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WESTERFORD HIGH SCHOOL

ACCOUNTING EXAMINATION
GRADE 10

26 May 2009
200 marks ; 2 hours

Examiners: Ms G Visser
Moderator: Mrs J Abrahams

INSTRUCTIONS

1. Answer ALL questions.

2. An ANSWER BOOK is provided. No pages must be removed from the answer


book.

3. Show your calculations in order for part marks to be allocated.

4. Read the instructions carefully and follow them precisely.

5. Candidates will forfeit marks for:


Dates which are omitted
Using abbreviations
Over-writing of figures

6. Non-programmable calculators may be used.

7. Use the table, on the next page, as a guide when answering the question paper and
try not to deviate from the time allocation.
QUESTION 1: 50 marks; 30 minutes
The topic of the question is: The learning outcomes covered are:
LO1 Financial accounting
- AS 1.1 Explain accounting concepts
Documents, recording, - AS 1.2 Recording information in books
accounting equation & concepts - AS 1.3 Analyse effect on accounting equation
LO3 Managing resources
- AS 3.6 Apply internal control processes

QUESTION 2: 50 marks; 30 minutes


The topic of the question is: The learning outcomes covered are:
LO1 Financial accounting
- AS 1.2 Recording information in books
Debtors & stock LO3 Managing resources
- AS 3.4 Perpetual inventory system
- AS 3.6 Apply internal control processes

QUESTION 3: 45 marks; 27 minutes


The topic of the question is: The learning outcomes covered are:
LO1 Financial accounting
- AS 2 Records information in the journals
General Journal LO3
- AS 4 Discusses the Perpetual inventory systems

QUESTION 4: 15 marks; 9 minutes


The topic of the question is: The learning outcomes covered are:
LO3 Managing resources
Different accounting systems - AS 3.1 Indigenous systems

QUESTION 5: 30 marks; 18 minutes


The topic of the question is: The learning outcomes covered are:
LO1 Financial accounting
- AS 1.2 Recording information in books
Debtors and creditors ledgers LO3 Managing resources
- AS 3.4 Perpetual inventory system
- AS 3.6 Apply internal control processes

QUESTION 6: 10 marks; 6 minutes


The topic of the question is: The learning outcomes covered are:
Code of ethics LO3 Managing accounting
- AS 5 Explains code of ethics

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QUESTION 1 (50 marks ; 30 minutes)
DOCUMENTS, RECORDING, ACCOUNTING EQUATION & CONCEPTS
Michael Marais has started his own business, M&M Clothing, which sells school uniforms.
He does not know much about Accounting, but he has employed a qualified bookkeeper,
Patricia Pretorius to look after the financial control of the business. Michael uses the
perpetual inventory system and a mark-up of 50% on cost.
Patricia’s opinion is that documents are vitally important in controlling the business
finances and providing information. Her first task was to get all the documents prepared
with ‘M&M Clothing’ printed on each document. Michael has also opened a bank account
in the name of the business.
Some of the transactions that occurred in January 2009 are as follows:
Jan 1 Michael provided capital in the form of cash, R80 000, and a
vehicle, R90 000.
4 M&M Clothing bought stock on credit from ABC Suppliers,
R5 000. They also charged a delivery fee of R400.
5 Returned stock to ABC Suppliers, R700.
11 Sold uniform items for cash to N Naude, R750. The cost price
was R500.
12 Paid Space Computers R8 000 by cheque for equipment bought.
15 Sold uniform items on credit to T Tredoux. The selling price was
R1 350 and the cost price was R900.
16 T Tredoux returned a school tracksuit that she had bought the
day before. The selling price was R240 and the cost price was
R160.
18 Paid for repairs to equipment out of petty cash, R40.
20 T Tredoux settled her account by cheque.
22 Donated stock to a learner who could not afford to pay. The cost
price was R450.
25 Settled the account of ABC Suppliers by cheque, less 5% cash
discount.
REQUIRED:
1.1 Analyse the transactions on the table provided in order to reflect
the source document and journal, the accounts affected in the
ledger, and the effect on the accounting equation. The first
transaction has been done for you as an example. (35)
1.2 Do you agree with Patricia’s opinion about documents? Provide a
convincing but concise explanation for your opinion. (5)
1.3 Explain what is meant by the ‘Business Entity Rule’ and why it is
important for Michael to open a separate bank account in the name
of the business. (4)
1.4 Explain what is meant by the following:
• Assets
• Liabilities
• Owner’s equity (6)

50

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QUESTION 2 (50 marks; 30 minutes)
DEBTORS & STOCK
You are provided with two accounts from the General Ledger of Tweety Traders. The
business uses the perpetual inventory system and a mark-up of 33 ⅓% on cost at all
times.
REQUIRED:

Study the information and then answer the questions which follow.

TWEETY TRADERS
Dr General Ledger Cr

DEBTORS CONTROL
2006 2006
Apr
1 Balance b/d 9 691 Apr
30 Bank & discount CRJ 11 722
30 Bank CPJ 340 Debtors allowances DAJ 588
Sales DJ 26 320 Sundry accounts GJ 510
Sundry accounts GJ 400 Balance c/d

Petty cash PCJ 200

May 1 Balance b/d

TRADING STOCK
2006 2006
Apr
1 Balance b/d 18 716 Apr
30 Cost of sales CRJ 4 110
30 ? CPJ 3 360 Cost of sales DJ 19 740
Cost of sales DAJ 441 Creditors control ? 4 426
Creditors
control
? 14 280 Balance c/d

May 1 Balance b/d

QUESTIONS:
DEBTORS:
2.1 According to the general ledger, how much is owed by the debtors at
the end of April? (2)
2.2 What is the best way of checking that the amount owed by debtors
according to the general ledger is correct? (2)
2.3 What is the value of credit sales for April? (2)
2.4 If the discount allowed to debtors for early payment is R620, how
much did the debtors pay during April? (2)
2.5 A bad debt was written off during April. In which figure in the ledger
account, is this bad debt included (provide only the figure)? (2)

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2.6 Give one possible explanation for the entry of R340 on the debit
side. (2)
2.7 Give one possible explanation for the entry of R588 on the credit
side. (2)
2.8 Have the debtors generally been settling their accounts on time?
Provide figure/s from the ledger account to support your opinion. (4)
2.9 If a debtor proves to be slow in settling his debt, what two points of
advice would you provide to Tweety Traders to solve this problem? (4)
2.10 All new customers opening accounts should be ‘screened’ by
Tweety Traders. What is meant by ‘screening’ and why is it
important for the business to do this? (4)
TRADING STOCK:
2.11 According to the general ledger, how much trading stock is on hand
at the end of April? (2)
2.12 What is the best way of checking that the amount of stock on hand
according to the general ledger is correct? (2)
2.13 What is the value of cash sales for April? (3)
2.14 In your opinion, should this business try to encourage more cash
sales than credit sales? Briefly explain your reason. (2)
2.15 How much stock was bought on credit during April? (2)
2.16 What is the main advantage of buying stock on credit? (2)
2.17 Provide the folio reference for the entry of R4 426 on the credit side. (2)
2.18 Should Tweety Traders be satisfied with the quality of goods they
have been receiving from their suppliers? Provide figure/s from the
ledger account to support your opinion. (4)
2.19 Provide the contra detail for the entry of R3 360 on the debit side. (2)
2.20 Is Tweety Traders carrying enough stock to satisfy the needs of its
customers for May? Provide figure/s to support your opinion. (3)

50

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QUESTION 3 (45 marks; 27 minutes)
GENERAL JOURNAL

Use the information given below to complete the General Journal in the books of Winter
Traders for August 2009.

Transactions for August 2009

2 The owner M Milo took goods marked at R500 for his own use. (Cost price R350)

5 Charged the account of Nesquik with 10% p.a. interest for 4 months. Nesquik owes
the business R900.

9 A payment of R795 made to Hot Choc, a creditor, was correctly entered in the Cash
payments journal but was in error posted to the account of Milk Shake, a debtor.

19 Cold Milk was declared insolvent. A final dividend of 75c in the rand was received
from his insolvent estate. His cheque of R600 was received and recorded in the
correct subsidiary journal and posted. The remainder of his account must be written
off as irrecoverable.

24 The cheque for R225, received from Chomp, a debtor, was received from the bank
marked (r/d). The cheque was previously received in full settlement of his account of
R250. No entry was made to cancel the discount.

28 Equipment was bought for cash, R907. However, the entry in the CPJ was made for
R970.

29 Milky Bar charged our overdue account with R15 interest.

30 An invoice from C Crunch for trading stock R600 and stationery R400 was recorded
as follows:

Creditors Journal for August 2009


Creditor Creditors Trading stock Stationery
control
C Crunch 1 000 400 600

Correct the error

31 The owner donated goods costing R175 to a local high school. This donations was
made on behalf of the business.

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QUESTION 4 (15 marks; 9 minutes)
DIFFERENT ACCOUNTING SYSTEMS
4.1 INDIGENOUS & FORMAL SYSTEMS
You know two entrepreneurs with their own businesses.
• Mary Mchunu uses an indigenous bookkeeping system – she sells fruit by herself
from a kiosk in a busy part of town
• Brenda Bokwe uses a formal bookkeeping system – she employs managers and
shop assistants to sell furniture from a shop that she owns in a busy shopping
complex.
REQUIRED:

4.1.1 Briefly explain what is meant by an ‘entrepreneur’. (2)

4.1.2 Briefly explain the difference between ‘indigenous’ and ‘formal’


bookkeeping systems. (3)
4.1.3 Consider the following statements. Decide which statements
would apply to Mary and which would apply to Brenda. Place a
tick in the appropriate column/s. Note that some statements could
apply to both. (10)

STATEMENTS:

MARY BRENDA
Indigenous Formal
system system
She relies on self-management
She plans extensively and ensures that budgets are drawn up
regularly
She uses documents extensively
She relies mainly on cash transactions
She safeguards her cash and her assets herself
She has separate bank accounts for herself and her business
She notes her important transactions in a notebook only
She may consider using a computerized accounting software
package
Making a profit is an important objective for her business
She keeps journals and ledgers and prepares a trial balance
each month
She adheres to GAAP
There is only one person involved in her business
She employs an accountant to prepare her financial
statements
There are divisions of duties within her business so that one
employee serves as a check on another
She is concerned about a good relationship with customers

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QUESTION 5 (30 marks; 18 minutes)
DEBTORS AND CREDITORS LEDGERS

INSTRUCTIONS

Use the information given below to prepare the account of Sleek, a debtor in the Debtors
Ledger and Smooth, a creditor in the Creditors Ledger of Charming Stores.

INFORMATION

On 1 February 2003, Sleek owed the business R500 and the business owed Smooth R1
800.

The following transactions took place in the books of the business during February 2003.

3 Received a cheque from Sleek in full settlement of his account. Issued receipt 77.

5 Received invoice X221 (renumbered 106) from Smooth for the following:
-goods, R2 600 (less 5% trade discount)
-equipment, R1 120

8 Sold goods costing Charming Stores R1 600 to Sleek. Goods are sold at cost plus
25%. Issued invoice 58 to him.

15 Sent a cheque to Smooth for half of the amount owed to them as on 1 February
2003. Issued cheque 876 to him.

18 Sleek returned goods with a selling price of R200 to us. These goods were bought
on the 8th. Issued credit note 45 to him.

21 Received a cheque from Sleek for R500 on account. Issued receipt 100 to him.

25 Bought goods on credit from Smooth, R1 000. Invoice renumbered 130.

26 Returned unsatisfactory goods with an invoice price of R200 (less 5% trade


discount) to Smooth. These goods were bought on 5th. Issued debit note 24 to
him.

30 Sent a cheque to Smooth in full settlement of account. Issued cheque 1000.

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QUESTION 6 (10 marks ; 6 minutes)
ETHICS

Kyle Summers is employed at the accounting firm DJM Accounting Services as a Senior
Accountant.

In his day to day work, he tries to do his job to the best of his ability to satisfy his
supervisors and their clients. When he was employed, he signed a service contract that
included some of the following principles of ethical and professional conduct:
A All employees should be honest in the performance of their duties.
B All employees should be fair and not allow prejudice or bias to override impartial
behaviour.
C Employees are expected to be competent in performing their duties if they agree to
provide professional services.
D Employees should respect the secrecy of information acquired during the course of
performing their duties.
E Employees should act in a manner that is consistent with the good reputation of the
organisation.
F Employees should carry out their duties in accordance with standards set by the
employer, Government and the Institute of Chartered Accountants.

REQUIRED:
Identify the principles of ethics and professional conduct by listing the above-mentioned
principles (A – F) in column B, next to the relevant principle.

Only indicate the appropriate letter on your answer sheet.


COLUMN A COLUMN B

No PRINCIPLE / ETHICS PRINCIPLE AS PER CONTRACT


6.1 Objectivity
6.2 Technical standards
6.3 Confidentiality
6.4 Integrity
Professional conduct and due
6.5
care

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