SECTION A — 20 Marks

Question 1: Multiple Choice Select the correct answer for each of the following. Write only the
letter (a–d) next to the question number.

1.1 What is Value Added Tax (VAT)? a) Consumption tax levied at 15% on most goods, 0% on
zero-rated, none on exempt. b) Income-based tax levied at 15% on all goods. c) Consumption
tax levied at 14% on all goods. d) Consumption tax levied at 15% plus 10% on exempt items.

1.2 How do you calculate the selling price if cost is R120 and mark-up is 25% on cost? a) SP =
CP / (CP + MU) b) SP = (SP + MU) / CP c) SP = (CP + MU) / CP d) SP = CP × (1 + MU)

1.3 Which of the following is the correct recognition criteria for PPE? a) Meets asset definition;
reliable cost; probable outflow. b) May meet asset definition; reliable cost; probable inflow. c)
Meets asset definition; cost could be measured reliably; probable inflow. d) Meets asset
definition; reliable cost; probable inflow.

1.4 What does the accrual principle require? a) Record when cash received/paid. b) Record in
the period it occurs. c) Record when documents verify. d) Record when reflected on bank
statement.

1.5 What is the function of the Statement of Cash Flows? a) Shows cash inflows/outflows. b)
Shows financial performance. c) Shows financial position at date. d) Shows changes in equity.

1.6 GMN Ltd buys vehicles from Koala Motors for R6,900,000 (VAT incl.). Input VAT is claimable.
What is the correct journal entry? a) Dr Vehicles R6,900,000; Dr Input VAT R1,035,000; Cr
Creditor R7,935,000 b) Dr Vehicles R7,935,000; Cr Creditor R6,900,000; Cr Input VAT R1,035,000
c) Dr Vehicles R6,900,000; Cr Input VAT R900,000; Cr Creditor R6,000,000 d) Dr Vehicles
R6,000,000; Dr Input VAT R900,000; Cr Creditor R6,900,000
1.7 NovaTech Ltd’s debt/equity ratio is 92%. What does this mean? a) Highly leveraged — heavy
debt reliance b) Moderately leveraged — low debt reliance c) Low leverage — minimal debt use
d) High leverage but reliant on equity

1.8 PPE note: Opening CV = R2,200,000; Additions = R450,000; Depreciation = R100,000. What
is missing? a) Disposals at carrying value b) Disposals at cost c) Accumulated depreciation on
disposals d) Accumulated depreciation on additions

1.9 SPL Convenience made R2,400,000 sales with 40% mark-up on selling price. What’s cost of
sales? a) R1,440,000 b) R1,200,000 c) R960,000 d) R1,875,000

1.10 Wolf Ltd trial balance: Sales = R6,800,000; Cost of sales = R3,200,000; Salaries = R350,000;
Lease = R150,000; Loan = R500,000 @ 9%; Tax = 28% Net profit after tax is: a) R2,450,000 b)
R2,800,000 c) R2,400,000 d) R2,900,000

1.11 What Act did VAT replace? a) Income Tax Act b) Companies Act c) General Sales Tax Act d)
Estate Duty Act

1.12 How is VAT treated when a VAT vendor records PPE? a) Include VAT if supplier is VAT
vendor b) Exclude VAT regardless of vendor status c) Include VAT if purchaser is vendor d)
Exclude VAT if neither is a vendor

1.13 Which formula calculates depreciation using the reducing balance method? a) (Cost – Acc.
Dep.) × Rate × Period b) (Cost – Carrying amount) × Rate × Period c) (Cost – Depreciation) × Rate
× Period d) (Cost – Impairment) × Rate × Period

1.14 Why do income and expenses affect equity? a) Closed to SOFP b) Closed to Share Capital c)
Closed to Statement of Equity d) Closed to Profit/Loss

1.15 Which account appears in a partnership but not a sole proprietorship? a) Current account
b) Capital account c) Retained income d) Drawings
1.16 Owl Traders buys inventory for R120,750 (incl. VAT). What formula gets the exclusive cost?
a) 120,750 × 15/115 b) 120,750 × 100/115 c) 120,750 × 115/100 d) 120,750 × 100/15

1.17 Coral Ltd posted full R575,000 (incl. VAT) to Machinery. What correction is needed? a) Dr
Input VAT; Cr Bank b) Dr Machinery; Cr Input VAT c) Dr Input VAT; Cr Machinery d) Dr Bank; Cr
Input VAT

1.18 Ms Y withdraws R25,000 for personal use. Cash flow classification? a) Financing outflow b)
Investing inflow c) Operating outflow d) Financing inflow

1.19 Silverline Ltd: Credit sales = 40% Sales = R1,200,000 Trade receivables: 2024 = R180,000;
2023 = R250,000 Calculate debtors’ collection period. a) 183 days b) 55 days c) 351 days d) 105
days

1.20 Pebble Watches Ltd: Sales = R3,900,000 Opening inventory = R3,000,000 Purchases = 12%
of sales Closing inventory = R2,300,000 Cost of sales? a) R2,050,000 b) R2,500,000 c)
R2,000,500 d) R2,000,050

SECTION B: (50 Marks)

Question 1 (15 marks)

VAT and Journal Entries

Jet Fresh Retailers (Pty) Ltd sells health products and has a 31 December year-end. They're a
registered VAT vendor making 100% taxable supplies. The following transactions occurred:

 June 2024: Jet Fresh received a bulk order for maize meal from Ubuntu Kitchens, a non-
profit. They ordered 80,000 units at R8.00 per unit, on credit. Mark-up is 10% on cost.
Inventory system: perpetual. Payment received 31 July 2024.

 Jet Fresh installed new scanning equipment on 30 November 2024. Total cost: R460,000
(VAT inclusive).

 Equipment depreciated at 25% on straight-line basis.

 Loan interest rate: 9% p.a., compounded annually. Interest still to be accrued.

REQUIRED:

1.1 List five zero-rated food items as per Section 11 of the VAT Act. (5) 1.2 Prepare general
journal entries for the above transactions. Show calculations and reference clearly. Start
numbering journals from J1. (10)

Question 2 (15 marks)

Property, Plant and Equipment

LSC Ltd purchased a thermal scanner for its Cape Town headquarters. The scanner was bought
on credit from InfraScan Ltd. Both are VAT vendors. Info:

Item Amount (R)

Purchase price (excl. VAT) 375,000

Transport costs 18,000

Legal costs (LSC Ltd only) 3,500

Legal costs (InfraScan Ltd) 2,000

Storage in transit 10,000

VAT 56,250

Installation cost 8,000

 Machine ready on 1 December 2024.

 Categorised under office equipment. Depreciation rate: 25% p.a., reducing balance.

 Ownership transfer date: 30 November 2024

 Existing office equipment as at 1 March 2024:

o Cost: R280,000

o Accumulated depreciation: R280,000

REQUIRED:

2.1 Apply IAS 16’s asset recognition criteria to assess if the scanner qualifies as PPE. (5)
2.2 Prepare PPE note to financial statements for year ended 28 February 2025. Show clear
workings. (10)

Question 3 (3 marks)

Matching Terminology

Match the terms in Column A with correct descriptions in Column B:

Column A Column B

1. Financing activities A. Cash from core operations like sales and marketing.

2. Investing activities B. Cash from acquisition/sale of assets or securities.

3. Operating activities C. Cash from transactions with lenders or shareholders.

Question 4 (5 marks)

Partnership Equity Section

R&M Advisors is a partnership between Mr R and Ms M. The following ledger balances exist at
30 June 2024:

Capital: Mr R

Date Account Amount (R)

1 Jul 2023 Balance b/d 45,000

30 Jun 2024 Bank 75,000

30 Jun 2024 Balance c/d 120,000

Capital: Ms M

Date Account Amount (R)

1 Jul 2023 Balance b/d 70,000

30 Jun 2024 Bank 160,000

30 Jun 2024 Balance c/d 230,000

Current Account: Mr R
Date Account Amount (R)

Balance b/d 15,000

Drawings 45,000

Interest on Capital 13,000

Salary 14,000

Profit share 6,000

Balance c/d 24,000

Current Account: Ms M

Date Account Amount (R)

Balance b/d 18,000

Drawings 6,000

Interest on Capital 26,000

Salary 28,000

Profit share 12,000

Balance c/d 78,000

REQUIRED:

Prepare the equity section of the Statement of Financial Position for R&M Advisors as at 30 June
2024. (4) Include proper headings, layout, and structure. (1)

Question 5 (12 marks)

Financial Ratios

Figures for LMT Logistics Ltd at 31 December 2024:

Debit R Credit R

Sales 3,400,000

Cost of Sales 1,100,000

Operating Expenses 390,000

Finance Costs 15,000

Income Tax Expense 378,000

Capital 950,000

Drawings 120,000

Inventories 35,000

Trade Receivables 145,000

Cash 85,000

Long-Term Loan 400,000

Trade Payables 210,000

REQUIRED:

5.1 Gross profit percentage (2)

5.2 Net profit percentage (2)

5.3 Return on investment (2)

5.4 Acid-test ratio (2)

SECTION C: (30 Marks)

Question 1

(30 marks) Ignore VAT

The financial statements of BrightTech (Pty) Ltd are provided to you below.

Statement of Comprehensive Income for the year ended 31 December 2025

Item Amount (R)

Sales 4,200,000

Cost of sales (2,150,000)

Gross profit 2,050,000

Operating expenses (1,410,000)

Depreciation 600,000

Insurance 110,000

Salaries and wages 420,000

Repairs and maintenance 80,000

Sundry expenses 200,000

Operating profit 640,000

Finance costs (42,000)

Profit before tax 598,000

Income tax expense (161,460)

Profit for the year 436,540

Statement of Financial Position as at 31 December 2025

Item 2025 (R) 2024 (R)

Assets

Non-current assets: PPE 3,800,000 2,200,000

Current assets:

Inventories 310,000 240,000

Trade receivables 305,000 390,000

Bank 180,000 70,000

Total assets 4,595,000 2,900,000

Equity and Liabilities

Equity:

Capital 215,000 195,000

Retained income 436,540 400,000

Total equity 651,540 595,000

Non-current liabilities: Loan 3,150,000 1,750,000

Current liabilities: Trade payables 793,460 555,000

Total liabilities 3,943,460 2,305,000

Total equity and liabilities 4,595,000 2,900,000

Additional Information:

 As part of an expansion initiative, additional warehouse space was acquired during the
year for R1,600,000 (cash).

 The loan facility was increased to fund the expansion.

 The income tax expense equals the tax paid.

 Dividends of R400,000 were paid in cash during the year.

 All inventory purchases were made on credit.

 70% of sales are made on credit.

REQUIRED:

1.1 Calculate the value of cash receipts from customers. (3)

1.2 Calculate the value of cash paid to suppliers and employees. (11)

1.3 Prepare the Statement of Cash Flows for the year ended 31 December 2025. Use your
answers from 1.1 and 1.2 to complete the statement. Show all calculations and cross-reference
values clearly. (16)