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PROVINCIAL EXAMINATION
NOVEMBER 2021
GRADE 11

ACCOUNTING (PAPER 1)

MARKING GUIDELINES

QUESTION TOTAL
Question 1 30
Question 2 40
Question 3 50
Question 4 30
TOTAL 150

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

QUESTION 1.1

1.1.1 Residual ✓

1.1.2 GAAP ✓

1.1.3 Matching ✓

1.1.4 Depreciation ✓

1.1.5 Accumulated depreciation ✓ 5

QUESTION 1.2
1.2.1

Depreciation on equipment AMOUNT

Old equipment

810 000 x 20% 162 000 

New equipment

120 000 ✓ x 20% x 3/12 ✓ = 6 000 

5
Total depreciation for the year 168 000 

1.2.2

Depreciation on vehicles AMOUNT

Depreciation on vehicle sold

320 000 – 46 400 = 273 600 ✓ x 10/100 x 6/12 ✓ 13 680 

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

Depreciation on remaining vehicles

2 680 000 – 320 000 = 2 360 000 ✓
134 640 
1 060 000 – 46 400 = 1 013 600 ✓
2 360 000 – 1 013 600 = 1 346 400 ✓ x 10%

Total depreciation for the year 148 320 

1.2.3 FIXED/TANGIBLE ASSETS VEHICLES EQUIPMENT

Carrying value at beginning of year 1 620 000 ✓ 570 000 ✓
Cost 2 680 000 810 000
Accumulated depreciation (1 060 000) (240 000)
Movements
Additions at cost 120 000 ✓
Disposals at carrying value (320 000 – [46 400 + (259 920) 
13 680]
see 1.2.2 (148
Depreciation  see 1.2.1 (168 000) 
320)
Carrying value at end of year 1 211 760  522 000 

Cost 2 360 000  930 000 

Accumulated depreciation (1 148 240)  (408 000) 

12

TOTAL

30

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

QUESTION 2
INCOME STATEMENT OF WESTVILLE TRADERS FOR THE YEAR ENDED
28 FEBRUARY 2021
Sales (945 300✓ – 28 620 ✓) 925 680 
3
Cost of sales (467 630)
Gross profit 458 050 
1
Other operating income 109 575 
1
Rent income (99 750 ✓ – 8 250 ✓✓) 91 500 
4
Provision for bad debts adjustment 
525
(3 500 ✓ – 2 975 ✓) 3
Discount received 17 550
Gross operating income 567 625 
1
Operating expenses (390 660) 
1
Bad debts 1 020
Stationery (12 520 ✓ – 1 420 ✓) 11 100 
3
Packing material 11 220 ✓
1
Salaries and wages 175 170
Utilities (45 210 ✓ + 3 180 ✓) 48 390 
3
Insurance 15 460
Advertising (17 080 ✓ – 2 100 ✓) 14 980 
3
Telephone 21 570
Motor expenses 25 840
Maintenance 13 710
Discount allowed 1 11 070
Bank charges (3 560 ✓ + 320 ✓ + 1 120 ✓) 5 000 
4
Trading stock deficit (174 120 – 171 020) 3 100 ✓
2
Depreciation 33 030 ✓
1
Operating profit 176 965 
1
Interest income 10 000
Profit before interest expense 1 186 965 
Interest expense (1 610 ✓ + 170 ✓ + 9 860 ✓) (11 640) 
4
Net profit for the year 175 325 ✓ 40
2
TOTAL

40

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

QUESTION 3

3.1.1 C✓

3.1.2 A✓

3.1.3 B✓
4
3.1.4 E✓

3.2 FRANKENSTEIN TRADERS

Extract of Balance Sheet on 28 February 2021
EQUITY AND LIABILITIES
Partners’ Equity 408 670
Capitals (200 000✓ + 170 000✓ + 30 000✓) 4 400 00 
Current accounts (10 360 – 1 690) 2 8 670 ✓
Non-current liabilities
Loan: ABSA (40 000 – 20 000) 2 20 000 ✓✓
Current liabilities 1 39 020 
Trade and other payables
(9 070✓ + 3 500✓ + 500✓ + 700✓) 5 13 770 
Bank Overdraft (20 250 – 15 000) 2 5 250 ✓
Short term loan 1 20 000 
Total equity and liabilities 1 467 690 

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

3.3 MARVELLOUS CANDY STORE

CAPITAL Mr Marvel Ms Lane

Balance at the beginning of the year 360 000 ✓ 760 000

Contribution of capital during the year 175 000 ✓
Withdrawals of capital during the year
Balance at the end of the year 535 000  760 000

CURRENT ACCOUNTS Mr Marvel Ms Lane

Profit per Income Statement 629 550  715 000 

Partners’ salaries 349 800 ✓ 425 000 ✓

Partners’ bonus 12 000 ✓ 51 000 ✓
Interest on capital 80 250 ✓✓ 114 000 ✓✓

Primary distribution of profits 442 050  590 000 

Final distribution of profits 187 500 ✓ 125 000
Drawings during the year
*(60 000) ✓✓ (30 000) ✓
*(25 000 + 35 000)
Retained income for the year 569 550  685 000 
Retained income at beginning of year (2 300) ✓ 4 500 ✓

Retained income at end of year 567 250  689 500 

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

Calculation: Interest on capital

Mr Marvel Ms Lane
535 000 x 15% = 80 250 760 000 x 15% = 114 000

Calculation: Salary Mr Marvel Calculation: Bonus Ms Lane

26 500 x 1,1 = 29 150 425 000 x 12% = 51 000
29 150 x 12 = 349 800

Calculation: Final distribution Mr Marvel

125 000 x 3/2 = 187 500

TOTAL

50

QUESTION 4
4.1 CALCULATION OF FINANCIAL INDICATORS FOR 2021

4.1.1 Acid-test ratio:

64 000 ✓ + 11 000 ✓ : 84 000 ✓
OR
171 000 ✓ – 96 000 ✓ : 84 000 ✓
OR
75 000 ✓✓ : 84 000 ✓

= 0,9 : 1  accept 0,89 : 1 4

4.1.2 Debt-equity ratio:
240 000 ✓ : 858 000 ✓

0,3 : 1  accept 0,27 : 1

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

4.1.3 % return on average equity earned by the partnership:

278 000 ✓ 100


½ ✓ (858 000 ✓ + 1 210 000✓) 1
OR

OR
278 000 ✓ 100

(1 034 000✓✓✓) 1
= 27%  accept 26.9% 5

4.2 Should the partners be concerned about the liquidity of the business
for 2021? Quote TWO financial indicators.
Comment ✓ Indicators ✓✓ Figures ✓✓

Current ratio decreased from 3,9 : 1 in 2020 to 2,2 : 1 in 2021.

Acid test ratio decreased from 2,1 : 1 to 0,9 / 0,89 : 1 in 2021.

The partners should not be concerned because the business is liquid.

They should have no problem paying off their short-term debts.
The liquidity ratios are far more efficient in 2021 as they were too high in
2020.
5

4.3.1 Is it a good idea to borrow R300 000? Quote ONE financial indicator to
support your answer.
Comment ✓✓ Indicators ✓ Figures ✓

Debt-equity ratio increased from 0,1 : 1 in 2020 to 0,3 : 1 in 2021.

Yes, the partnership is lowly geared/has low risk. They are not making
much use of loans.
OR
No, if they borrow R300 000 the debt-equity ratio will increase to 0,6 : 1
which increases the risk because there will be high interest and repayment
commitments. 4

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

4.3.2 Provide TWO other suggestions that the partners can consider instead of
increasing the loan.
Two valid suggestions ✓✓

• Increase their capital contributions

• Get another partner
• Use the fixed deposit 2

4.4 Mike is concerned about the % return that he is earning. Is this a valid
concern? Quote ONE financial indicator to support your answer.
Explanation ✓✓ Figures ✓✓

Mike should be concerned as his % return on equity decreased from 29% in

2020 to 22% in 2021, While Kate’s % return on equity increased form 21% in
2020 to 36% in 2019 4

4.5 Mike is not happy with Kate’s current contributions to the partnership. He
has decided to have a meeting with her about this. List THREE points he
should discuss with her at this meeting.
Three valid points ✓✓✓
• Kate withdrew R400 000 of her capital contribution during the year.
• Kate has a negative current account due to drawings.
• They receive the same salary, and they may not be doing the same
amount of work.
• They must renegotiate the partnership agreement as it is not fair on Mike.
He provides 75% of the capital and has not drawn all his earnings, yet he
3
is earning a lower return.

TOTAL

30

TOTAL: 150