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GAUTENG DEPARTMENT OF EDUCATION

PROVINCIAL EXAMINATION
NOVEMBER 2021
GRADE 11

ACCOUNTING
PAPER 1

TIME: 2 hours

MARKS: 150

12 pages + 1 formula page and an answer book of 10 pages

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ACCOUNTING 2
PAPER 1 GRADE 11

INSTRUCTIONS AND INFORMATION

1. Answer ALL the questions.

2. A special ANSWER BOOK is provided in which to answer ALL the questions.

3. A FORMULA SHEET for financial indicators is provided at the back of this question
paper. You may use it if necessary.

4. Show ALL workings to earn part-marks.

5. You may use a non-programmable calculator.

6. You may use a dark pencil or blue/black ink to answer the questions.

7. Where applicable, show all calculations to ONE decimal point.

8. Write neatly and legibly.

9. Use the information in the table below as a guide when answering the question
paper. Try NOT to deviate from it.

QUESTION TOPIC OF THE QUESTION MARKS TIME IN MINUTES

1 GAAP & Fixed Assets Note 30 24 minutes

2 Income Statement 40 32 minutes

3 Balance Sheet 50 40 minutes

4 Analysis and interpretation 30 24 minutes

TOTAL 150 120 minutes

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PAPER 1 GRADE 11

QUESTION 1: GAAP & FIXED ASSET NOTE (30 MARKS; 24 MINUTES)

1.1 CONCEPTS

1.1 Fill in the missing word(s). Write only the correct word(s) next to the question
numbers (1.1.1 to 1.1.5) in the ANSWER BOOK.

1.1.1 … is the remaining value of an asset after it has been fully depreciated.

1.1.2 … is a set of principles according to which financial statements are

prepared.

1.1.3 The … principle states that all incomes earned, and expenses incurred
must be shown for the same financial period.

1.1.4 … is an imputed expense.

1.1.5 … is a negative asset. (5)

1.2 FIXED ASSET NOTE

You are provided with the following information from the records of Good Place
Traders.

REQUIRED:

1.2.1 Calculate the depreciation on equipment for the year ended

31 December 2021. (5)

1.2.2 Calculate the depreciation on vehicles for the year ended 31 December
2021. (8)

1.2.3 Complete the Fixed Asset Note to the Financial Statements on

31 December 2021. (12)

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PAPER 1 GRADE 11

INFORMATION:
A The information provided below is an extract of a Pre-adjustment Trial
Balance of Good Place Traders.

List of balances on 31 December 2021

Vehicles 2 680 000

Equipment 810 000
Accumulated depreciation on vehicles 1 060 000
Accumulated depreciation on equipment 240 000

A Equipment

• New equipment with a cost price of R120 000 was purchased on

01 October 2021. No entries have been made for the transaction.

• Equipment is depreciated at 20% p.a. using the cost price method.

B Vehicles

• One of the delivery vehicles was sold for R190 000 on 01 July 2021.
The vehicle was purchased on 01 July 2019 for R320 000. The
accumulated depreciation for the vehicle on 01 January 2021 was
R46 400.

• Vehicles are depreciated at 10% p.a. using the diminishing balance

method.

30

QUESTION 2: INCOME STATEMENT (40 MARKS; 32 MINUTES)

The information provided below is from the accounting records of Westville Traders.
The financial year ends on 28 February 2021.

REQUIRED:

Prepare the Income Statement for the year ended 28 February 2021. (40)

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PAPER 1 GRADE 11

INFORMATION:
A Pre-adjustment Trial balance on 28 February 2021
Balance Sheet Accounts Section Debit Credit
Capital [01/03/2020] 510 000
Drawings 204 000
Land and buildings 450 000
Vehicles 210 000
Equipment 123 700
Accumulated depreciation on vehicles 94 500
Accumulated depreciation on equipment 43 500
Fixed Deposit: Nedbank [8% p.a.] 125 000
Loan: Nedbank [12% p.a.] 390 000
Trading Stock 174 120
Debtors’ Control 59 500
Provision for bad debts 3 500
Bank 29 320
Petty cash 1 000
Cash float 3 000
Creditors’ control 110 280
Nominal Accounts Section
Sales 954 300
Cost of sales 467 630
Debtors’ allowances 28 620
Bad debts 1 020
Stationery 12 520
Packing material 13 670
Salaries and wages 175 170
Utilities 45 210
Insurances 15 460
Advertising 17 080
Telephone 21 570
Motor expenses 25 840
Maintenance 13 710
Discount allowed 11 070
Discount received 17 550
Bank Charges 3 560
Interest on overdraft 1 610
Rent income 99 750
Interest on fixed deposit 10 000
2 233 380 2 233 380

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PAPER 1 GRADE 11

A Adjustments and additional information

i. Physical stock taking on 28 February 2021 revealed the following:

• Trading stock, R171 020

• Stationery, R1 420
• Packing material used during the year amounted to R11 220.

ii. Utilities account totalling R3 180 due for February 2021 will be paid on
10 March 2021.

iii. An amount of R2 100 was paid to Reality Ads on 25 February 2021 for an
advertisement which will appear during March 2021.

iv. Rent income includes rent for March 2021. Rent was increased by R750
from 1 January 2021.

v. Provision for bad debts must be adjusted to 5% of debtors.

vi. The following information appeared on the Bank Statements received from
Nedbank:

• Service fees, R1 120

• Internet banking fees, R320
• Interest on overdraft, R170

vii. The loan statement from Nedbank reflects the following:

Balance on 1 March 2020 450 000

Payments made during the year [12 x R5 000] 60 000
Balance on 28 February 2021 399 860

viii. Depreciation for the year amounted to R33 030.

40

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PAPER 1 GRADE 11

QUESTION 3: BALANCE SHEET (50 MARKS; 40 MINUTES)

3.1 Match the concept in Column A with the description in Column B. Write only
the letters (A – E) next to the question numbers (3.1.1 to 3.1.4) in the
ANSWER BOOK.

COLUMN A COLUMN B
3.1.1 Going concern A The partnership has enough assets to
cover all debts.
3.1.2 Solvency
B Analysis of the financial position of the
3.1.3 Balance Sheet partnership.

3.1.4 Liquidity C The partnership reflects trading stock in

the Balance Sheet at R60 000, even
though they are planning on having a sale
next month. The stock will then be sold for
R40 000.

D The partnership must use the same

inventory system from one financial year
to another.

E The partnership is able to pay off all short-

term debts. (4)

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PAPER 1 GRADE 11

3.2 FRANKENSTEIN TRADERS

REQUIRED:

Prepare the Equity and Liabilities Section of the Balance Sheet as at

28 February 2021. Show all the calculations relating to the notes in brackets. (18)

INFORMATION:

The following balances appeared amongst others, in the General Ledger

of Frankenstein Traders on 28 February 2021.

Capital: Frank 200 000

Capital: Stein 170 000
Current Account: Frank (Debit) 1 690 Dr
Current Account: Stein (Credit) 10 360 Cr
Tangible assets at carrying value 232 000
Fixed Deposit: ABSA Bank (9% p.a.) 70 000
Loan: ABSA Bank (12%) 40 000
Trading stock 85 980
Debtors’ control 64 000
Creditors’ control 9 070
SARS: PAYE 3 500
Bank (Credit) 20 250 Cr
Petty cash 1 200
Cash float 400
Provision for bad debts 890
Pension fund 500
Income received in advance 700

A Adjustments and additional information

i. On 28 February 2021 Ms Stein contributed equipment to the value of

R15 000 and cash of R15 000 to equalise her capital contribution. This
entry was not recorded.

ii. The partners have agreed to pay off R20 000 of the loan by 30 April
2021.

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PAPER 1 GRADE 11

3.3 MARVELLOUS CANDY STORE

The following information was extracted from the accounting records of Marvellous
Candy Store. The store is a partnership between Mr Marvel and Ms Lane.
REQUIRED:
Prepare the following notes as it would appear in the Balance Sheet for the
year ending 28 February 2021.
• Capital Note (3)
• Current Account Note (25)
INFORMATION:
A The following balances appeared in the ledger of MARVELLOUS CANDY
STORE on 28 February 2021.

Capital: Mr Marvel R360 000

Capital: Ms Lane R760 000
Current Account: Mr Marvel R2 300 (DR)
Current Account: Ms Lane R4 500 (CR)
Drawings: Mr Marvel R25 000
Drawings: Ms Lane R30 000
B Additional information
i. Mr Marvel took stock to the value of R35 000. This was donated to a
local charity in his personal capacity. This transaction was not
recorded.
ii. On 1 December 2020 Mr Marvel increased his capital by R175 000. No
entry has been made for this transaction.
iii. The partnership agreement stipulated the following:
• Partners are entitled to interest at 15% p.a. on their capital balance at
the end of the financial year.
• On 01 January 2020 Mr Marvel received a 10% increase on his
monthly salary of R26 500. No further increases were given.
• Ms Lane’s salary for the year amounted to R425 000.
• At the end of the financial year Ms Lane received a bonus equal to
12% of her annual salary.
• Mr Marvel and Ms Lane share the remaining profits or losses in the
ratio 3:2.

iv. Ms Lane’s portion of the final distribution of profit amounted to

R125 000.

v. Mr Marvel received a bonus of R12 000 at the end of the financial year.
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PAPER 1 GRADE 11

QUESTION 4: ANALYSIS AND INTERPRETATION (30 MARKS; 24 MINUTES)

The following information is extracted from the accounting records of Micro-touch.

Micro-touch is a partnership between Mike Ndlovu and Kate Terblanche.

REQUIRED:

4.1 Calculate the following indicators for 2021:

4.1.1 Acid-test ratio (4)

4.1.2 Debt-equity ratio (3)

4.1.3 % return on average equity earned by the partnership (5)

4.2 Should the partners be concerned about the liquidity of the business for
2021? Quote TWO financial indicators. (5)

4.3 Micro-touch sells Latex examination gloves to doctors and pharmacies. They
are considering expanding their product range to sanitisers and face masks.
The partners are considering increasing the loan by R300 000.

4.3.1 Is this a good idea to borrow R300 000? Quote ONE financial indicator
to support your answer. (4)

4.3.2 Provide TWO other suggestions that the partners can consider
instead of increasing the loan. (2)

4.4 Mike is concerned about the % return that he is earning. Is this a valid
concern? Quote ONE financial indicator to support your answer. (4)

4.5 Mike is not happy with Kate’s current contributions to the partnership. He has
decided to have a meeting with her about this. List THREE points he should
discuss with her at this meeting. (3)

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PAPER 1 GRADE 11

INFORMATION:

Extract from the Balance Sheet of Micro-Touch on 28 February:

2021 2020
R R

Fixed Deposit: Nedbank (10% p.a.) 300 000 390 000

Current Assets 171 000 304 000
Inventory 96 000 134 000
Trade and other receivables 64 000 45 000
Cash and cash equivalents 11 000 125 000
Capital accounts 800 000 1 200 000
Current accounts 58 000 10 000
Mortgage loan: Nedbank (12% p.a.) 240 000 135 000
Current liabilities 84 000 78 000

Extract from Appropriation and Partners’ Current Accounts:

Total
Mike Kate
2021
R R
R
Current accounts at beginning of year 10 000 40 000 (30 000)
Current accounts at end of year 58 000 108 000 (50 000)
Net profit for the year 278 000
Partners’ salaries 140 000 70 000 70 000
Interest on capital (6% p.a.) 54 000 36 000 18 000
Partners’ share of remaining profit 84 000 42 000 42 000
Partners’ drawings for the year 230 000 80 000 150 000

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NOTE:

i. Each partner contributed capital of R600 000 when the business started, but
Kate reduced her capital by R400 000 half-way through the 2021 financial
year.

ii. Mike maintained his capital contribution at R600 000 throughout the year. He
also reduced his drawings in order to prevent the business from going into a
bank overdraft.

Financial indicators:
2021 2020

% operating profit on sales 20% 23%

% net profit on sales 12% 15%
Current ratio 2,2 : 1 3,9 : 1
Acid-test ratio ? 2,2 : 1
Debt-equity ratio ? 0,1 : 1
Return on equity: Mike 22% 29%
Return on equity: Kate 36% 21%
Return on equity of partnership ? 18%

30

TOTAL: 150

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ACCOUNTING 13
PAPER 1 GRADE 11

FORMULA SHEET

Gross profit 100 Gross profit 100 Net profit 100

  
Sales 1 Cost of Sales 1 Sales 1

Operating Expenses 100 Operating Profit 100

 
Sales 1 Sales 1

Total Earnings by Partner 100 Net Profit 100

 
Average Partners' Equity 1 Average Partners' Equity 1

Current Assets: Current Liabilities Current Assets – Inventories: Current Liabilities

Average Debtors 365 12 Average Creditors 365 12

 or  or
Credit Sales 1 1 Credit Purchases or Cost of Sales 1 1

Average Inventorie s 365 12

 or
Cost of Sales 1 1

Non Current Liabilities : Partners’ Equity Total Assets : Total Liabilities

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GAUTENG DEPARTMENT OF EDUCATION

PROVINCIAL EXAMINATION
NOVEMBER 2021
GRADE 11

ACCOUNTING
PAPER 1

ANSWER BOOK

TIME: 2 hours
MARKS: 150

10 pages

Name of school:

Name of learner:

Grade:

MAXIMUM
QUESTION MARKS AWARDED MODERATED
MARKS
1 30

2 40

3 50

4 30

TOTAL 150

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ACCOUNTING ANSWER BOOK 2
PAPER 1 GRADE 11

QUESTION 1.1

1.1.1

1.1.2

1.1.3

1.1.4

1.1.5 5

QUESTION 1.2
1.2.1

Depreciation on equipment AMOUNT

Old equipment

New equipment

Total depreciation for the year

1.2.2

Depreciation on vehicles AMOUNT

Depreciation on vehicle sold

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ACCOUNTING ANSWER BOOK 3
PAPER 1 GRADE 11

Depreciation on remaining vehicles

Total depreciation for the year

1.2.3 FIXED/TANGIBLE ASSETS VEHICLES EQUIPMENT

Carrying value at beginning of year
Cost 2 680 000 810 000
Accumulated depreciation (1 060 000) (240 000)
Movements
Additions at cost
Disposals at carrying value
Depreciation
Carrying value at end of year

Cost
Accumulated depreciation

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TOTAL

30

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ACCOUNTING ANSWER BOOK 4
PAPER 1 GRADE 11

QUESTION 2
INCOME STATEMENT OF WESTVILLE TRADERS FOR THE YEAR ENDED
28 FEBRUARY 2021
Sales
Cost of sales 467 630
Gross profit
Other operating income
Rent income
Provision for bad debts adjustment
Discount received 17 550
Gross operating income
Operating expenses
Bad debts 1 020
Stationery
Packing material
Salaries and wages 175 170
Utilities
Insurance 15 460
Advertising
Telephone 21 570
Motor expenses 25 840
Maintenance 13 710
Discount allowed
Bank charges
Trading stock deficit
Depreciation
Operating profit
Interest income 10 000
Profit before interest expense
Interest expense
Net profit for the year 40

TOTAL

40

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ACCOUNTING ANSWER BOOK 5
PAPER 1 GRADE 11

QUESTION 3

3.1.1

3.1.2

3.1.3

3.1.4 4

3.2 FRANKENSTEIN TRADERS

Extract of Balance Sheet on 28 February 2021

EQUITY AND LIABILITIES

Partners’ Equity

Capitals
Current accounts

Non-current liabilities

Current liabilities

Trade and other payables

Total equity and liabilities

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ACCOUNTING ANSWER BOOK 6
PAPER 1 GRADE 11

3.3 MARVELLOUS CANDY STORE

CAPITAL Mr Marvel Ms Lane

Balance at the beginning of the year 760 000

Contribution of capital during the year
Withdrawal of capital during the year

Balance at the end of the year 760 000

CURRENT ACCOUNTS Mr Marvel Ms Lane

Profit as per Income Statement

Partners’ salaries
Partners’ bonus
Interest on capital

Primary distribution of profits

Final distribution of profits 125 000

Drawings during the year

Retained income for the year

Retained income at beginning of year

Retained income at end of year

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ACCOUNTING ANSWER BOOK 7
PAPER 1 GRADE 11

Calculation: Interest on capital

Mr Marvel Ms Lane

Calculation: Salary Mr Marvel Calculation: Bonus Ms Lane

Calculation: Final distribution Mr Marvel

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TOTAL

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ACCOUNTING ANSWER BOOK 8
PAPER 1 GRADE 11

QUESTION 4
CALCULATION OF FINANCIAL INDICATORS FOR 2021

4.1.1 Acid-test ratio:

4
4.1.2 Debt-equity ratio:

3
4.1.3 % return on average equity earned by the partnership:

4.2 Should the partners be concerned about the liquidity of the

business for 2021? Quote TWO financial indicators.

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ACCOUNTING ANSWER BOOK 9
PAPER 1 GRADE 11

4.3.1 Is it a good idea to borrow R300 000? Quote ONE financial

indicator to support your answer.

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

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4.4 Mike is concerned about the % return that he is earning. Is this a

valid concern? Quote ONE financial indicator to support your
answer.

4.5 Mike is not happy with Kate’s current contributions to the

partnership. He has decided to have a meeting with her about
this.
List THREE points he should discuss with her at this meeting.

TOTAL

30

TOTAL: 150

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PROVINCIAL EXAMINATION
NOVEMBER 2021
GRADE 11

ACCOUNTING (PAPER 1)

MARKING GUIDELINES

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

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

QUESTION 1.1

1.1.1 Residual ✓

1.1.2 GAAP ✓

1.1.3 Matching ✓

1.1.4 Depreciation ✓

1.1.5 Accumulated depreciation ✓ 5

QUESTION 1.2
1.2.1

Depreciation on equipment AMOUNT

Old equipment

810 000 x 20% 162 000 

New equipment

120 000 ✓ x 20% x 3/12 ✓ = 6 000 

5
Total depreciation for the year 168 000 

1.2.2

Depreciation on vehicles AMOUNT

Depreciation on vehicle sold

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

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

Depreciation on remaining vehicles

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

Total depreciation for the year 148 320 

1.2.3 FIXED/TANGIBLE ASSETS VEHICLES EQUIPMENT

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

Cost 2 360 000  930 000 

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

12

TOTAL

30

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

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

40

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

QUESTION 3

3.1.1 C✓

3.1.2 A✓

3.1.3 B✓
4
3.1.4 E✓

3.2 FRANKENSTEIN TRADERS

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

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

3.3 MARVELLOUS CANDY STORE

CAPITAL Mr Marvel Ms Lane

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

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

CURRENT ACCOUNTS Mr Marvel Ms Lane

Profit per Income Statement 629 550  715 000 

Partners’ salaries 349 800 ✓ 425 000 ✓

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

Primary distribution of profits 442 050  590 000 

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

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

25

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

Calculation: Interest on capital

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

Calculation: Salary Mr Marvel Calculation: Bonus Ms Lane

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

Calculation: Final distribution Mr Marvel

125 000 x 3/2 = 187 500

TOTAL

50

QUESTION 4
4.1 CALCULATION OF FINANCIAL INDICATORS FOR 2021

4.1.1 Acid-test ratio:

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

= 0,9 : 1  accept 0,89 : 1 4

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

0,3 : 1  accept 0,27 : 1

3

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

4.1.3 % return on average equity earned by the partnership:

278 000 ✓ 100


½ ✓ (858 000 ✓ + 1 210 000✓) 1
OR

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

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

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

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

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

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

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

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

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

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ACCOUNTING
MEMORANDUM (PAPER 1) GRADE 11

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

• Increase their capital contributions

• Get another partner
• Use the fixed deposit 2

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

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

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

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

TOTAL

30

TOTAL: 150