NSC Accounting Preparation of Financial Statements for companies: 4.1 Choose a term in COLUMN B th

Question

4.1 Choose a term in COLUMN B that matches an explanation in COLUMN A. Write only the letters (A–E) next to the question numbers (4.1.1 to 4.1.4) in the ANSWER BOOK.

COLUMN A                                   COLUMN B
4.1.1 Reflects the financial position of   A. Audit report
         the business on a specific date
4.1.2 Shows whether the business made a   B. Cash Flow Statement
         profit or loss
4.1.3 Provides details about the movement   C. Balance Sheet
         of money with regard to operating,
         investing and financing activities
4.1.4 Provides an unbiased opinion on   D. Income Statement
         the reliability of the financial statements
         of a business

4.2 AUDIT REPORT
Extract from the audit opinion of Everest Ltd for the financial year ended 30 April 2018:
Audit opinion
In our opinion, the financial statements fairly present, in all material respects, the financial position of the company at 30 April 2018 and of its cash flow for the year ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act, 2008 (of South Africa).
Kego and Murray Associates
Chartered accountants (SA)
31 July 2018

4.2.1 Give ONE reason why the Companies Act requires public companies to be audited by an independent auditor.
4.2.2 Give ONE reason for unqualified/disclaimed or qualified audit opinion.
4.2.3 Newspaper reports have indicated that Kego and Murray Associates have been found guilty of misconduct in terms of audit work done at several large firms. Explain how this may influence shareholders of Everest Ltd. State TWO points.

4.3 MVVS LTD
The information relates to the financial year ended 31 March 2019.

REQUIRED:
4.3.1 Complete the Statement of Comprehensive Income (Income Statement) for the year ended 31 March 2019.

4.3.2 Complete the following notes to the Balance Sheet:
• Fixed/Tangible Asset Note
• Ordinary share capital

INFORMATION:
Figures extracted from the Pre-adjustment Trial Balances on 31 March:

2019      R                     2018      R
Ordinary share capital   9 300 000   4 800 000
Mortgage bank: Sapphire Bank   1 400 000   0
Land and buildings   12 500 000   12 000 000
Vehicles   1 300 000   1 050 000
Equipment   1 377 000   1 000 000
Accumulated depreciation on vehicles 117 500   0
Furniture and fittings   0   27 500
Trading stock   364 000   411 000
Debtors   1 156 000   1 525 000
Cash and bank   405 000   612 000

Salaries and wages   1 180 000   1 080 000
Employer's contributions (medical, pension and UIF)   316 000   300 000
Bad debts   72 000   0
Consumable stores   53 200   0
Interest income   30 000   0
Insurance   59 000   0
Depreciation (on equipment sold)   1 750   0
Interest on loan   60 000   0
Bad debts recovered   36 000   0

Adjustments and additional information:
A. A credit invoice for R36 720 (after deducting a 10% trade discount) issued on 31 March 2019, was not recorded. Goods are marked up at 70% on cost.

B. The physical stock count on 31 March 2019 revealed the following on hand:
   - Trading stock, R334 500
   - Consumable stores, R400

C. Debtor S Magnum was declared insolvent. His estate paid R20 000, which was 20% of his debt. The difference must be written off as a bad debt.

D. R1 800 was received from a debtor, J Misting, whose debt had previously been written off. The bookkeeper incorrectly credited the amount to the Debtors' Control Account. Correct the error.

E. Adjust the provision for bad debts to R28 500.

F. Insurance includes an annual premium of R51 000 paid for the period 1 January 2019 to 31 December 2019.

G. An employee was left out of the Salaries Journal for March 2019. His salary is R12 000 before deductions.

H. Interest on loan is payable. A fixed monthly repayment of R25 400 was paid for the financial year.

I. Vehicles:  Details for the three vehicles are as follows:
Cost price                               Accumulated depreciation
31 March 2018
 R350 000                          R315 000
 R400 000                          R160 000
 R627 000                          30 November 2018
Vehicles are depreciated at 20% p.a. on cost.

II. Equipment: Equipment was sold for R9 600 cash on 31 August 2018. Only the following entries in respect of this sale were processed:
Cost price                               R28 000
Accumulated depreciation at the date of disposal   R21 500
Depreciation for the current financial year  R7 500

III. Depreciation on the remaining equipment is calculated at R92 500 after taking all of the above into account.

J. Interest income is the missing figure in the Income Statement.

K. Income tax is calculated at 28% of the net profit. The net profit before tax was R691 000.

L. Shares and dividends:  The company has an authorised share capital of 8 000 000 shares.
The company had 1 200 000 shares in issue on 1 April 2018.
150 000 shares were re-purchased (ASP: R4.00) during the year.
850 000 additional shares were issued on 30 September 2018.

Description	Amount (R)
Gross Profit	4 500 000
Operating Profit	3 300 000
Net Profit before Interest Expense	2 500 000
Interest Income	30 000
Profit Before Tax	2 530 000
Income Tax (28%)	708 400
Net Profit After Tax	1 821 600

Description	Amount (R)
Cost at beginning of year	12 500 000
Additions	627 000
Disposals	(6 500)
Depreciation	(1 800 000)
Carrying value at end of year	11 620 500

Description	Amount (R)
Authorised shares	8 000 000
Issued shares at beginning	4 800 000
Shares repurchased (150k)	(600 000)
New Shares Issued	5 100 000
Total shares in issue	9 300 000

4.1 Choose a term in COLUMN B that matches an explanation in COLUMN A - NSC Accounting - Question 4 - 2019 - Paper 1

Worked Solution & Example Answer:4.1 Choose a term in COLUMN B that matches an explanation in COLUMN A - NSC Accounting - Question 4 - 2019 - Paper 1

4.1.1 Reflects the financial position of the business on a specific date

4.1.2 Shows whether the business made a profit or loss

4.1.3 Provides details about the movement of money with regard to operating, investing and financing activities

4.1.4 Provides an unbiased opinion on the reliability of the financial statements of a business

4.2.1 Give ONE reason why the Companies Act requires public companies to be audited by an independent auditor.

4.2.2 Give ONE reason for unqualified/disclaimed or qualified audit opinion.

4.2.3 Explain how this may influence shareholders of Everest Ltd. State TWO points.

4.3.1 Complete the Statement of Comprehensive Income (Income Statement) for the year ended 31 March 2019.

4.3.2 Complete the following notes to the Balance Sheet: Fixed/Tangible Asset Note

4.3.2 Complete the following notes to the Balance Sheet: Ordinary share capital

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