TABLE OF CONTENTS

1. INTRODUCTION 2
2. HOW SHOULD WE USE THIS STUDY GUIDE? 3
3. INVENTORY VALUATION 4
KEY CONCEPTS 4
4. PRIOR KNOWLEDGE 5
5. STOCK VALUATION METHODS 9

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5.1 FIFO - WORKED EXAMPLE 1 11

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PRACTICE ACTIVITY 1 NSC Nov 2018 adapted 12
ANSWER SHEET 13

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SOLUTION - PRACTICE ACTIVITY 1 14
5.2 The WEIGHTED AVERAGE method used the following formula: 15
PRACTICE ACTIVITY 2: 16
SOLUTION PRCTICE ACTIVITY 2
s. 18
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5.3 SPECIFIC IDENTIFICATION - WORKED EXAMPLE 3: 19
PRACTICE ACTIVITY 3 21
SOLUTION PRACTICE ACTIVITY 3 24
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6. INTERNAL CONTROL PROCESSES 26

7. CONSOLIDATION ACTIVITIES 27
ACTIVITY 1: INVENTORY VALUATION AND INTERNAL CONTROL 27
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ACTIVITY 2 29
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ACTIVITY 3 31
ACTIVITY 4: INVENTORY VALUATION 33
ACTIVITY 5: INVENTORY VALUATION 36
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ACTIVITY 6 38
8. GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET 40
ANSWER SHEETS 41
SUGGESTED ANSWERS 50
9. EXAMINATION GUIDANCE (INVENTORY VALUATIONS) 62
10. ACKNOWLEDGEMENTS 64

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1. INTRODUCTION

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The declaration of COVID-19 as a global pandemic by the World Health
Organisation led to the disruption of effective teaching and learning in many
schools in South Africa. The majority of learners in various grades spent less
time in class due to the phased-in approach and rotational/ alternate
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attendance system that was implemented by various provinces.
Consequently, the majority of schools were not able to complete all the
relevant content designed for specific grades in accordance with the
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Curriculum and Assessment Policy Statements in most subjects.

As part of mitigating against the impact of COVID-19 on the current Grade 12,
the Department of Basic Education (DBE) worked in collaboration with subject
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specialists from various Provincial Education Departments (PEDs) developed

this Self-Study Guide. The Study Guide covers those topics, skills and
concepts that are located in Grade 12, that are critical to lay the foundation
for Grade 12. The main aim is to close the pre-existing content gaps in order
to strengthen the mastery of subject knowledge in Grade 12. More
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importantly, the Study Guide will engender the attitudes in the learners to
learning independently while mastering the core cross-cutting concepts.
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2. HOW SHOULD WE USE THIS STUDY GUIDE?

1. This study guide addresses content and offer strategies to understand the difference
between stock systems and stock valuation methods, to perform calculations and to
comment on internal control processes relating to inventory valuation. The approach
is to address each component in a piecemeal approach, with consolidation activities
to conclude.
2. The explanations and activities are intended to supplement the work you may have
covered in class or have gained from textbooks.
3. They proceed from the short, simple focused examples to more complex calculations

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and interpretation of information.

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4. It is important to allocate sufficient time to:
• Carefully read the explanations provided; underline/highlight key concepts, difficult
vocabulary, important dates and relevant amounts.
• Interrogate the worked example to gain an understanding of the message being

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conveyed or the sequence of events being illustrated.

5. Attempt the activities on your own; make constant reference to the explanatory
notes, but avoid referring to the suggested answers before completing an activity.

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6. Compare your answers to the suggested answers and do your corrections in a
different colour ink. Note that you will learn more by discovering your weaknesses
(when you get things wrong), and making an effort to understand why your thinking
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was out of sync.
7. The activities provided may not be sufficient to perfect your skills. Always refer to
similar questions from past examination papers for this purpose.
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8. Become familiar with the use of Answer Books and prepared writing material as this
is the trend with all Accounting examinations.

PRE-AMBLE:
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• Inventories is covered in Term 2, under Valuation of stock methods.

• It will feature in the Accounting P2 (Managerial Accounting and Internal Auditing).
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• Recent trends on this topic focus mainly on valuation of inventories FIFO, Weighted
average & Specific identification.
• Internal control is integrated in the topic.
• It can be integrated into Paper 1.
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3. INVENTORY VALUATION

A BRIEF EXPLANATION
Inventories refers to trading stock purchased by the business for the purposes of resale,
with the intention of making a profit. Inventories represents the least liquid of the three
Current Assets and is reflected on the Statement of Financial Position. Stock is purchased
at different intervals and at different prices throughout the financial year.

It is therefore necessary to value the stock as accurately as possible so that a true

reflection of the financial position as well as profit or loss is reported.

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Depending on the system in use, a physical stock count may be necessary to determine
the value of the closing stock, or to establish whether a deficit of surplus exists.

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Regular stock count is an essential internal control process and it helps to:
• Minimise fraudulent practices
• Ensure accurate recording and reporting (documents)

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• Facilitate reconciliation of records with actual stock

This study guide will offer explanations and examples on the different stock systems
introduced in grade 10 and 11, and on the THREE stock valuation methods that must be
covered in Grade 12.

KEY CONCEPTS
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Stock balance at the beginning of a financial year. This is
Opening Stock equal to the stock unsold at the end of the previous financial
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year.
Stock bought during the year for the purpose of resale. The
Purchases of stock net purchases would be adjusted for donations and
drawings.
This represents the cost of transporting the stock to the
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Carriage on purchases business, which is recorded separately under the periodic

inventory system
It will include taxes and duties if goods are purchased from
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Customs / Import
foreign countries, and will form part of the cost of the stock
duties
when determining selling price and profit mark-up.
Stock sent back to the suppliers for reasons such as
Returns of stock damaged, an incorrect order or inferior quality goods. This is
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also adjusted against the purchases account.

This is the value of the unsold stock (stock on hand) at the
end of the financial year. This figure is recorded in the
Closing stock
Balance Sheet, and is the opening stock of the following
year.

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4. PRIOR KNOWLEDGE
(Content you would have covered in previous Grades)

In Grade 10 transactions involving stock were recorded using the perpetual inventory
system. This was reflected in the General Ledger as:
• Trading Stock (Balance Sheet Account)
• Cost of Sales (Nominal Account)
In Grade 11 the periodic system was introduced. In this case, stock purchased for resale
was recorded in the Purchases account, Carriage on Purchases was recorded
separately. Both these accounts are nominal accounts. The cost of sales had to be
calculated at the end of a financial period.

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Perpetual Inventory System

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• A perpetual inventory system is a system that accounts for movement of inventory
continuously and on real time basis (on the point of transaction).
• Purchases and sales of inventory are recorded as and when they occur.

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• This system involves the use of point-of-sale recording systems, such as scanning.
• The cost of goods sold can therefore be easily determined at any point that results in a
movement of stock (purchase, sale, return).

Periodic Inventory System

•
s.
The periodic inventory system does not focus on real-time updating of stock balances;
the cost of stock sold is not captured at the point of sale.
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• Physical stock counting of inventory is therefore necessary to determine inventory
position at the end of a specified accounting period as required by the business.
• This physical stock count is also necessary to determine the stock unsold or closing
balance.
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• The cost of sales is determined by application of a mathematical formula:

Cost of sales = Stock balance at the beginning of the year
+ Net Purchases
+ Carriage on purchases
+ Customs/Import duties
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– Stock balance at the end of the year.

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Advantages (perpetual system) Advantages ( periodic system)

• Accurate and realistic • Cheaper and easy to use – no need to
• Stock on hand is available in the records use scanners.
• Stock surplus/deficit is determined by • No need to calculate cost of sales every
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comparing records to physical count. day.

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 DIFFERENCES
PERPETUAL(Continuous) PERIODIC
• Trading of individual, easily • Trading in large volume, low value
recognisable items goods
• Transactions are recorded in the • Transactions recorded in Purchases
Trading Stock account (B) account (N)
• Cost of sales calculated when goods are • Cost of sales calculated periodically
sold or returned usually at the end of the accounting
• A stock count is performed to validate period.

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stock records and determine losses. • A physical stock-count at the end of the
• Additional costs e.g. carriage on accounting period is necessary to
determine the value of closing stock.

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purchases, are debited to the trading
stock • Cost of sales is then calculated using
the closing stock amount.
• Additional expenses e.g. carriage on

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purchases are recoded separately in a
nominal account (expense account).

BASELINE ACTIVITY 1 = 504 900

XZY Traders end 31 December 2019
Required
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Calculate the cost of sales for the financial year ended 31 December 2019
INFORMATION:
A. Stock balance on 1 January 2019, R98 400.
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B. Transactions during the current financial year: R

i) Cash and credit purchases of trading goods 530 000
ii) Transport cost on trading goods paid by EFT 32 500
iii) Damaged goods returned to creditors. 12 600
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iv) Goods donated to a local school (fund raising) 8 500

v) Goods taken by the owner for personal use. 4 000
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C. Stock take on 31 December 2019 revealed that R76 550 was on hand.
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 Balance at the end of the previous
financial year is the opening
SUGGESTED ANSWER balance of the current financial year

COST OF SALES
R
Opening stock 98 400
+ Purchases (530 000 – 12 600 – 8500 – 4 000) 504 900
+ Carriage on purchases 32 500 Drawings and Donations
always @ cost price. Do not
- Closing stock 76 550 confuse the concepts of “cost
Cost of sales 559 250 price” and “cost of sales”.

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Balance at the end of the current
financial year, or the closing balance.

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(Left over stock, to be used next year).

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BASELINE ACTIVITY 2

Mandla Traders 31 October 2020

REQUIRED:
s.
Use the information below to prepare the Trading Account for the year ended on
31 October 2020. The business uses periodic inventory system
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INFORMATION:
A. Balances on 31 October 2020
R
Trading inventory (1 November 2019) 112 500
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Cash and credit purchases of trading goods 478 900

Carriage on purchases 46 300
Sales 951 000
Debtors Allowances 27 900
Customs duties 14 500
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B. Adjustments and additional information:

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1 Damaged goods returned to creditors. R 21 500

2 Goods taken by the owner for personal use. R 5 200
3 Delivery of merchandise R 1 850
Stock taking on 31 October 2020 revealed: Stock on hand of R 77 900.
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 SUGGESTED ANSWER Subtract debtors’
allowances from sales

Trading Account

Opening stock 112 500 Sales (951 000 - 27 900) 923 100
Take the additional
information into Purchases
account to adjust
452 200 Closing stock 77 900
(478 900 - 21 500 - 5 200)
purchases
Additional Carriage on purchases
information is taken
into account to (46 300 +1 850) 48 150

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adjust carriage on
purchases
Customs duties 14 500

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Profit & Loss
373 650
(Gross Profit)
1 001 000 1 001 000

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p ap
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 5. STOCK VALUATION METHODS
Businesses would value their stock using different stock valuation methods, depending
on the type of goods they buy and sell. The stock valuation method is recognized as
business policy:
• To achieve a level of consistency in determining the value of the closing stock and
the gross profit and subsequently taxable income (if applicable)
A SUMMARY OF THE DIFFERENT STOCK METHODS

FIFO (First-In First-Out) Weighted Average Specific Identification

• This method is based on • This is based on an • Large, easily

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the order in which stock is average unit cost, that identifiable, unique
bought and sold. (E.g. is calculated stock items;

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items which have a • Mainly suited for similar • Each item has its own
limited shelf life due to valued stock items cost price (as per the
fashion / seasons / purchased regularly and invoice) such as cars.

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technology / expiring in large quantities. E.g. • Closing stock is the
dates such as clothing / canned food/sports gear (cricket value of what is unsold
cellphone /milk / bats)/school uniforms
medicine
• It assumes that stock

•
bought first is sold first
Closing stock value
would be the most
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recent purchases.

CALCULATIONS RELEVANT TO ALL THREE METHODS*

Refer to the Worked Examples
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Specific
FIFO Weighted Average
identification
Total value of stock
Closing stock units x the No. of units
Closing Stock Cost of unsold items
unit cost of the last batches available for sale
value x no. of units unsold.
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purchased
x units on hand
Opening stock + Purchases + Carriage on purchases + Customs/Import duties –
Cost of sales returns – Closing stock depending on the method used (above).
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Gross Profit Sales – Cost of sales

% mark-up Gross Profit x 100

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achieved. Cost of sales* * based on the closing stock calculated above

(Average) stock Average stock × 365
holding period Cost of sales 1
Rate of stock Cost of sales = no. of times per year.
turnover Average Stock

Missing Items Sales – (Opening stock + Purchases – Returns) – Closing stock

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* Carriage on purchases (when goods are returned)
When goods are returned to a supplier, the supplier would generally provide a full refund of
the purchase price.
• If the supplier provides the transport (carriage on purchases), they may decide to also
refund the carriage cost.
• If the supplier has outsourced the transport, then this cost may not be recovered –
remain the cost of the business.
• In either case, this condition will always be stated by the question, so that you will know
whether to include the carriage on purchases (or exclude this) when calculating the
value of returns.

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5.1 FIFO - WORKED EXAMPLE 1

You are provided with the information related to Nosi Traders. The business used the
first - in - first - out method to value stock.
REQUIRED:
Calculate the following for February 2020
• Value of closing stock
• Cost of sales
• Gross profit
•

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Average stock holding period
INFORMATION:

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A. Stock balances: UNITS UNIT PRICE TOTAL
1 March 2019 20 R 6 030

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28 February 2020 38 ?

B. Purchases during the year: UNITS UNIT PRICE TOTAL

May 2019 40 R345 R 13 800
September 2019 45 R360 16 200
January 2020
TOTAL
30
115
s. R375 11 250
41 250
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C. RETURNS: Three units (3) from September 2019 purchases.
D. Total sales revenue amounted to R41 400 (92 units)
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SUGGESTED ANSWER

Calculate the following on 28 February 2020:

Value of the closing stock using First-In-First-Out.
The closing stock takes into account the most recent
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(30 x 375) (8 x 360) batches purchased.

11 250 + 2 880 = 14 130 The 38 units on hand is reflected at 30 units from the
January purchases and 8 must be taken from the
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September batch.
The cost of sales
The closing stock amount calculated above must be used
6 030 + 41 250 – 1 080 – 14 130 in the formula.
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= 32 070
The gross profit
The sales amount is given. If not, it must be calculated
41 400 – 32 070 = 9 330 using relevant information that will be provided.
The cost of sales calculated above is then used.

The average stock holding period.

Note that both amounts calculated above are used. The
½ (6 030+ 14 130) x 365 closing stock is part of the average stock (14 130) and the
cost of sales
32 070
= 114,7 / 115 days

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Points to Note:

• The closing stock value is more realistic as it uses the cost of the last batches
purchased.
• The cost of sales is low because the earlier cost prices are used.
• If a fixed selling price was applied, then a higher profit was made on the earlier sales
than on the most recent sales (it would be problematic to set a fixed % mark-up, due to
the change in the cost prices over time).
• Be alert to returns from the most recent batch purchased. This must be subtracted,
before calculating the value of the closing stock.
• Always add any carriage on purchases to the cost (and add this to the individual cost of

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the products). At times, the supplier may decide to refund the carriage on purchases.
Read carefully, before doing the calculation.

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PRACTICE ACTIVITY 1 NSC NOV 2018 ADAPTED

VUYISILE'S SUITCASE SHOP

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Tabile Vuyisile sells travel suitcases. The year-end is 30 June 2020.
REQUIRED:
1.1.1 Calculate the value of the closing stock on 30 June 2020 using the first-in-

1.1.2
first-out (FIFO) method. s.
Tabile suspects that suitcases have been stolen. Provide a calculation to
support his concern.
(5)

(5)
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1.1.3 Tabile is concerned about the volume of stock on hand.
• Calculate for how long his closing stock is expected to last. (6)
• State ONE problem with keeping too much stock on hand and ONE
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problem with keeping insufficient stock on hand. (4)

INFORMATION:

• Stock balances:
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UNITS UNIT PRICE TOTAL

Opening stock 420 R2 175 R913 500
Closing stock 496 ?
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• Purchases, returns and carriage:

UNITS UNIT PRICE TOTAL
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Purchases 3 155 R8 460 850

September 2019 850 R2 250 R1 912 500
December 980 R2 670 R2 616 600
March 2020 875 R2 930 R2 563 750
June* (see returns) 450 R3 040 R1 368 000
Returns*
25 R3 040 R76 000
(from June purchases)

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

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ANSWER SHEET

1.1 VUYISILE'S SUITCASE SHOP

1.1.1 Calculate the value of the closing stock on 30 June 2020 using the first-in-first-
out method.

Workings Answer

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1.1.2 Tabile suspects that suitcases have been stolen. Provide a calculation to support

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his concern.

Workings Answer

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1.1.3 Tabile is concerned about the volume of stock on hand.
Calculate for how long his closing stock is expected to last.
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Workings Answer
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ONE problem with keeping too much stock on hand:
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ONE problem with keeping insufficient stock on hand:

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SOLUTION - PRACTICE ACTIVITY 1

1.1 VUYISLE'S SUITCASE SHOP

1.1.1 Calculate the value of the closing stock on 30 June 2020 using the
first-in-first-out method.
two marks two marks

425 x 3 040 P 1 368 000 – 76 000 1 292 000 P

450 – 25

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71 R x 2 930 P 208 030
496 – 425 or units above
1 500 030 R

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1.1.2 Tabile suspects that suitcases have been stolen. Provide a calculation

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to support his concern.
(3 155 – 25)
420 + 3 130 – 3 050 – 496 = 4 units
P P P P R
–420 – 3 130 + 3 050 + 496 = –4 units s. 5
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1.1.3 Tabile is concerned about the volume of stock on hand.
Calculate for how long his closing stock is expected to last.
1 500 030 R x 365 (or 12) P
913 500 P + 8 384 850 P – 1 500 030 R
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8 460 850 – 76 000

9 298 350 two marks / 7 798 320 three marks

= 70,2 days R OR COS: 913 500 + 1 912 500 + 2 616 600 + 2 355 720
OR: 2,3 months one mark one mark one mark one mark
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OR: IF UNITS ARE USED:

two marks one mark one method mark two marks one mark one method mark
496 x 12 = 1,95 months OR 496 x 365 = 59,4 days
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3 050 two marks 3 050 two marks

ONE problem with keeping too much stock on hand: ONE point üü

Can become obsolete and therefore useless to customers.

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Staff may see less movement in stock and decide to steal.

Cost of storage / lack of storage space.
ONE problem with keeping insufficient stock on hand: ONE point üü

Will not meet the needs of consumers – they may go elsewhere to buy.
Loss of income from sales. 4

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5.2 THE WEIGHTED AVERAGE METHOD USED THE FOLLOWING
FORMULA:

!"!#$ &#$'( ") !*( '+,!- #&#,$#.$( !" .( -"$/

x units of stock on hand
+'0.(1 ") '+,!- #&#,$#.$(

WORKED EXAMPLE 2 (Weighted Average Method)

TBT uses the weighted average method for stock valuation
Calculate the following on 29 February 2020, the financial year-end:

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• Value of closing stock using the weighted average method.
• Cost of sales

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• Gross profit
• Average stock holding period
INFORMATION:

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A. Stock balances: UNITS UNIT PRICE TOTAL
1 March 2019 25 R330 R 8 250
29 February 2020 38 ?
B. Purchases during the year: UNITS UNIT PRICE TOTAL
May 2019
September 2019
January 2020
s.
45
45
25
R350
R365
R380
R 15 750
16 425
9 500
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TOTAL 115 41 675
Returns 3 R380 ?
*Carriage on purchases: R1 905.
C. RETURNS: Three units (3) from the January 2020 purchases.
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D. Sales amounted to R50 050 ( 91 units)

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 SUGGESTED ANSWER

Calculate the following on 29 February 2020:

Value of the closing stock using the weighted average.

50 690 (3 x 380) The total value of the goods, 50 690 ÷ by the

8 250 + 41 675 + 1 905 – 1 140 x 38 units available, 137 = 370 is referred to as the
25 + 115 – 3 weighted average price per item. Multiplying
137 this by the units on hand (38) is the value of
the closing stock that will be recorded in the
Balance Sheet.
= R14 060

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The cost of sales
The closing stock is used in the calculation
8 250 + 41 675 + 1 905 - 1 140 - 14 060 of the cost of sales. The average price is

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generally less than the most recent prices
(used in FIFO) resulting in a larger cost of
= 36 630 sales.
Gross profit Subtracting the larger cost of sales will

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result in a smaller gross profit.
50 050 - 36 630 = 13 420
The number of units missing or stolen.
Available for sale units sold and closing stock units Compare the units sold (sales) and closing
137 129
(25 + 115 – 3) – (38 + 91) = 8 units s. stock units to the total number of units that
was available for sale. If this is not the same,
then the difference will be missing.
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Points to note:
• The weighted average is only the average cost per unit; multiplying the closing
number of units by this figure will equal to the closing stock value thus completing the
answer.
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• It is easier to determine the loss due to theft by using the average price. This is difficult
to establish under FIFO method where we will need to know the affected batch.

Feb/March 2017 adapted

PRACTICE ACTIVITY 2:
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2.1 Complete the following sentences by filling in the missing words. Write only the
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words next to the question number (2.1.1–2.1.3) in the ANSWER BOOK.

2.1.1 The method that is appropriate for very expensive, individually
recognisable items is the … method. (1)
2.1.2 The method that assumes that the older stock is sold first is the … method. (1)
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2.1.3 The method that divides the total cost of goods available for sale by the
number of units is the … method. (1)
2.2 XY SPORT SHOP
Popo Shabalala is the owner of this business. This business uses the periodic
inventory system.
2.2.1 Calculate the unit price of cricket bats on 1 July 2019. (2)
2.2.2 Calculate the value of the stock on hand on 30 June 2020 using the
weighted-average method. (10)

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 2.2.3 Calculate the gross profit on 30 June 2020. (5)
2.2.4 Calculate how long (in days) it is expected to sell the closing stock of 465
cricket bats. Use the closing stock in your calculation. (4)
2.2.5 Popo is concerned about the control of cricket bats.
• Provide a calculation to support his concern. (5)
• How can Popo solve this problem? Explain ONE point. (2)
INFORMATION:
A. STOCK OF CRICKET BATS
UNITS UNIT PRICE TOTAL

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Opening stock (1 July 2019) 350 ? R420 000
Closing stock (30 June 2020) 465 ? ?

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B. PURCHASES, RETURNS AND CARRIAGE
UNITS UNIT PRICE TOTAL

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Purchases 3 150 R4 302 500
September 2019 1 100 R1 250 R1 375 000
January 2020 950 R1 350 R1 282 500
March 2020 650 R1 475 R958 750
June 2020
Returns (from June purchases)
Carriage on purchases:
s.
450
20
R1 525
?
R686 250
?
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• Total transport cost of stock purchased during the year is R110 400.
• No refund was received for carriage on the returns.

C. SALES: Total sales of R5 400 000 comprised 3 000 cricket bats sold at R1 800
each.
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ANSWER SHEET
2.1 2.1.1
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2.1.2
2.1.3 3
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2.2.1 Calculate the unit price of cricket bats on 1 July 2019.

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2.2.2 Calculate the value of the stock on hand on 30 June 2020 using the
weighted-average method.

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2.2.3 Calculate the gross profit on 30 June 2016.

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5

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2.2.4 Calculate how long (in days) it is expected to sell the closing stock of 465
cricket bats. Use the closing stock in your calculation.

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4

2.2.5 Provide a calculation to support Popo concern about the control of

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cricket bats.
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How can Popo solve this problem? Explain ONE point.

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SOLUTION PRCTICE ACTIVITY 2

2.1 2.1.1 Specific identification P

2.1.3 First In First Out/FIFO P
2.1.3 Weighted Average P 3

2.2.1 Calculate the unit price of cricket bats on 1 July 2019.

420 000 / 350 = R1 200 üü 2

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 2.2.2 Calculate the value of the stock on hand on 30 June 2020 using the
weighted-average method.
Net purchases = R 4 272 000 three marks
Purchases with carriage = R4 412 900 two marks
Net purchases with carriage = R4 382 400 four marks

4 802 400 five marks

R420 000P+ R4 302 500P+ R110 400P – R30 500üü x 365P = R641 700 R
350 P+ 3 150 P– 20 P 1
3 480 three marks

eight marks one mark one method mark

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1 380 x 365 = R641 700 10

2.2.3 Calculate the gross profit on 30 June 2020

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4 802 400 R – 641 700 R = 4 160 700 R

400 000P – 4 160 700 = R1 239 300R

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OR
5 400 000 – 4 802 400 – 641 700 = R1 239 300 5
2.2.4 Calculate how long (in days) it is expected to sell the closing stock of 465
cricket bats. Use the closing stock in your calculation.
641 700 R x
4 160 700R
365P = 56,3 days R
1
OR: IF UNITS ARE USED
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one mark one mark one mark one method mark
465 / 3 000 x 365 = 56,6 days
3 480 - 480 4

2.2.5 Provide a calculation to support Popo's concern about the control of

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cricket bats.
3 480 PR
(350 + 3 150 – 20) – 3 000 P – 465 P = 15 missing R

How can André solve this problem? Explain ONE point.

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Expected responses for 2 marks: PP

• Count stock regularly/randomly and check against stock records
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• Order smaller quantities, but more frequently

• Improve physical security e.g. controls at entrance/security cameras
• Restrict access to the storeroom
Expected responses for 1 mark:
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Stock count / Security cameras 7

5.3 SPECIFIC IDENTIFICATION - WORKED EXAMPLE 3:

The business sells TWO models of bicycles.

Refer to the different calculations in the table below.
INFORMATION:

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 A. Opening UNITS
Model Units Unit cost Total
Stock SOLD
1 March 2017 YYY 6 R9 000 R54 000 5
ZZZ 8 R7 000 R56 000 6
110 000

B. UNITS
Purchases: Model Units Unit cost Total
SOLD
June 2017 YYY 10 R9 000 R90 000
YYY: 18
ZZZ 5 R7 500 R37 500
September YYY 15 R9 000 R135 000

a
ZZZ: 9
2017 ZZZ 8 R7 500 R60 000
322 500

.z
C. Sales:
YYY is sold at a profit mark-up of 75% on cost.
ZZZ is sold at a fixed selling price of R15 500 each.

co
SPECIFIC CALCULATIONS RELEVANT TO SPECIFIC IDENTIFICATION:
Value of closing stock.
6 - 5 = 1 x 9 000
8 - 6 = 2 x 7 000
25 -18 = 7 x 9 000
9 000
14 000
63 000
s.
Determine the number of units unsold, for each
model. 8 of YYY and 6 of ZZZ.
Multiply this by the cost price of each model.
er
13 9 = 4 x 7 500 30 000
116 000

The cost of sales

ap

The same formula as used in FIFO and

110 000 + 322 500 – 116 000 316 500 WAM. The closing stock is subtracted
from the available stock for sale.

Sales
p

It is important to determine the selling price

YYY (5 + 18 = 23 x 15 750) 362 250 per model. Then calculate the number of
units sold, per model.
ZZZ (6 + 9 = 15 x 15 500 ) 232 500
et

594 750

The gross profit

tv

Use the figures calculated above, in this

594 750 – 316 500 278 250 calculation.

20 | P a g e
PRACTICE ACTIVITY 3 NSC Nov 2017 adapted
3.1 Choose the correct word(s) from those given in brackets. Write only the word(s) next to
the question number (3.1.1–3.1.4) in the ANSWER BOOK.
3.1.1 The (specific identification/weighted-average) stock valuation method is best
suited for products of similar value purchased in large quantities.
3.1.2 Cost of sales is determined at the point of sale in the (perpetual/ periodic)
inventory system.
3.1.3 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

a
purchases.
3.1.4 In the periodic inventory system, carriage on goods purchased is recorded as an

.z
(expense/asset) to the business. (4)
3.2 SHINY-WHEELS (PTY) LTD
You are provided with information relating to Shiny-Wheels (Pty) Ltd for the three

co
months ending 30 September 2020. The business trades in motorbikes and helmets.
Beauty, the owner, wants to assess his stock records before any price increases.
REQUIRED:
Motorbikes: s.
3.2.1 Calculate the value of the closing stock on 30 September 2020 using the specific
identification method. (7)
er
3.2.2 Beauty requires your advice on the three different models of motorbikes in which
he is trading. Explain TWO points of advice. (4)
Helmets:
3.2.3 Beauty suspects that helmets are being stolen from the shop despite security
ap

cameras being installed.

• Provide a calculation to verify his suspicion. (5)
• What can Beauty do to improve the internal control of stock? State THREE
points. (3)
p

INFORMATION:
A. Motorbikes: Information for three months ended 30 September 2020:
et

Stock on 1 July 2020:

MODEL UNITS COST PRICE PER UNIT TOTAL (R)
AO2 12 R 24 300 291 600
tv

Total purchases:
MODEL UNITS COST PRICE PER UNIT TOTAL (R)
AO2 6 R 24 300 145 800
AO3 15 R 27 400 411 000
AO4 18 R 31 600 568 800
39 1 125 600

21 | P a g e
 Sales:
TOTAL SALES AMOUNT
MODEL UNITS SOLD
(R)
AO2 8 311 040
AO3 11 482 240
AO4 10 505 600
29 1 298 880

B. Helmets: Information for three months ended 30 September 2020:

a
Stock balances according to physical count:

.z
COST PRICE
UNITS TOTAL (R)
PER UNIT (R)
1 July 2020 30 R500 R15 000
30 September 2020 12 ?

co
Purchases:
UNITS
COST PRICE
DATE PURCHASE TOTAL (R)
PER UNIT (R)
D
20 July 2020
20 August 2020
20 September 2020
25
30
20
s. R510
R525
R540
R12 750
R15 750
R10 800
er
TOTAL 75 R39 300
Returns: Five defective helmets from the purchases in August 2020 were returned
to suppliers for a full refund.
ap

Sales: 85 helmets were sold at R600 each.

p
et
tv

22 | P a g e
ANSWER SHEET
3.1 CONCEPTS

3.1.1
3.1.2
3.1.3
3.1.4 4

3.2 SHINY-WHEELS (PTY) LTD

a
Motorbikes:
3.2.1 Calculate the value of the closing stock on 30 September 2020 using the

.z
specific identification method.

co
7

3.2.2
s.
BEAUTY requires your advice on the three different models of motorbikes in
which he is trading. Explain TWO points of advice.
er
Point 1:
ap

Point 2:
p

Helmets:
et

3.2.3 Calculate the value of the closing stock on 30 September 2020 using the
weighted-average method.
tv

3.2.4 BEAUTY suspects that helmets are being stolen from the shop despite
security cameras being installed. Provide a calculation to verify his
suspicion.

5
23 | P a g e
 What can BEAUTY do to improve the internal control of stock?
State THREE points.

Point 1:

a
.z
Point 2:

co
Point 3:

SOLUTION PRACTICE ACTIVITY 3

s.
er
3.1 3.1.1 Weighted average / WA P
3.1.2 Perpetual P
3.1.3 First-in-first-out / FIFO P
3.1.4 Expense P 4
ap

3.2 SHINY-WHEELS (PTY) LTD

Motorbikes:

3.2.1 Calculate the value of the closing stock on 30 September 2020 using the
p

specific identification method.

243 000 PP + 109 600 PP + 252 800 PP = 605 400 R

et

18 – 8 15 – 11 18 – 10
(10 x 24 300) + (4 x 27 400) + (8 x 31 600)

OR
tv

OS +P – COS = CS
one mark one mark four marks one method mark
291 600 + 1 125 600 – 811 800 = 605 400
316 000 + 301 400 + 194 400 7
3.2.2 BEAUTY requires your advice on the three different models of motorbikes in
which he is trading. Explain TWO points of advice.

Any TWO valid point of advice PP PP

24 | P a g e
 Expected responses:
• Reduce the price of AO2 to increase sales / A lower mark-up% will help in
reducing stock levels.
• Discontinue / decrease the AO2 product and look at stocking alternative later
model products.
• Stock more AO3 products as they seem to be more popular and in an
affordable range.
• Stock more of the AO4 model because gross profit per unit is the biggest on
the item. 4

Helmets:

a
3.2.3 Calculate the value of the closing stock on 30 September 2020 using the
weighted-average method.

.z
51 675 four marks
54 300 two marks (5 x 525) two marks

co
15 000 P + 39 300 P – 2 625 PP x 12 P = 6 201 R
30 P + 75 P – 5 P
105 two marks 100 three marks
(517 x 12)
OR 516,75 x 12 = 6 201 or 6 204 (weighted-average rounded off)
seven marks s.
3.2.4 BEAUTY suspects that helmets are being stolen from the shop despite using
security cameras. Provide a calculation to verify his suspicion.
9
er
(30 + 75 – 5)
100 PR – 12 P – 85 P = 3 helmets missing R
5
ap

What can BEAUTY do to improve the internal control of stock?

State THREE points.

Three valid points P P P

p

Expected responses:
• Do regular physical stock counts
• Place tracking devices on the products / security price tags
et

• Provide secure display cabinets for the stock

• Improve security at the gates / inspect items and check to sales slip
• Division of duties (if staff is suspected)
tv

• Buy in smaller quantities / more regularly

Do NOT accept security cameras / CCTV

3

25 | P a g e
 6. INTERNAL CONTROL PROCESSES

• Internal control is learned from grade 10.

• The topic can be integrated with stock.
• Comment about internal control measures from within the business.
• Identify problems and provide solutions.

Count stock regularly/randomly and check against stock records/ record of lost
material.
Order smaller quantities, but more frequently.

a
Improve physical security e.g. controls at entrance/security cameras.

.z
Insure the stock against theft, fire and damages resulting from natural disaster.
Division of duties-receiving of stock, payments and stock keeping should be done
by separate individuals to minimise the risk of fraudulent activities. Responsible

co
person should be able to provided explanations.
Standardise record keeping -check if records of stock received match payments for
stock.

s.
Accountability – responsible person should be able to provided explanations.
Locate the right suppliers in terms of quality, negotiate discounts.
er
WORKED EXAMPLE 4
SCENARIO
Nomsa, the owner of TT Traders selling cell phones, suspects that although
ap

cameras are installed in the building and the security personnel is available, her
employees are stealing from the business.

Provide other TWO internal control measures she can put in place to address the problem of theft.
p

SUGGESTED ANSWER
et

Provide other TWO internal control measures she can put in place to address the
problem of theft.

Any two valid points

tv

Improve the physical security at doors/bar coded strips/tracking devices etc.

Use security detectors on products

Rotate duties (if staff is suspected)

Do regular/random stock control/checks/stock-take.

Put dummy phones on display and keep real phone locked in cabinet.

26 | P a g e
7. CONSOLIDATION ACTIVITIES
ACTIVITY 1: INVENTORY VALUATION AND INTERNAL CONTROL
Feb/March 2018 adapted
SASA TRADERS
You are provided with information relating to SASA Traders. The business sells one type
of plastic table. Their financial year ends on 31 December. The business uses the FIFO
method to value their stock. They use the periodic inventory system.

a
REQUIRED:
1.1.1 Calculate the value of the closing stock according to the FIFO method on

.z
31 December 2020. (6)
1.1.2 Calculate the following for the year ended 31 December 2020:
• Cost of sales

co
• Gross profit (8)
1.1.3 The owner considers changing the stock valuation method to the weighted-
average method. Calculate the value of the closing stock on 31 December 2020
by using the weighted-average method. (6)

INFORMATION:
s.
er
A. Inventories:
NUMBER OF TOTAL
DATE PER UNIT
UNITS VALUE
1 January 2020 540 R350 R189 000
ap

31 December 2020 440 ? ?

B. Purchases and returns in 2020:

Purchases:
p

NO. TOTAL
PER TOTAL CARRIAGE TOTAL
DATE OF PURCHASE
UNIT PURCHASES PER UNIT CARRIAGE
UNITS COST
et

31 550 R203 500

R370 R13 750 R217 250
Mar.
30 900 R342 000
R380 R22 850 R364 850
Jun.
tv

30 500 R175 000

R350 R12 500 R187 500
Sep. R25
30 300 R120 000
R400 R9 000 R129 000
Nov. R30
Totals 2 250 R840 500 R58 100 R898 600

27 | P a g e
Returns:
NO. OF PER TOTAL CARRIAGE TOTAL
DATE
UNITS UNIT RETURNS PER UNIT CARRIAGE

5 Jul. 50 R380 R19 000 0 0

These returns are from the purchases of June 2020. There is no refund for
carriage.

C. Sales:

a
2 300 units at R600 each = R1 380 000

.z
co
s.
er
p ap
et
tv

28 | P a g e
ACTIVITY 2 NSC Nov 2019 adapted
George Sicwetsha is the majority shareholder and CEO of Sicwetsha Ltd. The company
supplies hotels with cabinets and lamps.
The periodic system is used. The year-end is 30 September 2020.
REQUIRED:
CABINETS
2.1 Calculate the value of closing stock for cabinets on 30 September 2020 using the
FIFO method. (6)
2.2 In 2020, the company decided to extend the target market and to grant trade

a
discounts to increase sales.
2.2.1 Calculate the % mark-up achieved in 2020. (4)

.z
2.2.2 Provide TWO points (with figures) to prove that this decision achieved its
aims. (4)

co
2.2.3 The CEO feels that this decision also negatively affected the company.
• Provide TWO points (with figures) to support his opinion. (4)
• Give the directors advice to solve this problem. Explain TWO points. (2)

LAMPS
2.3
s.
Calculate the stockholding period for lamps (use closing stock). (3)
er
2.4 George is concerned about the control of lamps. An investigation revealed that the
store manager was supplying local boarding houses with lamps without
documentation.
• Calculate the number of missing lamps. (5)
ap

• Give TWO suggestions to solve this problem. (4)

TELEVISION SETS
p

2.5 During April 2020, while George was in hospital, Mzwandile Sefatsa (the chief
financial officer) decided to include television sets in their product range. He was
able to secure bulk discounts from Thisway on two TV set models, namely LYN and
et

KYA.
Calculate the value of the closing stock of TV sets on 30 September 2020 using the
specific identification method. (7)
tv

2.6 An employee of Thisway told George that Mzwandile received a 10% 'commission'
from Thisway for buying excess stock. George wants to discuss this at the next
board meeting.
Explain THREE different concerns that George would have about this problem. (6)

29 | P a g e
INFORMATION:
A. Stock records of cabinets and lamps:
CABINETS LAMPS
UNIT
UNITS TOTAL UNITS TOTAL
PRICE
Stock balances
1 Oct. 2019 370 R800 R 296 000 600 R108 000
30 Sep. 2020 280 ? 265 R59 625
Purchases: 2020
January 800 R920 R 736 000 1 200 R240 000
April 1 200 R990 R 1 188 000 1 800 R432 000

a
July 250 R1 100 R 275 000 800 R210 000
Total 2 250 R2 199 000 3 800 R882 000

.z
Returns 20 R1 100
Sales 3 675
Cost of sales R930 375

co
B. Information relating to cabinets:
2020 2019
Sales
Cost of sales
Units sold
s.
R3 480 000
R2 170 500
2 320
R3 375 000
R1 950 000
2 500
er
Selling price per unit R1 500 R1 400
% mark-up achieved ? 73%
Customers on record 37 26

C. Stock records of television sets:

ap

UNIT
MODELS UNITS TOTAL
PRICE
Purchases
p

May 2020 LYN 800 R6 000 R4 800 000

KYA 950 R7 200 R6 840 000
July 2020 LYN 500 R6 000 R3 000 000
et

KYA 500 R7 200 R3 600 000

TOTAL 2 750 R18 240 000
Sales LYN 430 R8 400 R3 612 000
KYA 540 R10 080 R5 443 200
tv

30 | P a g e
ACTIVITY 3 NSC Nov 2020 adapted
VANDERBIJLPARK ACCESSORIES
The owner is Xolo VANDERBIJLPARK. The business uses the first-in first-out method to
value gas lamps. They decided to sell gas stoves as well, expecting a demand due to
increased load shedding. The specific identification method is used to value these stoves.
The financial year-end is 30 April each year.
REQUIRED:
3.1.1 Calculate the following for the gas lamps on 30 April 2021:

a
• Value of closing stock (using FIFO) (6)
• Stockholding period in days (using closing stock) (6)

.z
3.1.2 Xolo suspects that the stock of gas lamps are not well controlled.
Calculate the number of gas lamps missing. (4)

co
3.1.3 An investigation revealed that Xolo's brother (employed at the store) orders gas
lamps using the business ordering system, and sells them privately to his
friends.
What should Xolo say to his brother when dealing with this matter? Provide TWO

3.1.4
points. s.
Calculate the closing stock value for gas stoves on 30 April 2021 (using the
specific identification method).
(4)

(5)
er
3.1.5 Xolo thinks he should stop selling gas stoves as they are causing a liquidity
problem and the profit is low.
(2)
• Provide figures to support his opinion.
ap

• Explain TWO points to convince him NOT to discontinue trading in gas (4)
stoves.
p
et
tv

31 | P a g e
INFORMATION:
A. STOCK RECORDS FOR GAS LAMPS:

UNIT PRICE AMOUNT

UNITS
(R) (R)
Stock balance on 1 May 2020 230 R12 650
Purchases during the year: 2 770 R193 500
July 2020 650 R60 39 000
September 2020 800 R68 54 400
January 2021 1 100 R75 82 500

a
March 2021 220 R80 17 600
Returns (from March 2021) 40 ? ?

.z
Available for sale 2 960
Stock balance: 30 April 2021 270 ? ?

co
Total sales 2 180 R140 R305 200

B. STOCK RECORDS FOR GAS STOVES:

PURCHASES:
MONTH
August 2020

October 2020
MODEL
B-LITE
B-LITE
s.
UNITS
80
80
UNIT PRICE
R495
R495
AMOUNT
R39 600
R39 600
er
SMART 100 R700 R70 000
B-LITE 120 R495 R59 400
February 2021
SMART 60 R700 R42 000

SALES:
ap

MODEL UNITS SOLD SELLING PRICE AMOUNT

B-LITE 132 R790 R104 280
SMART 54 R980 R52 920

GROSS PROFIT AND MARK-UP:

p

MODEL COST OF SALES GROSS PROFIT MARK-UP

B-LITE R65 340 R38 940 60%
et

SMART R37 800 R15 120 40%

tv

32 | P a g e
ACTIVITY 4: INVENTORY VALUATION SC June 2018 adapted
4.1 BAFANA CYCLES
You are provided with information for the year ended 31 May 2019. The owner is
Fred Mzangwa. The business sells different models of bicycles. Fred uses the periodic
inventory system and the specific identification method to value stock.
REQUIRED:
4.1.1 Calculate:

• Value of the closing stock of bicycles on 31 May 2019 (8)

a
• Cost of sales for the year ended 31 May 2019 (4)
• Gross profit for the year ended 31 May 2019 (3)

.z
4.1.2 Fred is satisfied that he is selling approximately 18 Cruze bicycles per month.
However, he is concerned that the new Ryder model, despite its lower selling
price, is not selling as quickly as the Cruze model.

co
• Calculate the selling price of a Ryder bicycle. (3)
• Calculate the average number of Ryder bicycles sold per month. (3)
• Indicate how long it will take Fred to sell the closing stock of the Ryder
bicycles. Show calculations. (3)
• s.
Give ONE possible reason for the slow sales of Ryder bicycles, and give
advice (ONE point) to Fred in this regard. (4)
er
INFORMATION:
A. Three different models of bicycles were sold during the 2019 financial year.
MARK UNITS OTHER
MODEL SALES
ap

-UP SOLD INFORMATION

Tempo 60% 66 R897 600 This model is no longer produced.

R3 308
Cruze 60% 220
800
p

This model was introduced on 1 Sep.

Ryder 35% 98 R979 020 2018.
TOTAL SALES R5 185 420
et

B. Opening stock:
COST PRICE PER
DATE MODEL UNITS TOTAL
tv

UNIT
Tempo 70 R8 500 R595 000
1 Jun. 2018
Cruze 0

33 | P a g e
C. Purchases and returns:

COST PRICE PER

DATE MODEL UNITS TOTAL
UNIT
PURCHASES:
1 Jun. 2018 Cruze 260 R9 400 R2 444 000
1 Sep. 2018 Ryder 200 R7 400 R1 480 000
RETURNS:
Feb. 2019 Ryder 45 R7 400 (R333 000)
Net purchases R3 591 000

a
.z
co
s.
er
p ap
et
tv

34 | P a g e
4.2 MANAGEMENT OF INVENTORIES: CELIA'S CLOTHING
Celia Mtolo owns a small clothing business. You are provided with information
for the year ended 28 February 2019. The business sells T-shirts, jackets and
pants.
Celia took certain decisions at the beginning of the 2019 financial year.
REQUIRED:
Quote relevant figures for ALL the questions below.
4.2.1 T-shirts:
Explain why it was NOT a good idea to change to a cheaper supplier of T-

a
shirts. State TWO points. (4)
4.2.2 Jackets:

.z
Celia decided to change the supplier in 2019 and to change the mark-up
%.
How has this decision affected the business? State TWO points.

co
(4)
4.2.3 Pants:
Celia reduced the selling price of pants significantly in the 2019 financial year
in response to a new competitor who sells similar pants at R990.

to improve the profit on pants in 2019.

INFORMATION:
s.
Based on the information below, make TWO separate suggestions to Celia
(4)
er
T-SHIRTS JACKETS PANTS
2019 2018 2019 2018 2019 2018
Gross units sold 1 200 1 080 150 165 280 325
ap

Returns by
40 0 0 5 15 15
customers
Selling price R75 R120 R1 650 R1 085 R910 R1 054
Cost price R50 R80 R1 000 R700 R650 R620
Mark-up % 50% 50% 65% 55% 40% 70%
p

Gross profit R29 000 R43 200 R97 500 R61 600 R68 900 R134 540
et
tv

35 | P a g e
ACTIVITY 5: INVENTORY VALUATION (40 marks; 25 minutes)

5.1 Choose the correct term from those given in brackets. Write only the term next to
the question numbers (5.1.1 to 5.1.3) in the ANSWER BOOK.

51.1 The most recent purchases will be considered as closing stock in the
(FIFO/weighted-average) stock valuation method.

5.1.2 Merchandise purchased is recorded in a Trading Stock Account in the

(perpetual/periodic) inventory system.

a
5.1.3 Carriage on purchases is recorded as an (asset/expense) in the periodic
inventory system. (3)

.z
5.2 PHOTO-FIX TRADERS

co
The information relates to Photo-fix Traders for the financial year ended
30 April 2020. The business is owned by PETER Samuels and sells two models of
cameras (Grand and De-Lux) and photo frames.
• The stock of cameras is valued using the specific identification method.
• s.
Photo frames are valued using the weighted average method.
REQUIRED:
er
5.2.1 Calculate the value of closing stock of cameras on 30 April 2020.
(9)
5.2.2 Calculate the value of closing stock of photo frames.
ap

(8)
5.2.3 The owner suspects that photo frames are being stolen. Provide a
calculation to confirm his suspicions. (5)
5.2.4 PETER is thinking of employing an assistant at a wage of R3 500 per
p

month to control the stock of photo frames. Explain why this is NOT a
good idea. Provide TWO points with figures/calculations. (6)
et

INFORMATION:
The following information is in respect of the year ended 30 April 2020:
tv

36 | P a g e
 A. CAMERAS: STOCK, BOUGHT AND SOLD

BOUGHT UNITS
UNITS UNIT COST TOTAL SOLD

GRAND MODEL
Opening stock 20 R5 500 R110 000 14
R1 380
Purchases 240 R5 750 170
000

DE-LUX MODEL

a
R1 104
Net purchases: 270 235
000

.z
September 2018 180 R4 000 R720 000 140
Returns (30) R4 000 (R120 000)
January 2020 120 R4 200 R504 000 95

co
B. PHOTO FRAMES: STOCK, BOUGHT AND SOLD

UNITS AMOUNTS
Opening stock 60 R7 200
Purchases
Returns
Closing stock
s.
720
30
80
R108 000
R4 500
?
er
Sales 657

5.3 MANAGEMENT OF INVENTORIES

ap

The information relates to Lyle Furnishers for the financial year ended 28 February
2020. The business sells cupboards, tables and chairs. No stock went missing
during the year.
REQUIRED:
p

Provide ONE different problem (with figures) relating to EACH product and ONE
solution to EACH problem. (9)
et

INFORMATION:

CUPBOARDS TABLES CHAIRS

tv

Opening stock (units) 200 160 1 300

Purchases (units) 2 500 3 050 6 000
Selling price per unit R1 750 R850 R350
Credit sales (units) 800 2 400 2 100
Returns by customers (units) (500) (10) 0
Cash sales (units) 1 000 600 2 250
Closing stock (units) 400 200 2 950
Cash received from cash sales R1 750 000 R470 000 R787 500

37 | P a g e
 ACTIVITY 6 EC 2020 Trial adapted

Nigari Stores sells ladies’ and men's watches:

• Ladies’ watches are imported from Germany.

• Men’s watches are locally manufactured.

The financial year ended on 31 August 2020.

REQUIRED:

a
6.1.1 Calculate the following in respect of ladies watches on 31 August 2020:

(a) Value of Closing stock (5)

.z
(b) Cost of sales (5)
(c) Stock-holding period (in days), using average stock. (4)
6.1.2 Calculate the following in respect of men’s watches on 31 August 2020:

co
(a) Value of Closing stock (7)
(b) Sales (3)

6.1.3 Explain why the business uses different methods to value each type of watch.
State ONE valid point.

INFORMATION:
s. (2)
er
A. • The business uses the following methods to value the stock of watches:
o Ladies watches – specific identification
o Men’s watches – weighted average
• No watches were stolen or lost during the financial year.
ap

B. Information relating to ladies’ watches:

UNIT TOTAL UNITS SOLD TOTAL
p

UNITS
PRICE AMOUNT SALES
Opening stock 12 R6 500 R78 000 11 R125 125
et

Purchases: 35 R252 000

September 2019 15 R6 800 R102 000 10 R119 000
January 2020 12 R7 300 R87 600 10 R127 750
April 2020 8 R7 800 R62 400 5 R68 250
tv

47 R330 000 36 R440 125

• The cost price of ladies watches includes transport costs and customs duties.

• These watches are sold at a mark-up of 75% on cost.

38 | P a g e
C. Information relating to men’s watches:

TOTAL
UNITS UNIT PRICE
AMOUNT
Opening stock 95 R340 R32 300
Purchases: 675 R259 900
September 2019 320 R375 R120 000
January 2020 210 R390 R81 900
April 2020 145 R400 R58 000

a
• Men’s watches are sold at a fixed selling price of R520 each.
• Cost to transport of the men’s watches from local suppliers amounted to R11 950 for

.z
the financial year and is not included in the figures above.
• There were 92 men’s watches in stock on 31 August 2020.

co
s.
er
p ap
et
tv

39 | P a g e
8. GRADE 12 ACCOUNTING FINANCIAL INDICATOR FORMULA SHEET

Gross profit x 100 Gross profit x 100

Sales 1 Cost of sales 1

Net profit before tax x 100 Net profit after tax x 100
Sales 1 Sales 1

Operating expenses x 100 Operating profit x 100

Sales 1 Sales 1

a
Total assets : Total liabilities Current assets : Current liabilities

.z
(Current assets – Inventories) : Current
Non-current liabilities : Shareholders' equity
liabilities

co
(Trade & other receivables + Cash & cash equivalents) : Current liabilities

Average trading stock x 365 Cost of sales .

Cost of sales

Average debtors x 365

1 s. Average trading stock

Average creditors x 365

er
Credit sales 1 Cost of sales 1
Net income after tax x 100
Net income after tax x 100 Number of issued shares 1
Average shareholders' equity 1
ap

(*See note below)

Net income before tax + Interest on loans x 100
Average shareholders' equity + Average non-current liabilities 1
p

Shareholders' equity x 100 Dividends for the year x 100

Number of issued shares 1 Number of issued shares 1
et

Interim dividends x 100 Final dividends x 100

Number of issued shares 1 Number of issued shares 1
tv

Dividends per share x 100 Dividends for the year x 100

Earnings per share 1 Net income after tax 1

Total fixed costs .

Selling price per unit – Variable costs per unit

NOTE: In this case, if there is a change in the number of issued shares during a financial
year, the weighted-average number of shares is used in practice.

40 | P a g e
ANSWER SHEETS

ACTIVITY 1

1.1.1 Calculate the value of the closing stock according to the FIFO method on
31 December 2020.

a
6

.z
1.1.2 Calculate the cost of sales.

co
Calculate the gross profit.
s.
er
8

1.1.3 Calculate the value of the closing stock on 31 December 2020 by using the
ap

weighted-average method.
p

6
et

What will be the effect on the gross profit if the owner changes to this
valuation method? Provide figures.
tv

41 | P a g e
ACTIVITY 2

CABINETS

2.1 Calculate the value of closing stock using FIFO.

Workings Answer

2.2.1 Calculate the % mark-up achieved in 2019.

a
Workings Answer

.z
4

co
2.2.2 Provide TWO points (with figures) to prove that this decision achieved its
aims.

Point 1

Point 2
s.
er
4

2.2.3 The CEO feels that this decision also negatively affected the company.
Provide TWO points (with figures) to support his opinion.
ap

Point 1
p
et

Point 2

4
Give the directors advice to solve this problem. Explain TWO points.
tv

Point 1

Point 2

42 | P a g e
LAMPS

2.3 Calculate the stockholding period for lamps (use closing stock).
Workings Answer

2.4 Calculate the number of missing lamps.

Workings Answer

a
5

.z
Give TWO suggestions to solve this problem.

co
Suggestion 1

Suggestion 2
4

TELEVISION SETS
s.
er
2.5 Calculate the value of the closing stock of TV sets on 30 September
2019 using the specific identification method.
Workings Answer
ap

7
p

2.6 Explain THREE different concerns that George would have about this
problem.
et

Concern 1

Concern 2
tv

Concern 3
6

43 | P a g e
ACTIVITY 3

3.1 VANDERBIJLPARK ACCESSORIES

3.1.1 Calculate: Value of closing stock for gas lamps (using FIFO)
Workings Answer

a
Calculate: Stockholding period in days for gas lamps (using closing
stock)

.z
Workings Answer

co
6
3.1.2 s.
Xolo suspects that the stock of gas lamps are not well controlled.
Calculate the number of gas lamps missing.
Workings Answer
er
4
ap

3.1.3 What should Xolo say to his brother when dealing with this matter?
Provide TWO points.
p
et

4
3.1.4 Calculate the closing stock value for gas stoves on 30 April 2021 (using
the specific identification method).
Workings Answer
tv

44 | P a g e
3.1.5 Xolo thinks he should stop selling gas stoves as they are causing a
liquidity problem and the profit is low. Provide figures to support his
opinion.

2
Explain TWO points to convince him NOT to discontinue trading in gas
stoves.

a
4

.z
ACTIVITY 4

4.1.1 Calculate the value of the closing stock of bicycles on 31 May 2018.

co
Workings Answer
Tempo
Cruze
Ryder s.
er
8
Calculate the cost of sales for the year ended 31 May 2018.
Workings Answer
ap

4
p

Calculate the gross profit for the year ended 31 May 2018.
Workings Answer
et
tv

4.1.2 Calculate the selling price of a Ryder bicycle.

Workings Answer

45 | P a g e
 Calculate the average number of Ryder bicycles sold per month.
Workings Answer

3
Indicate how long it will take Fred to sell the closing stock of the Ryder
bicycles. Show calculations.
Workings Answer

a
.z
3
Give ONE possible reason for the slow sales of Ryder bicycles.

co
Give advice (ONE point) to Fred in this regard.

s. 4
er
4.2.1 Explain why it was NOT a good idea to change to a cheaper supplier of
T-shirts. State TWO points.
Point 1:
ap

Point 2:

4.2.2 Celia decided to change the supplier in 2018 and to change the
p

mark-up %. How has this decision affected the business? State TWO
points.
et

Point 1:
tv

Point 2:

46 | P a g e
4.2.3 Make TWO separate suggestions to Celia to improve the profit on pants
in Mzangwa.

Point 1:

Point 2:

ACTIVITY 5

a
5.1
5.1.1

.z
5.1.2
5.1.3 3

co
5.2 PHOTO-FIX TRADERS

5.2.1 Calculate:
Value of closing stock of cameras
Workings
s. Answer
er
9
ap

5.2.2 Value of closing stock of photo frames

Workings Answer
p

8
et

5.2.3 The owner suspects that photo frames are being stolen. Provide a
calculation to confirm his suspicions.
Workings Answer
tv

47 | P a g e
5.2.4 Tom is thinking of employing an assistant at a wage of R3 500 per month to
control the stock of photo frames. Explain why this is NOT a good idea.
Provide TWO points with figures/calculations.
Explanation Figures

Point 1

Point 2

a
.z
6

5.3 MANAGEMENT OF INVENTORIES

co
Product Problem Solution

Cupboards
s.
er
ap

Tables
p

Chairs
et

9
tv

48 | P a g e
ACTIVITY 6

6.1.1 Calculate the following in respect of ladies watches on 31 August 2020:

(a) Value of closing stock

a
(b) Cost of sales

.z
co
(c) Average stock-holding period (in days) using average stock.

s.
er
6.1.2 Calculate the following in respect of the men’s watches on 31 August 2020:
(a) Value of closing stock
p ap
et

(b) Sales
tv

6.1.3 Explain why the business uses different methods to value each type of watch. State
ONE valid point.

49 | P a g e
SUGGESTED ANSWERS

CONSOLIDATION ACTIVITY 1

1.1.1 Calculate the value of the closing stock according to the FIFO method on
31 December 2020.

300 x R430 = R129 000 PP

140þx R375 ü = R52 500 R

a
(440–300)(350+25) = R181 500 R
6

.z
1.1.2 Calculate the cost of sales.

co
(840 500 + 58 100)
189 000P + 898 600 ü– 19 000P= 1 068 600 – 181 500 R = 887 100 þ

OR: Using units sold:

s.
540
550
900 – 50 =
189 000
217 250
345 850
one mark
er
one mark
850
500 – 140 =
135 000 two marks
360
887 100 one method mark
ap

Calculate the gross profit.

1 380 000 ü – 887 100 R = 492 900 R

8
p

1.1.3 Calculate the value of the closing stock on 31 December 2020 by using
the weighted-average method.
et

1 068 600üþ one part correct

189 000 + 898 600 – 19 000 x 440 P = 171 600 þone part correct (must be x 440)
540 + 2 250 – 50
tv

2 740 üþ one part correct

390 (WA) four marks 6
What will be the effect on the gross profit if the owner changes to this
valuation method? Provide figures.

Gross profit will decrease / be less P* by 9 900 þþ (181 500 – 171 600)

OR 492 900 – 483 000

FIFO WA 3

50 | P a g e
ACTIVITY 2
CABINETS
2.1 Calculate the value of closing stock using FIFO.
Workings Answer
If 280 – units in first part
(230 P x 1 100 P) + (50 RR x 990 P) 302 500 R
253 000 49 500

Op. Stock Purchases Returns Cost of sales

OR 296 000 + 2 199 000 – 22 000 – 2 170 500
one mark one mark two marks one mark 6

a
2.2.1 Calculate the % mark-up achieved in 2019.
Workings Answer

.z
3 480 000 – 2 170 500 60,3% R
1 309 500 PP x 100
2 170 500 P 4

co
2.2.2 Provide TWO points (with figures) to prove that this decision achieved its
aims.
P P Sales increased to R3 480 000 (from R3 375 000) / by R105 000
/ by 3,1%
TWO different &
valid points
P P
Figures
s.
Number of customers increased to 37 (from 26) / by 11 / by 42%
4
er
2.2.3 The CEO feels that this decision also negatively affected the company.
Provide TWO points (with figures) to support his opinion
Gross profit decreased to R1 309 500 (from R1 425 000) / by
ap

P P R115 500 / by 8,1% / Cost of sales increased to R2 170 500

TWO different & (from 1 950 000) / by R220 500 / by 11,30%
valid points
P P Average units per customer dropped to 63 (from 96) (2 500/26)
Figures (2 320/37) / by 33 / by 34%
Units sold dropped by from 2 500 to 2 320 / by 180 / by 7,2% 4
p

Give the directors advice to solve this problem. Explain TWO points.
Restrict (be selective with) trade discounts to good customers
et

only
Find a cheaper supplier (to compensate for keeping selling
P P prices low)
TWO different &
tv

valid points Increase marketing / advertising in areas outside the current

areas targeted
Provide other incentives such as after-sales services,
maintenance or free deliveries 2

51 | P a g e
LAMPS
2.3 Calculate the stockholding period for lamps (use closing stock).
Workings Answer
OR 23,4 days R OR 0,8 months
59 625 P x 365 265 one mark x 365
930 375 PP 1 3 675 one mark 1 OR 26,3 days OR 0,9 months
Accept 23 or 26 days 3

2.4 Calculate the number of missing lamps.

Workings Answer

a
Op.stock Purchases Clos.stock Sales
600 + 3 800 – 265 – 3 675 460 R

.z
P P P P 5
Give TWO suggestions to solve this problem.
Divide duties / delegate to different employees

co
Threaten strong disciplinary action (in future) / recover cost from
culprit
PP PP Increase supervision at regular intervals / random physical
inspection of stock
s.
Change to the perpetual inventory system to record stock
CCTV as an internal control measure
er
Insist on proper documents for all stock supplied 4
p ap
et
tv

52 | P a g e
TELEVISION SETS

2.5 Calculate the value of the closing stock of TV sets on

30 September 2019 using the specific identification method.
Workings Answer
7 800 000 – 2 580 000 = R5 220 000
(4 800 000 + 3 000 000) (430 x 6 000)
LYN: [(800 + 500) x 6 000]
OR 870 x R6 000
R11 772
10 440 000 – 3 888 000 = R6 552 000 000 R

a
(6 840 000 + 3 600 000) (540 x 7 200)
KYA: (1 450 x R7 200)
OR 910 x R7 200 7

.z
430 x R6 000 540 x R7 200
OR: LYN 18 240 000 – 2 580 000 – 3 888 000
+ KYA

co
2.6 Explain THREE different concerns George would have about this
problem.
Directors engaging in fraud and corruption / bribes / conflict of
interests
THREE Unethical behaviour of CFO places the company placing at risk
different &
valid
concerns
s.
Image of the company negatively affected / will affect the share
price and further investments from potential investors
High stock value is tied up in stock / Obsolete / Affects liquidity
er
PP PP
PP Shareholders may want to sell their shares
It will negatively affect the audit report
Business will lose goodwill as it is unethical 6
p ap
et
tv

53 | P a g e
ACTIVITY 3

3.1 VANDERBIJLPARK ACCESSORIES

3.1.1 Calculate: Value of closing stock for gas lamps (using FIFO)
Workings Answer

(220 – 40)
180PP x R80 = R14 400 R* R21 150 R*
(270 – 180)
90 R x R75 = R 6 750 R*
6

a
Calculate: Stockholding period in days of gas lamps (using closing stock)
Workings Answer

.z
Using totals: 42,5 days R
21 150 R see above x 365
12 650 P + 193 500 P – 3 200 P – 21 150 R see above OR

co
181 800 (40 x 80)

45,2 days
OR: Using units:
270 x 365
2 180

3.1.2
s.
XOLO suspects that the stock of gas lamps are not well controlled. Calculate
6
er
the number of gas lamps missing.
Workings Answer
P P P
2 960 – 2 180 – 270 510 P
ap

OR
(230 +2 770 – 40) - 2180 - 270
4
p

3.1.3 What should XOLO say to his brother when dealing with this matter? Provide
TWO points.
et

ONE comment PP PP part marks for incomplete answers

• His actions are unethical; it compromises the profitability of the business; he is

taking advantage of being a family member;
•
tv

Enriching himself at the expense of the business;

• He should not be expected to be treated differently and he will be subject to the
rules and procedures of the business.
• It is a conflict of interest and he must stop this practice. 4

54 | P a g e
3.1.4 Calculate the closing stock value for gas stoves on 30 April 2021 (using the
specific identification method).
Workings Answer

(80 + 80 + 120) R147 460 R*

280 – 132 148 x R495 = R73 260 PR*
(100 + 60)
160 – 54 106 x R700 = R74 200 PR*
5
3.1.5 XOLO thinks he should stop selling gas stoves as they are causing a liquidity
problem and the profit is low. Provide figures to support his opinion.

a
Too much cash tied up in stock, R147 460 PP
Total profit on gas stoves is R54 060

.z
Only 186 units of 440 (42,3%) Too much stock on hand, 254 units.
2
Explain TWO points to convince him NOT to discontinue trading in gas stoves.

co
TWO points PP PP

• He is achieving a 60% profit on B-Lite and a 40% profit on Smart.

• He could reduce the mark-up to increase sales (recognising the state of the

•
•
economy and his customers). s.
These stock items are durable and can be sold in the future.
The trend is to move towards gas because of load shedding – demand will
er
increase in the future.
• Customers may not be aware that he is selling these products.
• He must advertise more extensively.
4
p ap
et
tv

55 | P a g e
ACTIVITY 4

4.1.1 Calculate the value of the closing stock of bicycles on 31 May 2019.
Workings Answer
Tempo 8 500 x 4P R 34 000
Cruze 9 400 x 40P R 376 000
Ryder 7 400 x 57PP R 421 800
R 831 800
OR: Op.Stock Purchases COS Tempo COS Cruze COS Ryder
[……………………– 3 354 200………………………….]
595 000 + 3 591 000 [ – 561 000 – 2 068 000 – 725 200 ] = 831

a
800
One mark for both together One accuracy mark & one method mark for each model One method mark 8
Calculate the cost of sales for the year ended 31 May 2019.

.z
Opening stock P 595 000
Net purchases P 3 591 000

co
Closing stock R (831 800)
Cost of sales R 3 354 200
OR One mark One mark One mark One method mark
(8 500 x 66) + (9 400 x 220) + (7 400 x 98) = 3 354 200
561 000 2 068 000 s.
725 200

Calculate the gross profit for the year ended 31 May 2019.
4
er
P þ þ
5 185 420 – 3 354 200 = 1 831 220

OR (66 x 8 500 x 60%) + (220 x 9 400 x 60%) + (98 x 7 400 x 35%)

ap

336 600 + 1 240 800 + 253 820 = 1 831 220

3
p
et
tv

56 | P a g e
4.1.2 Calculate the selling price of a Ryder bicycle.
P þ
R979 020 = R9 990
98P

One mark One mark One method mark

OR R7 400 x 135/100 = R9 990 OR R7 400 + R2 590 = R9 990 3
Calculate the average number of Ryder bicycles sold per month.

P P þ
98 ÷ 9 = 10,9 per month 3

a
Indicate how long it will take Fred to sell the closing stock of the Ryder
bicycles. Show calculations.

.z
For three marks: 57 units R ÷ 10,9 per month R = 5,2 months R

co
OR 57 units X 9 = 5,2 months or approx. 157 days
98 units 1

OR 421 800 X 270 = 5,2 months or approx. 157 days

725 200 1

For two marks:

421 800 X 365 = 212,3 days
s.
er
725 200 1

OR 57 units X 12 = 7 months
98 units 1 3
ap

Give ONE possible reason for the slow sales of Ryder bicycles.
ONE valid reason: üü Part-marks for unclear / incomplete answer
• The customers do not like the new Ryder model
• High returns indicate the quality is not good
• This is a new model / Customers not familiar with this model / poor marketing
p

strategy.

Give advice (ONE point) to Fred in this regard.

et

ONE valid point of advice üü Part-marks for unclear / incomplete answer

• Look for another model to replace the Ryder model
• Discontinue selling this model as mark-up % is low
tv

• Advertise/promote the positive characteristics of the new model. 4

57 | P a g e
4.2.1 Explain why it was NOT a good idea to change to a cheaper supplier of
T-shirts. State TWO points.

Any two valid points Explanations P P Figures P P

Possible answers:
• The returns by customers are up from 0 to 40 (do not accept poor quality
only)
• Although more units were sold the total gross profit decreased from R43 200
to R29 000 or by R14 200 (32,9%)
• Maintaining the profit mark-up at 50% on cost resulted in a lower selling price

a
(R45 cheaper) made customers doubt the quality. 4
4.2.2 Celia decided to change the supplier in 2019 and to change the

.z
mark-up %. How has this decision affected the business? State TWO
points.

Any two valid points Explanations P P Figures P P

co
Possible answers:
• Total units sold decreased from 165 to 150 / by 15 units / by 9%
• No returns (zero) in 2019 / returns by customers went down from 5 to 0

4.2.3
s.
• The gross profit increased from R61 600 to R97 500 /by R35 900 / 58,3%)

Make TWO separate suggestions to Celia to improve the profit on pants in

4
er
2019.

Any two valid points Explanations P P Figures P P

Possible answers:
ap

• Advertise more to increase the sales as it went down from 325 to 280
• Increase the selling price (increase mark-up) to be > 910 and < 990
• Find a cheaper supplier as cost price went up from R620 to R650 4
p
et
tv

58 | P a g e
ACTIVITY 5

5.1
5.1.1 FIFO P
5.1.2 Perpetual P
5.1.3 Expense P 3

5.2 PHOTO-FIX TRADERS

5.2.1 Calculate:

a
Value of closing stock of cameras
OR (OS + P – COS)

.z
(6 x 5 500) (70 x 5 750) (10 x R4 110 000 + 1 104 000 + 1 380 000 –
000) (25 x 4 200) 2 013 500
33 000 + 402 500 + 40 000 + 105 000 (77 000 + 977 500

co
PP PP PP PP + 560 000+ 399 000)
= 580 500 R
= 580 500

5.2.2 Value of closing stock of photo frames

s.
er
110 700 three marks
7 200 P + 108 000 P– 4 500 P x 80P = 11 808 R x 80
60 P + 720 P – 30P
ap

750 three marks

R147,60 six marks 8

5.2.3 The owner suspects that photo frames are being stolen. Provide a
calculation to confirm his suspicions.
p

PR P P R
et

(60 + 720 – 30) – 80 – 657 = 13

750

5
tv

59 | P a g e
5.2.4 Tom is thinking of employing an assistant at a wage of R3 500 per month
to control the stock of photo frames. Explain why this is NOT a good idea.
Provide TWO points with figures/calculations.

Explanation P P FiguresPP PP
Wages one mark
R42 000 p a / R 3 500 p m
Wages greatly exceed the cost of Cost of units missing: one mark
Point 1
the missing units 13 x R147,60 = R1 918,80
(could use unit cost price)

Units missing = 13 one mark

a
Units missing are a very small % Units available = 750 one mark
Point 2
of units available
% missing = Less than 2%

.z
two marks
6

5.3 MANAGEMENT OF INVENTORIES

co
Product Problem Solution
Problem P P P P P P
Figures P P P
Possible change to new supplier
High returns
Ensure high quality ordered
Cupboards 500/2 500 (20%)
s.
500/1 800 sold (27, 7%)
Credit sales much higher than
Order as per customer
specifications
Promote cash sales by providing
er
cash sales
incentives such as cash
2 400/3 210 (75%);
Tables 600/3 210 (25%)
discount
Division of duties/ banking of
Missing money, 40 000
money
(510 000/470 000)
ap

Slow selling item/ high stock

Change to a different type of
figures
chair. Advertise more to
(1 300 and 2 950)
Chairs Purchases much higher than
increase sales
Buy stock according to sales.
sales (6 000/4 350)
Reduce mark-up%
9
p
et
tv

60 | P a g e
ACTIVITY 6
6.1.1 Calculate the following in respect of ladies watches on 31 August 2020:
(d) Closing Stock

1 x 6 500 5 x 6 800 2 x 7 300 3 x 7 800

6 500 P + 34 000 P + 14 600 P + 23 400 P
5
= 78 500 R One part correct (1 + 5 + 2 + 3 = 11 units) / 47 – 36 = 11

(b) Cost of sales

OR

a
330 000 two marks
78 000 P + 252 000 P – 78 500 R (see
above) 71 500 (11 x 6 500)

.z
68 000 (10 x 6 800)
= 251 500 PR One part correct 73 000 (10 x 7 300)
OR 39 000 (05 x 7 800)

co
251 500
440 125 x 100/175 = 251 500 5
(1 mark) (2 marks) (1 mark) (w/w)

(c) Stock-holding period (in days), using average stock.

78 250 2 marks
½ (78 000P + 78 500R)
see 6.3.1 (a)

251 500 R see 6.3.1 (b)

s.
x 365 = 113,6 days R One part correct
Accept 114 days
er
4

6.1.2 Calculate the following in respect of men’s watches on 31 August 2020:

(a) Value of closing stock
ap

304 150 (3 marks)

32 300 P+ 259 900 P + 11 950 P
95 P+ 675 P
770 (2 marks)
= 395
p

395 x 92 P = 36 340 R One part correct 7

et

(b) Sales
(770 – 92) = 678 (units sold)PP (2 or 0)

678 x R520 = 352 560R One part correct 3

tv

6.1.3 Explain why the business uses different methods to value each type of watch.
State ONE valid point.
One valid point PP
• Ladies watches are sold at a high value. Small quantities are purchased.
• Each item can be monitored individually.
• The value is continuously changing.
Men’s watches are sold at a low value. Large quantities are purchased.
The value of the watches are almost the same. 2

61 | P a g e
9. EXAMINATION GUIDANCE (INVENTORY VALUATION)

1. The study guide provides explanation of concepts, steps to do calculations, worked

activities, formula sheet, and suggested marking guidelines and practice activities
adapted from pat NSC papers.
2. Stock systems covered in Grade 11 must be clearly understood and revised as
prior knowledge in understanding stock valuation methods.
3. Although Inventory valuation is tested independently in P2, it can feature in P1 and
in P2. In P1 it can feature as an adjustment to the preparation of the financial

a
statements. It can also be integrated with P2 topics such as stock account in
manufacturing or purchases and sale in budgets. This topic is integrated in deep

.z
problem solving scenarios and you are expected to critically analyse the
information.
4. The questions is structured in the same layout. The required first, followed by
information needed to and answer the question. You are expected to sift and

co
extract relevant information to answer the question.
5. A clear distinction of the three methods First in First out (FIFO), weighted average
and specific identification methods can be understood by making reference to
types of products offered by different businesses.
6.

7.
s.
You need to understand the calculation for closing stock, cost of sales, gross profit
and missing items and financial indicators relevant to stock valuation.
Understanding the format for the calculation of the closing stock under each level
of stock valuation method is required. Calculating the value of closing stock using
er
FIFO requires to focus on the latest purchases and to also take the returns into
account.
8. You are expected to have the arithmetical skill and understanding of logic of the
calculations to formulate simple calculations.
ap

9. Show all workings, to ensure that maximum part marks can be achieved.
10. Understanding of business ethics is required to answer problem solving question in
a form of internal control.
11. A special ANSWER BOOK is provided, to assist with time management. Take note
of the information included in the ANSWER BOOK.
p

12. GENERAL STUDY AND EXAMINATION TIPS

1. Note that Accounting is now assessed in TWO papers;

et

• P1 Financial Reporting and Evaluation 150 marks 2 hours

• P2 Managerial accounting and internal controls 150 marks 2 hours

2. It is important to be familiar with the specific content for each paper so that you
tv

can plan effectively for examinations. Note that certain topics are relevant to
both paper and some topics may be integrated within one question.

3. Obtain many past examination papers, the examination guidelines and exemplar
papers to form the basis of your study programme.

4. Prepare a functional study time table and focus on specific topics at different
intervals. Align this to time management; exploring short-cuts for calculations,
frequently asked predictable questions and recommended responses for
interpretive questions.

62 | P a g e
 5. Pay close attention to the language used in past papers such as key vocabulary
and action verbs.

6. For calculations, always show all workings – they carry many part marks.

7. Familiarize yourself with the structure and layout of Questions. They follow the
same pattern which is: Appetizer, Required, Information.

8. Note that the ANSWER BOOK is a vital part of the Question Paper, as many
amounts and details will be included for most Questions. This is a time-saving
device. Ensure that you include these amounts in your final answers, where

a
relevant.

.z
9. Always arrive at least 30 minutes before the commencement of the paper. You
will then be able to easily take care of all the administration requirements and to
make effective use of your 10 minutes reading time.

co
10. Use the reading time to get a global picture of the paper, and identify where you
wish to start (according to your strengths). You already have the ANSWER
BOOK to assist in this regard. Simply go to the relevant pages for that Question.

s.
11. You can also answer the sub-questions in any order; always inserting what is
given, working from the simple to the more challenging.
er
12. Write legibly and neatly; markers must be clear about your answers.

13. Keep your comments short and to-the-point. The mark allocation is your guide
about the expected length of your response.
ap

14. Have your own stationery and a good calculator (even a spare – just in case).
p
et
tv

63 | P a g e
ACKNOWLEDGEMENTS

The Department of Basic Education (DBE) gratefully acknowledges the following officials for giving up their
valuable time and families, and for contributing their knowledge and expertise to develop this this study guide
for the children of our country, under very stringent conditions of COVID-19.

Writers:

a
Poobie Govender, Mbangwa Shabalala, Beauty Mpanza, Tabile Nobhala, Nosipho Sicwetsha, Vuyisile
Deluhlazo and Nomsa Bikitsha.

.z
DBE Subject Specialist: Percy Masango

co
The development of the Study Guide was managed and coordinated by Ms Cheryl

Weston and Dr Sandy Malapile.

s.
er
p ap
et
tv

91
tv
et
pa
pe
rs
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o.
za