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NATIONAL SENIOR CERTIFICATE EXAMINATION

NOVEMBER 2022

ACCOUNTING: PAPER II

EXAMINATION NUMBER

Time: 2 hours 100 marks

PLEASE READ THE FOLLOWING INSTRUCTIONS CAREFULLY

1. This question paper consists of 10 pages, an Information Booklet of 7 pages (i–vii)

and a Formula Sheet of 1 page (i). Please check that your question paper is
complete.

2. Read the questions carefully.

3. Answer the questions in the space provided.

4. It is in your own interest to write legibly and to present your work neatly.

5. You may not use red or green ink. You may use a pencil, but please use a sharp,
dark pencil.

6. All calculations should be rounded off to two decimal places.

7. The allocation of marks and appropriate time to be spent on each question are as
follows:

Possible Actual Marker Moderator

marks marks signature signature

Question 1: Budgets
34
(41 minutes)

Question 2: Company Analysis

47
(56 minutes)

Question 3: Reconciliations
19
(23 minutes)

TOTAL 100

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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 2 of 10

QUESTION 1 BUDGETS [34 marks; 41 minutes]

1.1 Complete the Creditor's Payment Schedule below relating to Ink Solution.

Creditor's Payment Schedule for November 2022

Ink and toner cost
November
for the month
August 2022 * *
September 2022 * 2 646
October 2022 11 000 *
10 446
(4)

1.2 Complete the cash budget for November 2022. Show your calculations.

Cash Budget of Relax 'n Rent for November 2022

Receipts 258 920
Machine rental income 144 000
Per page income 114 920
Payments Do not calculate

Creditors payment: Ink Solution 10 446

Creditors payment: Copy Ink Ltd for the old equipment
*

Creditors payment: Copy Ink Ltd for the new equipment 26 950
Technician costs
*

Water and electricity *

Salary: Sihle Bhengu 50 000
Salary: Mrs Bhengu *
Phone charges and WIFI Do not calculate

Office supply purchases *

Donations *
Cash surplus / deficit 100 734
Balance at the beginning of the month 379 020
Balance at the end of the month 479 754
(11)

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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 3 of 10

1.3 1.3.1 Using the statement from Copy Ink Ltd, complete the Equity and Liabilities
part of the Statement of Financial Position as at 31 October 2022.

Extract from the Statement of Financial Position at 31 October 2022

EQUITY AND LIABILITIES
Shareholder's Equity 436 320
Non-current liabilities: Copy Ink Ltd *
Current liabilities Do not calculate

Ink Solution 6 020

Copy Ink Ltd *
Total equity and liabilities Do not calculate
(2)

1.3.2 Name the GAAP principle that dictates which figure, from the statement
from Copy Ink Ltd, you used to complete the liabilities section above.

(1)

1.4 Calculate the cost of the new equipment.

(3)

1.5 1.5.1 Calculate the debt equity ratio on 1 November 2022 should Relax 'n Rent
buy the new machines.

(3)

1.5.2 Based on the debt equity ratio calculated in Question 1.5.1, do you think
that Copy Ink Ltd should sell the new equipment to Relax 'n Rent on credit?

(1)

1.5.3 Relax 'n Rent has a 200% return on equity. Explain why Relax 'n Rent has
such a high return on shareholder's equity.

(1)
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1.5.4 Besides the gearing, explain two other factors that Copy Ink Ltd should look
at before granting Relax 'n Rent more credit, then explain why you would
advise Copy Ink Ltd to sell them/not sell them the new equipment.

Would you advise Copy Ink Ltd to sell them the new equipment? Yes / No

(4)

1.6 Sihle has a suspicion that one of the technicians is charging him for going out to
businesses to service or fix the machines, but is not actually going there. He is
charging for jobs he did not do. Discuss a control measure Sihle can implement to
stop this from happening.

(2)

1.7 Sihle has hired you as an external auditor. Explain in detail why you would allow, or
not allow, Mrs Bhengu's salary to remain in the Statement of Comprehensive Income.

(2)

34

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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 5 of 10

QUESTION 2 COMPANY ANALYSIS [47 marks; 56 minutes]

Study the information given for Italtile Ltd, and then answer the following questions.

2.1 In their financial statements, Italtile published a seven-year review. Discuss the value
of this compared to just showing the latest two years.

(2)

2.2 Study the seven-year review then answer the following questions:

2.2.1 Explain why the mark-up fluctuates from year to year.

(1)

2.2.2 Discuss whether the directors would be pleased with the 2021 gross profit and
mark-up. Motivate with two calculations.

(3)

2.2.3 Comment on whether Italtile's operating expenses are being well controlled.

(2)

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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 6 of 10

2.3 Italtile has an extensive property portfolio. Discuss two detailed advantages for Italtile
to own most of the property on which their shops and distribution facilities are built.

(4)

2.4 Refer to the financial ratios given and calculate the missing figures in the 2020
Statement of Financial Position. Do not calculate the "?". Show your calculations in
the blocks.
Rm
A
B
C
D
(5)

2.5 2.5.1 Calculate the stock turnover rate for 2021, then write a detailed comment on
whether this would be a satisfactory rate for Italtile.

(5)

2.5.2 The current ratio has dropped from 4,6 : 1 in 2019 to 2,28 : 1 in 2021. Explain,
providing a reason, whether this is an improvement or not.

(2)
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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 7 of 10

2.6 2.6.1 Analyse the cash flow movement shown in the seven-year review, and explain
whether this is a good or bad way of handling their cash.

(3)

2.6.2 Write down two examples of the investing activities that Italtile has that were
mentioned in the case study.

●
(2)

2.7 2.7.1 Calculate the return on shareholder's equity for 2021, and then comment on
whether the directors of Italtile would be happy with the return.

(7)

2.7.2 Although the EPS was 141 cents, the DPS was only 106 cents. Discuss
whether the shareholders would be pleased with the 106 cents, or whether
they should have received a DPS of 141 cents.

(2)
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2.7.3 Explain what the Net Asset Value represents and why the share price is so
much higher than it.

(2)

2.8 Read the extract from the auditor's report, then answer the following questions.

2.8.1 What is the purpose of the external auditor's report?

(1)

2.8.2 Write down two pieces of audit evidence they would obtain to verify the water
and electricity amount in the Statement of Comprehensive Income.

(2)

2.9 Read the extract from the Corporate Governance report. Italtile is not allowed to
count this as one of their corporate social responsibility programmes as, by law,
these programmes are not allowed to benefit their employees or their families.

Explain the difference between Corporate Governance and a Corporate Social

Responsibility programme. Then discuss whether Italtile should be spending time
and effort on their Employee Wellness Programme if it does not count towards their
corporate social responsibility programme.

(4)

47
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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 9 of 10

QUESTION 3 RECONCILIATIONS [19 marks; 23 minutes]

3.1 Explain the importance of a Debtors' Age Analysis.

(2)

3.2 Use the information in the information book to make corrections to the Debtors' Age
Analysis. The Debtors' Age Analysis does not need to be totalled.

Incorrect/incomplete Debtors' Age Analysis drawn up on 31 October 2022.

120 + days 90 days 60 days 30 days Current
16 000 3 500 89 400 120 350 92 680

(7)

3.3 In adjustment 1, Santa's sled was damaged and this caused a problem between
Dazzling Designs and MegaSpend Mall. Jemma realised that something similar
could happen again at any one of the malls that they decorate. Discuss what she can
do to prevent this from becoming an issue in the future.

(2)

3.4 3.4.1 Some of Dazzling Design's repeat cash customers are asking to open
accounts. Discuss one reason as to whether Jemma should allow them to
open accounts or not.

(1)

3.4.2 If Dazzling Designs were to open accounts for them, write down three terms
and conditions that Dazzling Designs should put on their contracts.

(3)

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NATIONAL SENIOR CERTIFICATE: ACCOUNTING: PAPER II Page 10 of 10

3.5 Compare the statement from Authentic Wood to their account in Dazzling Design's
Creditors' Ledger. Use the additional information to complete the Creditor's
Reconciliation statement below.

Creditor's
Reconciliation
Incorrect balance 106 810

Do not calculate
(4)

19

Total: 100 marks

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