R1 750 000.
2 Provide for interest on capital at 12% p.a. Take into account the
adjustments in capital contributions. Mat’s interest on capital is R195 000. Calculate Ridge’s
interest on capital. Show calculations in the space provided.
3 Partners are entitled to monthly salaries as follows:
• West R60 000
• Ridge R75 000
4. Each partner earned a Bonus of R20 000 each.
4 The remaining profit is shared between West and Ridge in the ratio 2:3 respectively. West’s
share of the remaining profit is R420 000.
 9 Accounting 2020 Gr11

3.2 FINANCIAL STATEMENTS – BALANCE SHEET [20 Mark; 13 mins]

The following information was extracted from the accounting records of RM Traders, a partnership
business owned by Raymond and Mhlaba. The financial year ends on 28 February 2015.

REQUIRED

The Equity and Liabilities section of the Balance Sheet on 29 February 2012. (20)
Note: Adjustments must be shown in brackets on the balance sheet.

INFORMATION

[A] The following balances appeared amongst others in the General Ledger of
RM Traders on 28 February 2015.
Capital: Raymond 1 000 000
Capital: Mhlaba 850 000
Current Account: Raymond [Debit] 8 450Dr
Current Account: Mhlaba [Credit] 51 800 Cr
Tangible Assets at carrying value 1 160 000
Fixed Deposit: Money Bank – 9% p.a. 350 000
Loan: Ching Bank – 12% p.a. 200 000
Trading Stock 429 900
Debtors Control 320 000
Creditors’ Control 45 350
SARS: PAYE 17 500
Bank overdraft 101 250Cr
Petty Cash 6 000
Cash Float 2 000
Provision for bad debts 4 450
Pension Fund 2 500
Income Received in Advance 3 500

[B] Adjustments and additional information

1. A cheque for R75 000 dated 31 March 2015 was issued to Wiseman Builders for improvements to
the property. The transaction was properly recorded in the CPJ and posted to the general ledger.
Make the necessary adjustment on the Balance Sheet.

2. On 28 February 2015 partner Mhlaba contributed Equipment to the value of R150 000 to equalize his
capital contribution. This entry was not recorded.

3. The partners have agreed to pay off R100 000 of the Loan from Ching Bank by 30 April 2015.
10 Accounting 2020 Gr11

QUESTION 5 (35Marks; 21 min)

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS [35]

5.1 Match the information in column A with the information in column B.

Write the only the alphabet indicating the correct answer. [10]

No. Column A Column B

Period for which there is
5.1.1 Total assets : Total liabilities A
enough stock on hand
Aaaaaa
5.1.2 Average debtors / Credit sales X 365 B Current ratio
5.1.3 Current assets : Current liabilities C Solvency
5.1.4 Non-current liabilities : Owners’ equity D Debtors’ collection period
5.1.5 Average stock / Cost of sales X 365 E Debt to equity

5.2 The information provided below was drawn from the accounting records of Anchor Traders on
28 February 2015.

REQUIRED
5.2.1 Comment on whether the business was more profitable in 2015 than in 2014. Support your
answer with a suitable financial indicator.
Show your calculation. [Refer to information A] (7)
5.2.2 Comment on whether the owner should be pleased with his return. Use a suitable
financial indicator to support your answer.
Show your calculation. [Refer to information A] (10)
5.2.3 Do you think that the business will run into liquidity problems? Support your answer by
quoting two financial indicators.
Show calculations. [Refer to information B] (8)

INFORMATION

A 2015 2014
Sales 1 470 000
Cost of sales 1 050 000
Other operating incomes 18 000
Operating expenses 138 000
Operating profit 300 000
Owners’ equity 1 246 620 1 100 000
Actual mark-up achieved 40% 45%
Operating profit on turnover ? 16%
Return on equity ? 20%
11 Accounting 2020 Gr11

B 2015 2014
Current assets [including inventories] 162 500 175 000
Current liabilities 117 500 105 000
Inventories 70 000 60 000
Stock turnover rate 6 times 8 times
Acid test ratio ? 1,1 : 1
12 Accounting 2020 Gr11

QUESTION 5 MANUFACTURING (64 marks; 38 minutes)

5.1
You are provided with information relating to Smug-Fit Calculators for the financial year ended
28 February 2015

5.1.1 Calculate Direct Labour Cost (10)

5.1.2 Prepare the following Ledger Accounts in the General Ledger:
Raw material Stock (16)
Work-in-Process Stock (14)
Finished Good Stock (9)
[49]
INFORMATION
1. The following indicates the stock on hand
R R
Feb 2015 Feb 2014
Raw materials stock 85 500 107 000
Work-in-process stock 86 414 25 800
Stock of finished goods 25 400 126 400
Consumables stores on hand (Indirect materials) 1 800 9 600

2. Summary of transactions for the year ended 28 February 2015.

R
Office stationery purchased 4 350
Raw materials purchased for cash 250 000
Raw Material purchased on credit 158 000
Indirect materials purchased for cash 19 900
Carriage on purchases of raw materials cash 15 400
Sales of finished goods 1 520 000
Advertising 28 200
Vehicle expenses 14 500
Factory wages 192 600
Salaries: Factory Foreman 90 000
Administrative staff 110 000
Sales staff 99 000
Rates 20 040
Insurance 31 200
Electricity and water 30 000

ADDITIONAL INFORMATION

1. Raw materials costing R16 000, purchased from Electronic Suppliers were returned on 28
February 2014. This transaction was not recorded
2. UIF deductions of 1% apply to all employees. The business contributes an additional 1%.
All employees contribute to the Pension fund. The deduction from earnings of 7,5%, while the
business contributes 10,5% of monthly earnings towards the Pension fund.
3 The Total Fixed Overhead Cost for the year amounted R216 965
13 Accounting 2020 Gr11

1.2
MEED Manufacturers manufactures toddler’s tracksuits. Tracksuits are sold at a mark-up of 50% on
cost. The owner of MEED Manufacturers has provided you with the following information:
• Selling price per tracksuit: R80
• Variable cost per tracksuit: R53,75
• Total fixed costs: R945 000
The owner informs you that he has discovered a new supplier for raw material. The
Material will fade after one wash. However, this will reduce the variable cost to R49,80. If the business
charges the same selling price it will ensure greater profits.

1.2.1 From the list below, select only the THREE FIXED COSTS
Raw Materials Cost Direct labour costs
Salary Foreman Commission on sales: Sales Staff
Factory Rent Salary of the Accountant (3)
1.2.2 Calculate the break even value of MEED Manufacturers. (5)
1.2.3 In your opinion should MEED Manufacturers change to the cheaper supplier? Give TWO
reasons for your answer. (7)
[15]
14 Accounting 2020 Gr11

QUESTION 6 BUDGETS (30 marks; 18 minutes)

REQUIRED
6.1 Complete the Debtors’ Collection Schedule of Kudu Traders for November and December
2015. (8)
6.2 Complete the Cash Budget of Kudu Traders for December 2015 (20)
6.3 Name TWO operating expenses, taken from the information below, which appear in the
Income Statement, but not in the Cash Budget. (2)

INFORMATION
1. PROVISIONAL BUDGETED AMOUNTS
1.1 Sales
SEPTEMBER OCTOBER NOVEMBER DECEMBER
Cash R40 000 R48 000 R42 600 R60 000
Credit R60 000 R72 000 ? ?
60% of the total sales are sold on credit

1.2 Purchases of Trading Stock

NOVEMBER DECEMBER
Cash R18 000 R20 700
Credit R56 000 R48 300

1.3 Purchases of Consumable Stores

NOVEMBER DECEMBER
Cash R8 000 R8 000

1.4 Drawings
NOVEMBER DECEMBER
Cash R6 000 R7 500
Trading Stock R2 750 R3 500

1.5 Bad Debts written off

NOVEMBER DECEMBER
R800 R1 160

2. ADDITIONAL INFORMATION

2.1 Debtors paid their accounts as follows:

• 20% during the month of the transaction
• 77% during the first month following the month of the transaction
• The remainder will be written off in the second month following the month of
transaction

2.2 Creditors are paid in full in the month of purchases to qualify for a 5% discount.

2.3 Wages:
2.3.1 Bonuses are normally paid at the end of November. Employees receive a bonus of 60%
of their normal wages
2.3.2 Wages are increased annually on 1 December. The increase is expected to amount to
7,5%.
2.3.3 The annual stocktaking takes place during December. Temporary workers are employed
15 Accounting 2020 Gr11

to help. The additional wages will amount to R4 500. No provision was made for this in
the provisional budget.

2.4 On 1 December 2014 Kudu Traders obtained a loan of R80 000 at 15% p.a. The loan is
payable in annual instalments of R10 000 on 30 November. The Interest is payable
monthly.

2.5 Kudu Traders plans to buy an additional vehicle for R150 000 on 1 November 2015. 45%
will be paid on 1 November and the balance will be paid in three equal instalments
commencing 1 December 2015

2.6 The depreciation on vehicles for the year ending 31 December 2015 is calculated at 20%
p.a. on the diminishing balance method.

2.7 Kudu Traders makes an annual donation on 1 November 2015 to the local high school,
consisting of:
• Trading stock, cost price R5 000
• Cash contribution to the bursary fund, R2 000

2.8 A flat, that is part of the building, is let by Kudu Traders. The rental is received on the first
day of each month by means of a stop order. The rent amounts to R5 500 per month.
There is an increase of 15% on 1 December each year.