PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

CRAWFORD INTERNATIONAL

PRELIMINARY EXAMINATION 2023

ACCOUNTING PAPER 1

Time: 2 hours 200 marks

Examiners: A Harmse, N Williams, T Barnes, J Moderator: T Williamson
Powell

MARKING GUIDELINE

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

QUESTION 1

INVENTORY AND VAT (40marks; 24minutes)

PART A – INVENTORY SYSTEMS

1.1 Calculate how many candles are in stock on 31 July 2022.

1 200 + 3 000 + 2 000 + 3 500 – 450 – 5 100 = 4 150 candles

(3)

1.2 Calculate Fleur Candles’ cost of sales and gross profit at the end of
the year, using the FIFO method.
Cost of Sales:
1 200 x R26 = R31 200
3 000 x R28 = R84 000
900 x R29 = R26 100 

=R141 300

Gross Profit:

(5 100 x R44)  – 141 300 (answer in part 1) 

= R224 400 – 141 300 (6)
= R83 100

1.3 The owner wants to change to the weighted average method in the
next financial year.
1.3.1 The owner added the four different cost prices together and divided
by four to arrive to an average price of R26,25. Explain why this is
not the correct way of calculating the weighted average price.

The owner is not taking into account that more units were bought at
the different price points.  (2)

1.3.2 Calculate the correct weighted average price of one candle.

31 200+84 000+58 000+77 000−13 050

= 237 150/9 250 = R25, 64 
1 200+3 000+2 000+3 500−450 (7)

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

1.3.3 Is there a tax benefit to the business if it changes the stock valuation
method? Why or why not?
Yes  Changing to the weighted average method makes the gross
profit lower. Which in turn results in a lower amount of tax payable. (3)

Lower closing stock/higher cost of sales/lower GP/Less Tax

1.3.4 Name one advantage and one disadvantage of the perpetual and
periodic systems.
Perpetual
Advantage:
• Records are updated daily (with every transaction) thus the
stock records are accurate. 

Disadvantage:
• It is expensive to maintain. 

Periodic
Advantage:

• Simple calculations and easy record keeping. 

Disadvantage:

• More difficult to detect theft or discrepancies in the stock

levels. 
(any other suitable answer)

(4)

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

PART B - VAT
1.4 1.4 Calculate the amount that is payable to or refundable by
SARS as indicated in the table below. Show calculations
for part marks. The use or non-use of brackets is
important. Round up to the nearest rand.

Transaction Amount payable or refundable to/by

Number SARS

Calculation Effect on
SARS
amount
1.4.1 (2 600)
1.4.2 156 400 x 15/115 (20 400) 
1.4.3 (27 600/1.25) x 15/100 3312
1.4.4 162 000 x 15/100 (24 300) 
1.4.5 20 400 x 0,05 1020
1.4.6 26 910 x 15/115 (3 510) 
1.4.7 391 000 x 15/115 51 000
Amount payable or refundable by SARS 4 522

(15)

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

QUESTION 2

FINANCIAL STATEMENTS (75marks; 45minutes)

2.1 Presume the net profit before tax and before the year end adjustments is
R2 305 400. Calculate the correct net profit before tax for the year ending
28 February 2023 after taking all year end adjustments into consideration. (30)

Net profit before tax 2 305 400

Trading stock deficit (ADJ 1) (5 985) 

Consumables stores on hand (ADJ 2) 4 000 √

Profit on sell of asset (ADJ 3) (CALC BELOW) 44 000

Depreciation (ADJ 3) (198 015) 

Repairs (ADJ 4) (28 000) √

Bad debts (ADJ 5) (1 200 x 40/60) (800) √

Provision for Bad Debts (ADJ 6) (2 100 – 1 896) 204 √

Interest income (ADJ 7) (CALC BELOW) 10 500

Rent Income (ADJ 8) (CALC BELOW) (40 000) 

Insurance (ADJ 9) (CALC BELOW) 13 600√

Interest on loan (ADJ 10) (CALC BELOW) (72 000) 

Salary outstanding (3 000 x 100/20=15 000√ + 3 000 √+ 150√+1 200√+150√)

ADJ 11 (19 500)

Corrected Net Profit before Tax 2 013 424

(18)
Calculations:
ASSET DISPOSAL (3) RENT INCOME(3)
80 000√ + 204 000√ – 240 000√ 8x +6(x +5 000) = 240 000√
= 44 000 14x = 210 000√
(or 240 000√-30000√/14)
X= 15 000√
(15 000 +5 000) x 2 = 40 000

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

INTEREST INCOME (2) INSURANCE (1)

(300 000 x 6.5/100) √– 9 000√ 20 400/6 x 4 √

INTEREST ON LOAN (3)

280 000 √+ 192 000√ – 400 000√

2.2 Complete the tangible asset note.

Take note: Some of the information is already completed, presume the information is
correct and do not change the amounts. (20)

Land and
3. TANGIBLE ASSETS Vehicles Equipment
Building
Carrying value at the beginning 504 000 260 100√
of year
Cost (5 928 000 – 28 000) 5 900 000√ 840 000 360 000√
Accumulated depreciation (336 000) (99 900)
Movement
Additions 40 000√
Disposal at carrying value (36 000) 
Depreciation for the year (156 000)  (42 015) 
Carrying value at the end of the 5 900 000√ 312 000 258 085 
year
Cost 600 000 √ 400 000
Accumulated depreciation (288 000)  (141
915)
(13)

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

Calculations:
VEHICLES: (5)
CV of vehicles sold:
240 000√ – (36 000 – 168 000) √ = 36 000
Depreciation of old vehicles:
840 000 -240 000 = 600 000√ x 20% = 120 000√

Depreciation of sold vehicles:

240 000 x 20% x 9/12 = 36 000√

EQUIPMENT: (2)
Depreciation of new equipment:
40 000 x 15% x 6/12 = 3 000√

Depreciation of old equipment:

(360 000 – 99 900) x 15% = 39 015√

2.3 Calculate how much SARS (income tax) will be disclosed on Statement of
Financial Position. Show all calculations and indicate if it is an asset or a liability
at the end of the year. (4)

Provisional Tax 120 000

Provisional Tax 120 000√
Income tax (584 339)√
Tax liability √ (344 339)√

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

2.4 Complete the Statement of financial position below.

Take note: Some of the information is already completed, presume the information is
correct and do not change the amounts. (21)
BRAMBA LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2023
Note R
ASSETS
NON-CURRENT ASSETS
Fixed/Tangible Assets 3 6 470 085
Financial Assets (300 000 – 150 000√) 150 000√

CURRENT ASSETS
Inventories (219 000√ – 5 985√ + 4 000√) 4 217 035
Trade and other receivables 5 85 404
(64 000 – 800 – (2 100 √– 204) +13 600
+10 500)

Cash and Cash equivalent (480 000 + 150 000√) 6 630 000√

TOTAL ASSETS 7 546 025

EQUITY AND LIABILITIES

SHAREHOLDERS EQUITY 6 616 186
Ordinary Share Capital 7 4 720 000
Retained Income 8 1 896 186

NON-CURRENT ASSETS
Loan from Beet bank (280 000√ – 120 000√) 160 000

CURRENT LIABILITIES
Trade and other payables 9 649 839
? Short term portion of loan√ 120 000√

TOTAL EQUITY AND LIABILITIES 7 546 025

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

QUESTION 3

CASH FLOW STATEMENT (45marks; 27minutes)

Use the information from the information booklet to complete the:

3.1 Retained Income note
3.2 The Cash Flow Statement
(Show the necessary calculations)

NOTES TO THE STATEMENT OF FINANCIAL POSITION ON 31 MARCH 2023

3.1. RETAINED INCOME NOTE (14)
Retained income at the beginning of the year ✓ 254 000

✓ Net profit after tax (267120 / 28 x 72) ✓ ✓ 686 880

✓ Repurchases of 60 000 at R1,17 ✓ ✓ (70 200)

Dividends on Ordinary Shares (✓) (634 600)

Interim (4 000 000✓ x 0.07✓) (✓) 280 000

Final (4 000 000 – 60 000 ✓= 3 940 000 x 0.09✓) (✓) 354 600

Retained income at the end of the year 236 080

WEIGHTED AVERAGE (2)

(5 920 000 + 2 600 000) 8 520 000 ✓

(3 200 000 + 800 000) 4 000 000 ✓

= 2,13

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

3.2. CASH FLOW STATEMENT (23)

SMART LTD
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2023
Note R
Cash flow from operating activities DO NOT CALCULATE

Cash generated from operations 1 304 680

Interest paid ✓ (14 600)

Dividends Paid (✓ ) (568 000)

Tax Paid (✓ ) (236 030)

Cash flows from investing activities DO NOT CALCULATE

Purchase of non-current assets (1 650 000 ✓ + 842 200 ✓✓✓) (✓) (2 492 200)

Proceeds from the sale of non-current assets ✓ 15 450

Increase in investments (380 000 – 310 000) ✓ (70 000)

Cash flow from financing activities DO NOT CALCULATE

Proceeds from issue of share capital (800 000✓ x 3.25) ✓ 2 600 000

Repurchase of shares (60 000✓ x 3.30) ✓ (198 000)

Repayment of the long-term loan (50 400 ✓– 14 600 ✓) (35 800)
Additional long-term loan ✓✓✓310 800

Net cash and cash equivalents 2 DO NOT CALCULATE

Cash and cash equivalents – beginning of the year ✓296 400

Cash and cash equivalents – end of the year (3 500 ✓ –
(✓) (131 500)
135 000✓)

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

TAX PAID (3) DIVIDENDS PAID (3)

26 200 ^ Amount owed start year (26200) (288 000) ^ Amount owed start year 288 000
(267 120) ^ Tax for the year 267120 (634 600) ^ Dividends for year 634 600
4 890 ^ Amount owed from SARS (4 890) 358 600 ^ Amount owed end year (358 600)
(236 030) 236 030 (568 000) 568 000

PROCEEDS / PURCHASE ASSETS LOAN

Land
2 950 000 – 1 300 000 = 1 650 000 Balance 105 000
Interest 14 600 ✓
Equipment Payments (50 400) ✓
CV 820 000 Additional ?? 310 800 ✓
Disposal (15 450) ✓ Balance 380 000
Depreciation (46 750) ✓
Addition ?? 842 200 ✓ Allocate marks here if the amount in the CF is
CV 1 600 000 incorrect.

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

QUESTION 4

MANUFACTURING (40marks; 24minutes)

Refer to the Information Booklet for information relating to “Power On”

Generators
4.1 Complete the following notes to the production cost statement for the year ended
30 September 2022.

A. Raw Materials (8)

Opening Stock 1 236 000√
* Purchases (1 340 000√ + 2 680 000√ – 24 000√ – 3 939 000
57 000√
* Carriage (126 300√ - 1 000√ 125 300
Closing Stock (1 191 000) √
Do not total

B. Direct Labour (7)

Gross earnings (10√ x 35 √x 40√ x 48√ = 672 000 + 1 086 000
414 000√
Contributions 672 000 x 1% 6 720√
Do not total

C. Factory Overheads (13)

77 850 85 950
Indirect Materials (25 200√ + (103 800 x 75%√) – 17 100√
Indirect Labour (759 000√ x 100/66 = 1 150 000 √+ 1 161 500
11 500√
Water & Electricity (189 540 x 7/10√ 132 678
Rent Expense (1 197 000 – 33 000√ = 1 164 000 x 873 000
210/280√
Depreciation (156 000 156 000√
Insurance (138 600/11 = 12 600√ x 12 = 151 200 x 2/3√ 100 800
Telephone (37 800 x 20/100√ 7 560
Do not total

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PRELIMINARY EXAMINATION 2023: ACCOUNTING PAPER 1 – MARKING GUIDELINE

4.2 Calculate the cost of sales for the year ended 31 May 2020. (3)

7350 √+ 9 986 985 √– 576 000√ = 10 145 985

4.3 Using the information given calculate “Power On” Generators break even point.is.
(7)

(720 + 150)√ √ x 2 500√

6 974 √– (1 486 + 200) √√

2 175 000
5 288
√
411its/412 units

4.4 How would you treat the closing balance for Work-In-Progress in the production
cost statements and why would you do this? (2)

The closing amount for Work-In- Progress should be subtracted as this stock
should not be included in the cost of production completed. √√

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