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4.1 CONCEPTS Indicate whether the following statements are TRUE or FALSE - NSC Accounting - Question 4 - 2018 - Paper 1
Question 4
4.1 CONCEPTS Indicate whether the following statements are TRUE or FALSE. Write only 'true' or 'false' next to the question numbers (4.1.1 to 4.1.5 in the ANSWER BO... show full transcript
Worked Solution & Example Answer:4.1 CONCEPTS Indicate whether the following statements are TRUE or FALSE - NSC Accounting - Question 4 - 2018 - Paper 1
Step 1
Prepare the Retained Income Note to the Balance Sheet on 28 February 2018.
Answer
The Retained Income Note is computed as follows:
- Balance at beginning of year: R567,000
- Add: Net profit after tax: R2,482,000
- Less: Ordinary share dividends:
- Interim: R672,000
- Final: R1,728,000
The calculation proceeds:
- Balance at beginning of year: R567,000
- Net profit after tax: + R2,482,000
- Interim dividends: - R672,000
- Final dividends: - R1,728,000
Balance at end of year:
egin{align*} ext{End Balance} & = 567,000 + 2,482,000 - 672,000 - 1,728,000 \ & = R649,000 ext{Balance at end of year} = R649,000 \end{align*}
Step 2
Complete the Balance Sheet on 28 February 2018. Show ALL workings.
Answer
Balance Sheet of Modise Ltd on 28 February 2018
ASSETS
- Non-current assets:
- Fixed assets: R12,666,500
- Fixed deposit: R720,000
- Current assets:
- Inventory: R1,040,000
- Debtors' control: R2,320,000
Total Assets: R17,286,500
EQUITY AND LIABILITIES
- Ordinary shareholders’ equity:
- Ordinary share capital: R13,650,000
- Retained income: R649,000
- Current liabilities:
- Trade and other payables: R2,600,000
Total Equity and Liabilities: R17,286,500
Step 3
The directors want to give R500 000 to a local school. Give TWO reasons why companies take such decisions.
Answer
- This forms part of their corporate social investment (CSI) initiatives, contributing positively to community welfare.
- It enhances goodwill from the community by fostering positive public relations.
Step 4
Briefly explain the role of an independent auditor.
Answer
An independent auditor is responsible for expressing an opinion on the fairness and accuracy of a company's financial statements. This includes verifying that the financial statements are free from material misstatements, whether due to fraud or error.
Step 5
Did Denga Limited receive a qualified/unqualified/disclaimer of opinion audit report? Briefly explain your choice.
Answer
Denga Limited received a qualified opinion audit report. This is because the auditors were unable to verify the advertising expense of R500,000, which was a significant issue considered when assessing the overall financial statements.
Step 6
State THREE possible consequences for the independent auditor if he had NOT mentioned the advertising expense in his report.
Answer
- Disciplinary hearing (IRBA) for failing to adhere to professional standards.
- Potential civil liability if stakeholders rely on incorrect financial statements.
- Damage to professional reputation and credibility.