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NATIONAL
SENIOR CERTIFICATE

GRADE 12

JUNE 2023

ACCOUNTING P1

MARKS: 150

TIME: 2 hours

This question paper consists of 11 pages, a formula sheet and

a 12-page answer book.
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ACCOUNTING P1 (EC/JUNE 2023)

INSTRUCTIONS AND INFORMATION

Read the following instructions carefully and follow them precisely.

1. Answer ALL the questions.

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

3. Show ALL workings to earn part-marks.

4. You may use a non-programmable calculator.

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

6. Where applicable, show ALL calculations to ONE decimal point.

7. If you choose to do so, you may use the Financial Indicator Formula Sheet
attached at the end of the question paper. The use of this formula sheet is not
compulsory.

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.

TIME
QUESTION TOPIC MARKS
(minutes)
Statement of Comprehensive Income
1 60 45
and Statement of Financial Position
Notes to Financial Statements, Cash
2 flow Statement and Financial 40 30
Indicators

3 Interpretation of Financial Statements 35 30

4 Corporate Governance 15 15

TOTAL 150 120

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(EC/JUNE 2023) ACCOUNTING P1 3

QUESTION 1: STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF

FINANCIAL POSITION
(60 marks; 45 minutes)

The information relates to Midros Ltd for the financial year ended on 28 February
2023.

REQUIRED:

1.1 Refer to Information B (i) and (ii).

Calculate:

1.1.1 The profit/loss on the trade-in of the old vehicle (4)

1.1.2 The total depreciation for the year (4)

1.2 Complete the following for the year ended 28 February 2023:

1.2.1 Statement of Comprehensive Income (Income statement) (36)

1.2.2 Equity and Liabilities section of the Statement of Financial Position

(Balance sheet) (16)

NOTE: Some amounts are provided in the ANSWER BOOK.

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ACCOUNTING P1 (EC/JUNE 2023)

INFORMATION:
A. Extract: Balances and totals from the records on 28 February:

2023 2022
(R) (R)
Vehicles ? 1 350 000
Accumulated depreciation on vehicles ? 855 000
Equipment 1 022 500 1 022 500
Accumulated depreciation on equipment 923 260 800 900
Fixed deposit: River Bank 1 500 000
Provision for bad debts ? 15 950
SARS: Income tax (provisional tax payments) 196 040
Mortgage loan: Somerville Bank ? 2 205 500
Ordinary share capital ?
Retained income 970 750
Creditors control 448 725
Net sales 11 724 000
Cost of sales 7 363 500
Salaries and wages 982 290
Employer’s contributions 63 620
Directors’ fees 1 925 000
Rent income 174 675
Bad debts 15 090
Sundry expenses (balancing figure) ?

B. Adjustments and additional information:

(i) The following transaction was not recorded:

An old vehicle, cost price R270 000, was traded-in on 28 February 2023 for
a newer model which cost R616 500. The accumulated depreciation on the
trade-in date was R111 240. The trade-in value for the old vehicle was
R105 000.
Depreciation on vehicles is calculated at 20% p.a. on the diminishing
balance.

(ii) Depreciation for the year:

• Depreciation on equipment was brought into account.
• Make provision for depreciation on vehicles.

(iii) An invoice for R28 800 issued to a debtor for goods purchased on
26 February 2023 was incorrectly recorded as a credit note.
The mark-up on these goods were 60%.

(iv) An amount of R3 230 which was not received from the insolvent estate of
a debtor, must be written-off as irrecoverable.

(v) The provision for bad debts must be decreased by R2 000.

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(EC/JUNE 2023) ACCOUNTING P1 5

(vi) Rent increased by 10% per month with effect from 1 September 2022, as
per the lease agreement. Rent is received until March 2023.

(vii) Extract from the salaries journal for February 2023:

Deductions Net salary Contributions

R15 600 R47 330 R7 550

The total for gross salaries was not posted to the general ledger.
All the relevant payments for salaries were made.

(viii) The company had five directors until one resigned on 30 June 2022. The
one who resigned was only replaced on 1 October 2022. All directors are
on the same fee structure. The fees for two directors for February 2023 are
still outstanding.

(ix) Income tax for the financial year was calculated as R242 040. This is 30%
of the net profit before tax.

(x) The Loan statement received from Somerville Bank reflects the following:

Balance at the beginning of the financial year R2 205 500

Interest capitalised ?
Repayments including interest 1 260 000
Balance at the end of the financial year 1 125 000

The loan balance will be reduced by R625 000 in the next financial year.

(xi) Dividends:
• Total dividends for the year amounted to R410 000, which includes an
interim dividend of R160 000 paid on 31 August 2022.

60

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ACCOUNTING P1 (EC/JUNE 2023)

QUESTION 2: CASH FLOW STATEMENT AND FINANCIAL INDICATORS

(40 marks; 30 minutes)

2.1 Choose the correct word from those given in brackets. Write only the word next
to the question numbers (2.1.1 to 2.1.3) in the ANSWER BOOK.

2.1.1 An increase in inventory represents an (inflow/outflow) of cash.

2.1.2 A decrease in accounts payable represent an (inflow/outflow) of cash.

2.1.3 An adjustment for (depreciation / income tax) should be made when

calculating the cash effects of operating activities.
(3 x 1) (3)

2.2 EAGLES LTD

The information relates to the financial year ended 28 February 2023.

REQUIRED:

2.2.1 Prepare the Retained Income note on 28 February 2023. (8)

2.2.2 Complete the Cash Flow Statement on 28 February 2023. (18)

NOTE: Some amounts are provided in the ANSWER BOOK.

2.2.3 Calculate the following financial indicators on 28 February 2023.

• Acid-test ratio (3)

• % Return on average shareholders’ equity (ROSHE) (4)
• Dividends per share (4)

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(EC/JUNE 2023) ACCOUNTING P1 7

INFORMATION:

A. Extract: Statement of Comprehensive Income for the year ended

28 February 2022:

Sales R 2 450 000

Depreciation 567 490
Profit before interest expense 1 208 200
Net profit before tax 1 120 000
Net profit after tax 784 000

B. Income tax was calculated at 30% for the current financial year.

C. Items extracted from Statement of Financial Position on 28 February:

2023 2022
Fixed deposit 144 450 277 550
Current assets 2 175 600 2 003 790
Current liabilities 753 065 719 800
Inventories 1 469 700 1 431 000
Trade debtors 603 400 557 340
Cash and cash equivalents 92 840 15 450
SARS: Income tax 9 660 Dr 20 020 Cr
Shareholders for dividends 207 070 150 000
Bank overdraft 0 28 480
Non-current liabilities 735 000 980 000
Ordinary share capital ? 9 520 000
Ordinary shareholders equity 11 887 820 9 814 000

D. Share capital and dividends:

1 March 2022 1 190 000 shares were in issue.

30 June 2022 85 000 shares repurchased at R2 above the
average share price.
These shares do not qualify for dividends.
30 August 2022 Interim dividends of 12 cents per share paid.
1 November 2022 R2 479 500 received for additional shares issued.
28 February 2023 1 380 500 shares were in issue.
28 February 2023 A final dividend was declared.

40

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ACCOUNTING P1 (EC/JUNE 2023)

QUESTION 3: INTERPRETATION OF FINANCIAL STATEMENTS

(35 marks; 30 minutes)

3.1 Choose an explanation in COLUMN B that matches a term in COLUMN A.

Write only the letters (A–D) next to the question numbers (3.1.1 to 3.1.3) in the
ANSWER BOOK.

COLUMN A COLUMN B
3.1.1 Return A Total liabilities exceeding total assets

3.1.2 Current asset B Vehicle used in operating the business

3.1.3 Insolvent C The percentage net income on equity

D Fixed deposit matures in the next financial year

(3 x 1) (3)

3.2 ROCK LTD and WILLS LTD.

The information relates to two companies which operate in the same industry.
The financial year ends on 28 February each year.
REQUIRED:
NOTE: Provide figures, trends, financial indicators or calculations in EACH
case to support your comments and explanations.
3.2.1 Identify the company with the better profitability financial indicators.
Quote TWO financial indicators. (3)
3.2.2 Identify and explain which company is managing its liquidity more
efficiently. Quote TWO financial indicators. (6)
3.2.3 Comment on the dividend pay-out policy of each company. Provide a
possible reason why each company decided on the policy adopted.
Quote figures. (6)
3.2.4 The directors of Wills Ltd decided to increase the loan during the
current financial year. Explain whether this was a good decision or not.
Quote TWO financial indicators. (6)
3.2.5 The shareholders of Rock Ltd are satisfied with the market price of their
shares, whereas the shareholders of Wills Ltd are not satisfied. Explain
by quoting a financial indicator for EACH company. (6)
3.2.6 Refer to Information C.
Wills Ltd will issue a further 300 000 shares during the new financial
year. The Mentoor family is interested to buy 180 000 of these shares.
• Calculate the % percentage shareholding of the Mentoor family if
they buy these shares. (2)
• As a shareholder, why would you be concerned about the interest
shown by the Mentoor family? Provide THREE points. (3)

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(EC/JUNE 2023) ACCOUNTING P1 9

INFORMATION:

A. Financial indicators calculated on 28 February 2023:

ROCK LTD WILLS LTD

Mark-up % achieved 45% 52%
% Operating expenses on sales 25,5% 18.3%
% Operating profit on sales 7,4% 10,3%
Current ratio 1,5 : 1 4,2 : 1
Acid-test ratio 0,7 : 1 1,2 : 1
Average debtors’ collection period 28 days 45 days
Debt/equity ratio 0,3 : 1 0,6 : 1
% return on average shareholders’ equity 22,3% 14,2%
% return on average capital employed 15,9% 9,5%
Dividends per share 117 cents 190 cents
Earnings per share 390 cents 250 cents
Dividend pay-out rate 30% 76%
Net asset value per share 784 cents 652 cents

B. Additional information on 28 February 2023:

ROCK LTD WILLS LTD

Market price per share on stock exchange 838 cents 515 cents
Interest on fixed deposits 6% 6%
Interest on loans 11% 11%

C. Extracts from the accounting records on 28 February 2023:

ROCK LTD WILLS LTD

Number of shares in issue 2 000 000 1 600 000
% shareholding of the Mentoor family 23,9% 50,5%

35

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ACCOUNTING P1 (EC/JUNE 2023)

QUESTION 4: CORPORATE GOVERNANCE (15 marks; 15 minutes)

4.1 The following extract represent a certain type of audit report.

In our opinion the financial statements present fairly, in all material respects,
the financial position of the company as at 28 February 2023.

REQUIRED:

4.1.1 Identify the type of audit report in the extract above and give a reason
for your answer. (2)

4.1.2 Explain the effect of this type of report for the image of the company.
Provide ONE point. (2)

4.2 The following information was extracted from a local publication. It relates to
a company listed on the JSE.

The JSE has imposed the maximum fine on former CEO (Chief Executive Officer)
of Millo Ltd, as well as barring her from serving as a director on the board of any
JSE listed company, for ten years. The JSE stated that it had imposed the above
penalty for the following reasons:

• The release of financial statements that did not comply with listing
requirements.
• The financial statements contained incorrect, false and misleading
information.
• Fictitious source documents that falsely inflated income by millions of
rands, were also discovered.

REQUIRED:

4.2.1 Provide TWO possible reasons why the CEO was fined, and not the
company. (4)

4.2.2 Provide TWO points why the JSE took this action. (4)

4.2.3 Identify ONE other party (stakeholder) that could also be accountable
for allowing this situation. Provide a reason. (3)

15

TOTAL: 150

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(EC/JUNE 2023) ACCOUNTING P1 11

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

Total assets : Total liabilities Current assets : Current liabilities

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

liabilities

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

Average trading stock x 365 Cost of sales .

Cost of sales 1 Average trading stock

Average debtors x 365 Average creditors x 365
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 (*See note below)

Net income before tax + Interest on loans x 100

Average shareholders' equity + Average non-current liabilities 1
Shareholders' equity x 100 Dividends for the year x 100
Number of issued shares 1 Number of issued shares 1

Interim dividends x 100 Final dividends x 100

Number of issued shares 1 Number of issued shares 1
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.

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Name:

NATIONAL
SENIOR CERTIFICATE

GRADE 12

JUNE 2023

ACCOUNTING P1
ANSWER BOOK

MARKS MODERATED
QUESTION MAX. MARKS
OBTAINED MARKS

1 60

2 40

3 35

4 15

150

This answer book consists of 12 pages.

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P1 (ANSWER BOOK) (EC/JUNE 2023)

QUESTION 1

1.1.1 Calculate: The profit/loss on the trade-in of the old vehicle

WORKINGS ANSWER

1.1.2 Calculate: The total depreciation for the year

Depreciation on equipment

Depreciation on vehicles

NOTE: The amounts calculated above must be transferred to

QUESTION 1.2.1, the Statement of Comprehensive Income.

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P1 (ANSWER BOOK) 3

1.2.1 Statement of Comprehensive Income for the year ended 28 February 2023

Sales

Cost of sales

Gross profit

Other income

Discount received 32 400

Gross operating income

Operating expenses

Audit fees 180 060

Insurance 56 920

Sundry expenses

Operating profit
Interest income 120 000

Profit before interest expense

Net profit before tax

Income tax (242 040)

Net profit after tax 36

*

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P1 (ANSWER BOOK) (EC/JUNE 2023)

1.2.2 Extract: Statement of Financial Position on 28 February 2023

EQUITY AND LIABILITIES

ORDINARY SHAREHOLDERS' EQUITY 5 870 750

NON-CURRENT LIABILITIES

CURRENT LIABILITIES
Trade and other payables

TOTAL EQUITY AND LIABILITIES 16

TOTAL MARKS

60

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P1 (ANSWER BOOK) 5

QUESTION 2

2.1 2.1.1

2.1.2

2.1.3
3

2.2.1 Retained Income

Balance on 1 March 2022

Net profit after tax 784 000

Ordinary share dividends

Final dividends 207 070

Balance on 28 February 2023

8

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P1 (ANSWER BOOK) (EC/JUNE 2023)

2.2.2 Cash Flow Statement for the year ended on 28 February 2023.

Information is NOT required in shaded areas.

CASH FLOW FROM OPERATING ACTIVITIES

Cash generated from operations

Interest paid

CASH FLOW FROM INVESTING ACTIVITIES

CASH FLOW FROM FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING

CASH AND CASH EQUIVALENTS AT END

92 840 18

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P1 (ANSWER BOOK) 7

2.2.3 Calculate the following financial indicators on 28 February 2023.

Acid-test ratio
WORKINGS ANSWER

3
% Return on average shareholders’ equity (ROSHE)
WORKINGS ANSWER

4
Dividend per share
WORKINGS ANSWER

TOTAL MARKS

40

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P1 (ANSWER BOOK) (EC/JUNE 2023)

QUESTION 3

3.1 3.1.1

3.1.2

3.1.3 3

3.2.1 Identify the company with the better profitability financial indicators.
Quote TWO financial indicators.

3.2.2 Identify and explain which company is managing its liquidity more
efficiently. Quote TWO financial indicators.

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P1 (ANSWER BOOK) 9

3.2.3 Comment on the dividend pay-out policy of each company. Provide a

possible reason why each company decided on the policy adopted.
Quote figures.
Comment Explanation

Rock Ltd

Wills Ltd

3.2.4 The directors of Wills Ltd decided to increase the loan during the
current financial year. Explain whether this was a good decision or not.
Quote TWO financial indicators.

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P1 (ANSWER BOOK) (EC/JUNE 2023)

3.2.5 The shareholders of Rock Ltd are satisfied with the market price of their
shares, whereas the shareholders of Wills Ltd are not satisfied. Explain
by quoting a financial indicator for EACH company.

ROCK LTD

WILLS LTD

3.2.6 Calculate the % percentage shareholding of the Mentoor- family if they

buy these shares.
WORKINGS ANSWER

2
As a shareholder, why would you be concerned about the interest
shown by the Mentoor family? Provide TWO points.

TOTAL MARKS
35

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P1 (ANSWER BOOK) 11

QUESTION 4

4.1.1 Identify the type of audit report in the extract above and give a reason
for your answer.

Type of report: 

Reason:

4.1.2 Explain the effect of this type of report for the image of the company.
Provide ONE point.

4.2.1 Provide TWO possible reasons why the CEO was fined, and not the
company.

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P1 (ANSWER BOOK) (EC/JUNE 2023)

4.2.2 Provide TWO points why the JSE took this action.

4.2.3 Identify ONE other party (stakeholder) that could also be accountable
for allowing this situation. Provide a reason.

TOTAL MARKS

15

TOTAL: 150

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NATIONAL
SENIOR CERTIFICATE

GRADE 12

JUNE 2023

ACCOUNTING P1
MARKING GUIDELINE
MARKS: 150

MARKING PRINCIPLES:
1. Unless otherwise stated in the marking guideline, penalties for foreign items are applied only if the
candidate is not losing marks elsewhere in the question for that item (no penalty for misplaced item).
No double penalty applied.
2. Penalties for placement or poor presentation (e.g. details) are applied only if the candidate is earning
marks on the figures for that item.
3. Unless otherwise stated, give full marks for correct answer. If answer is incorrect, mark workings.
4. If a pre-adjustment figure is shown as a final figure, allocate the part-mark as working for that figure
(not the method mark for the answer). NOTE: If figures are stipulated in marking guideline for
components of workings, these do not carry the method mark for final answer as well.
5. Unless otherwise indicated, the positive or negative effect of any figure must be considered to award
the mark. If no + or – sign or bracket is provided, assume that the figure is positive.
6. Where indicated, part-marks may be awarded to differentiate between differing qualities of answers
from candidates.
7. Where penalties are applied, the marks for that section of the question cannot be a final negative.
8. Where penalties are applied, the marks for that section of the question cannot be a final negative.
9. Where method marks are awarded for operation, the marker must inspect the reasonableness of the
answer before awarding the mark.
10 'Operation' means 'Check operation'. 'One part correct' means 'Operation and one part correct'.
NOTE: check operation must be +, -, x, ÷, as per candidate’s calculation (if valid) or per
memorandum.
11. In calculations, do not award marks for workings if numerator and denominator are swapped – this
also applies to ratios.
12. In awarding method marks, ensure that candidates do not get full marks for any item that is incorrect
at least in part. Indicate by with a 
13. Be aware of candidates who provide valid alternatives beyond the marking guideline. Note that one
comment could contain different aspects.
14. Codes: f = foreign item; p = placement/presentation.

This marking guideline consists of 12 pages.

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ACCOUNTING P1 (MARKING GUIDELINE) (EC/JUNE 2023)

QUESTION 1

1.1.1 Calculate: The profit/loss on the trade-in of the old vehicle

WORKINGS ANSWER

270 000 ✓ – 111 240 ✓– 105 000 ✓ 53 760 ✓

1.1.2 Calculate: The total depreciation for the year

Depreciation on equipment 923 260 – 800 900 122 360 ✓

(1 350 000 – 855 000)

Depreciation on vehicles 495 000 x 20% 99 000 ✓
one part correct

221 360 
one part correct
4

NOTE: The amounts calculated above must be transferred to

QUESTION 1.2.1, the Statement of Comprehensive Income.

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ACCOUNTING P1 (MARKING GUIDELINE) 3

1.2.1 Statement of Comprehensive Income for the year ended 28 February

2023
Sales (28 800+28 800)
11 724 000 ✓ + 57 600 ✓ 11 781 600 *
Cost of sales (18 000 + 18 000)
7 327 500 ✓ + 36 000 ✓✓ (7 363 500) *

Gross profit Sales – CoS 4 418 100  8

No
Other income 195 055 mark

Discount received 32 400

Provision for bad debts-adjustment 2 000 ✓
Rent income 174 675 ✓ – 14 025 ✓✓ 160 650 *

Gross operating income GP + OI 4 613 150  6

Operating expenses GOI – OP (3 746 850) 

Audit fees 180 060

Insurance 56 920
Loss on sale of
vehicle see 1.1.1 above 53 760 
Depreciation se 1.1.2 above 221 360 
Bad debts 15 090 + 3 230 18 320 ✓✓
Salaries and wages 982 290 ✓+ 62 930 ✓✓ 1 045 220 *
Directors’ fees 1 925 000 ✓ + 70 000 ✓✓ 1 995 000 *
Employer’s contribution 63 620 ✓
Sundry expenses balancing figure 112 590 

Operating profit PBIE – Int inc 866 300  16

Interest income 120 000

Profit before interest expense NPBT + Int exp 986 300 

Interest expense 1 260 000 + 1 125 000 – 2 205 500 (179 500) ✓*

Net profit before tax 242 040 x 100/30 806 800 ✓✓ 6

Income tax (242 040)

NPBT – Tax
Net profit after tax OR 242 040 x 70/30 564 760  36
*

-1 foreign items (max. -2)

*one part correct
For misplaced items mark workings

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ACCOUNTING P1 (MARKING GUIDELINE) (EC/JUNE 2023)

1.2.2 Extract: Statement of Financial Position on 28 February 2023

EQUITY AND LIABILITIES

ORDINARY SHAREHOLDERS' EQUITY 5 870 750

Ordinary share capital OSHE – RI

4 900 000 

Retained income 970 750 ✓ 2

NON-CURRENT LIABILITIES
Mortgage loan 1 125 000 – 625 000 500 000 * 2

CURRENT LIABILITIES 1 965 250 No mark

Trade and other payables

(616 500 – 105 000) Rent Inc. D fees
448 725 ✓ + 511 500 ✓✓ + 14 025  + 70 000  1 044 250 *

SARS: Income tax (242 040 – 196 040) 46 000 ✓✓

Current portion of loan 625 000 ✓ 12

Shareholders for dividends (410 000 – 160 000) 250 000 ✓✓

TOTAL EQUITY AND LIABILITIES operation

8 336 000 ✓

16
-1 F foreign items (max. -2) *one part correct
For misplaced items mark workings only
-1 P max. (if no, or inappropriate details)

TOTAL MARKS 60

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ACCOUNTING P1 (MARKING GUIDELINE) 5

QUESTION 2

2.1
2.1.1 Outflow 

2.1.2 Outflow 

2.1.3 Depreciation 
3

2.2.1 Retained Income

Balance on 1 March 2022 9 814 000 – 9 520 000 294 000 

Net profit after tax 784 000

Shares repurchased 85 000 x R2 (170 000) 

Ordinary share dividends (339 675) 

Interim dividends (1 190 000 – 85 000) x 12c 132 600 

Final dividends 207 070

Balance on 28 February 2023 568 320 

8

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ACCOUNTING P1 (MARKING GUIDELINE) (EC/JUNE 2023)

2.2.2 Cash Flow Statement for the year ended on 28 February 2023.

Information is NOT required in shaded areas.

CASH FLOW FROM OPERATING ACTIVITIES

Cash generated from operations

Interest paid

Income tax paid 20 020 ✓ + 336 000 ✓ + 9 660 ✓ (365 680) *

Be aware of signs reversed and use of brackets

Dividends paid 150 000✓ + 132 600  (282 600) *

Be aware of signs reversed and use of brackets

CASH FLOW FROM INVESTING ACTIVITIES

CASH FLOW FROM FINANCING ACTIVITIES operation 1 384 500 

Proceeds from issue of new shares 2 479 500 ✓

Repurchase of shares  
(850 000) *
(680 000 + 170 000) OR 85 000 x R10

Loan repaid (245 000) ✓

NET CHANGE IN CASH AND CASH EQUIVALENTS 105 870 

CCE end + CCE beg

CASH AND CASH EQUIVALENTS AT BEGINNING (13 030) ✓✓

(15 450 – 28 480)

CASH AND CASH EQUIVALENTS AT END

92 840 18
*one part correct; in brackets
If no brackets, award marks for workings only

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ACCOUNTING P1 (MARKING GUIDELINE) 7

2.2.3 Calculate the following financial indicators on 28 February 2023.

Acid-test ratio
WORKINGS ANSWER

2 175 600 – 1 469 700 0,9 : 1 

705 900 ✓ : 753 065 ✓ one part correct;
in the form x : 1
3
% Return on average shareholders’ equity (ROSHE)
WORKINGS ANSWER

784 000 
x 100* 7,2% 
½ (11 887 825  + 9 814 000 )
two marks one part correct and
must use average (½)
% sign not necessary
NOTE: * 100 is not one part correct
4
Dividend per share
WORKINGS ANSWER

207 070 / 1 380 500 x 100

12 cents ✓ + 15 cents ✓✓ 27 cents 
one part correct with division one part correct;

TOTAL MARKS 40

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ACCOUNTING P1 (MARKING GUIDELINE) (EC/JUNE 2023)

QUESTION 3

3.1 3.1.1 C✓

3.1.2 D✓

3.1.3 A✓
3

3.2.1 Identify the company with the better profitability financial indicators.
Quote TWO financial indicators.

Wills Ltd ✓
If wrong company identified, allocate marks for relevant financial indicators only (max. 2 marks)

Financial Indicators (with figure)

% Operating expenses on sales – 18,3% ✓ (compared to 25,5% of Rock Ltd)
% Operating profit on sales – 10,3% ✓ (compared to 17,4% of Rock Ltd)

* Mark-up % is a deliberate decision; ignore if mentioned

Max. -1 for superfluous additional financial indicators mentioned.
3

3.2.2 Identify and explain which company is managing its liquidity more
efficiently. Quote TWO financial indicators.

TWO financial indicators of Rock Ltd  comparative figures  explanation ✓✓

If figures are shown for Wills Ltd, award marks for correct financial indicators identified.
(max. 2 marks)

• Current ratio:
Rock Ltd is 1,5 : 1 compared to Wills Ltd of 4,2 : 1
The current assets of Rock Ltd are enough to cover current liabilities /
Wills Ltd keep too much cash tied-up in stock (stockpiling)

• Debtors’ collection period:

Rock Ltd is 28 days compared to 45 days of Wills Ltd.
Constant inflow of cash from debtors who pay within the acceptable
credit terms
6

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ACCOUNTING P1 (MARKING GUIDELINE) 9

3.2.3 Comment on the dividend pay-out policy of each company. Provide a

possible reason why each company decided on the policy adopted.
Quote figures.

Comment  Explanation 

(with figures) part marks for incomplete / partial / unclear
responses

The company retained more

Paid out 30% of earnings as profit to focus on growth /
Rock Ltd
dividends / Retained 70% of expansion / long-term
earnings sustainability of the business.

The company wants to keep

Paid out 76% of earnings as shareholders happy to distract
Wills Ltd dividends / Retained 24% of attention from poor
earnings performance of the company.
6

3.2.4 The directors of Wills Ltd decided to increase the loan during the
current financial year. Explain whether this was a good decision or
not. Quote TWO financial indicators.
Indicator and figure: Debt/equity ratio is 0,6 : 1 ✓

Indicator and figure: % return on average capital employed is 9,5% ✓

Explanation:
• The company is highly geared / high financial risk / rely too much on
borrowed capital ✓✓
• The company is negatively geared / ROTCE is lower than the interest
rate of 11% / does not make effective use of loan to generate
profits ✓✓
6

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ACCOUNTING P1 (MARKING GUIDELINE) (EC/JUNE 2023)

3.2.5 The shareholders of Rock Ltd are satisfied with the market price of their
shares, whereas the shareholders of Wills Ltd are not satisfied. Explain
by quoting a financial indicator for EACH company.

ROCK LTD Market price per share of 838c is higher than the Net asset
Comparison of value of 784c / Market price per share is 54c higher than the
MP to NAV ✓ ✓
Figures ✓ NAV.

WILLS LTD Market price per share of 515c is lower than the Net asset
Comparison of value of 652c / Market price per share is 137c lower than the
MP to NAV ✓ ✓
Figures ✓ NAV.
6

3.2.6 Calculate the % percentage shareholding of the Mentoor-family if they

buy these shares.
WORKINGS ANSWER

808 000 + 180 000

988 000 100 52% ✓✓
x
1 900 000 1 % sign not necessary
2
(1 600 000 + 300 000)

As a shareholder, why would you be concerned about the interest

shown by the Mentoor family? Provide THREE points.

Any THREE valid and separate points ✓ ✓ ✓ 


NOTE:
The family was the majority shareholders during the past financial year and most of the
financial indicators were not encouraging. 

• Their control over major decisions / Influence over decisions did not
benefit the company much, e.g.
The company should have retained funds for expansion but pay 76% as
dividends. / The company paid 76% of earnings to keep shareholders
happy for poor performance.
• Their past experience in directing the company: their skills and
knowledge.
• The effect on the future of the company e.g. losing shareholders /
attracting new investors / possibility of instability. 3

TOTAL MARKS 35

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ACCOUNTING P1 (MARKING GUIDELINE) 11

QUESTION 4

4.1.1 Identify the type of audit report in the extract above and give a reason
for your answer.

Type of report: Unqualified report 


Reason: ONE valid reason 

• No issues found with information on the financial statements

• Financial statements “present fairly” the financial position of the
company
• This it is a clean (good) report “in all material respects” 2

4.1.2 Explain the effect of this type of report for the image of the company.
Provide ONE point.

ONE valid point  part marks for partial / incomplete / unclear responses

• This will impact positively on the share price / demand for shares
• Potential investors would be interested to buy shares
• Directors appointed are reliable; shareholders are confident in their
ability to continue good governance.
• Employees and other role players would recognise that good internal
controls are employed and continue to maintain this.
2

4.2.1 Provide TWO possible reasons why the CEO was fined, and not the
company.
TWO valid and different points part marks for incomplete / partial answers

• Is the highest-ranking executive of the company.

• Guides company practices and procedures.
• Oversee company operations.
• Communicating between board of directors and other executives.
• Making important decisions, which affect the company’s image. 4

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ACCOUNTING P1 (MARKING GUIDELINE) (EC/JUNE 2023)

4.2.2 Provide TWO points why the JSE took this action.

TWO valid and different points  part marks for incomplete / partial answers

• They will not deceive the public as it is their role to ensure that sound
business management practices are in place / do not want to cast
doubts about their operations.
• Would want to avoid any legal action against the JSE for misleading
shareholders / Reputation of JSE may become questionable.
• JSE is a vital organisation in facilitating capital funds that stimulate the
economy / leads to creation of jobs / public relies on credible information
JSE competes with international stock markets / need to guard their
activities / ensure adherence to rules and regulations.
4

4.2.3 Identify ONE other party (stakeholder) that could also be accountable
for allowing this situation. Provide a reason.
ONE valid party  Reason  part marks for incomplete / partial answers

• Board of directors: Plays a supervisory role / overseeing corporate

activities and assessing performance / look after shareholders’ interest.
• CFO (Chief financial officer): Managing the financial actions of the
company / overseeing all aspects of its financial success.
• Audit and risk committee: Monitoring the financial reporting processes /
the compliance processes / the performance of auditors / overseeing the
audit program.
3

TOTAL MARKS 15

TOTAL MARKS: 150

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