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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 B... 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
4.2.1 Prepare the Retained Income Note to the Balance Sheet on 28 February 2018
Answer
To prepare the Retained Income Statement, we start with the balance brought forward and adjust for any profits and dividends:
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Balance at Beginning of Year: R567,000
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Net Profit after Tax: R2,482,000
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Ordinary Share Dividends: -R2,400,000 (including interim of R672,000 and final of R1,728,000)
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Balance at End of Year:
Balance = R567,000 + R2,482,000 - R2,400,000 = R586,000
Step 2
4.2.2 Complete the Balance Sheet on 28 February 2018. Show ALL workings.
Answer
The Balance Sheet for Modise Ltd on 28 February 2018 is as follows:
ASSETS
- Non-current Assets: R13,386,500
- Fixed assets at carrying value: R12,666,500
- Fixed deposit: R720,000
- Current Assets: R2,600,000
- Inventories: R1,040,000
- Debtors' Control: R554,000
- Bank: R?
Total Assets: R17,286,500
EQUITY AND LIABILITIES
- Ordinary Shareholders' Equity: R14,326,500
- Ordinary Share Capital: R13,650,000
- Retained Income: R586,000
- Current Liabilities: R2,600,000
- Total Equity and Liabilities: R17,286,500
Step 3
4.2.3 The directors want to give R500 000 to a local school. Give TWO reasons why companies take such decisions.
Answer
- Corporate Social Responsibility (CSR): Companies engage in CSR to improve their community relations and demonstrate good corporate citizenship.
- Public Goodwill: Contributing to the community creates goodwill among stakeholders and enhances the company’s reputation, potentially leading to increased sales and customer loyalty.
Step 4
4.3.1 Briefly explain the role of an independent auditor.
Answer
The role of an independent auditor includes:
- Expressing an Opinion: They provide an opinion on the fairness of the financial statements presented by management.
- Protecting Stakeholders: They protect stakeholders' interests by ensuring that the financial statements are free from material misstatement.
Step 5
4.3.2 Did Denga Limited receive a qualified/unqualified/disclaimer of opinion audit report? Briefly explain your choice.
Answer
Denga Limited received a qualified opinion. This is because the auditor identified exceptions related to the advertising expense that could not be verified, which implies that the financial statements did not fully represent the company's position regarding those specific expenses.
Step 6
4.3.3 State THREE possible consequences for the independent auditor if he had NOT mentioned the advertising expense in his report.
Answer
- Disciplinary Action by IRBA: The auditor could face disciplinary measures by the Independent Regulatory Board for Auditors for negligence.
- Legal Consequences: They may be held liable for any financial losses incurred by stakeholders due to reliance on misleading statements.
- Reputation Damage: Failing to disclose significant information can damage the auditor's professional reputation and credibility in the industry.