CAPS Grade 11 Accounting: Complete Course + Grade 12 Prep

Ethical problems can be addressed by gathering as much information as possible, considering both sides of the situation, identifying the problem, deciding on the most appropriate course of action, and evaluating alternative solutions.

Two important concepts discussed in this lesson are transparency and accountability.

Remember to review the attached document!

Internal control is essential for preventing, detecting, and correcting errors.

Internal control can be carried out through:

• Employees (internal control)

• Internal audits (continuously testing and evaluating internal control systems)

• External audits (providing an independent opinion on financial information and evaluating internal controls periodically)

Remember to review the attached document!

Prices can be quoted as either VAT-inclusive or VAT-exclusive.

The standard VAT rate used in this lesson is 14%.

There are two accounting bases for VAT, namely the invoice basis and the payments basis.

The invoice basis is the method most commonly used.

A VAT vendor may claim VAT relief on a credit sale to a debtor if the debt later becomes irrecoverable.

Please note: South Africa's current VAT rate is 15%. However, many schools and examination papers still use 14% for historical examples. Always confirm with your teacher which VAT rate you should use for your class and examinations.

Remember to review the attached documents!

A provision for doubtful debts is created for debtors who appear likely to become uncollectable in the future. 

To create the provision, debit the provision for doubtful debts expense in the income statement and credit the provision for doubtful debts in the balance sheet. 

The provision for doubtful debts account (credit balance) in the balance sheet will be deducted from the debtors balance when the balance sheet is prepared.

Remember to check the attached documents!!!

Businesses receive a bank statement from the bank every month.

A bank statement shows:

• Opening balance

• Deposits into the account

• Withdrawals from the account

• Interest earned or charged on the account

• Stop orders and debit orders

• Bank charges

• Closing balance

A bank statement is prepared from the bank's point of view.

Liability

If I have money in the bank, the bank owes me money.

This is a liability for the bank and appears as a credit balance in the bank's records.

Asset

If I have an overdrawn bank account, I owe the bank money.

This is an asset for the bank and appears as a debit balance in the bank's records.

The business records all cash transactions in its Cash Journals, while the bank records every transaction on the bank statement.

The balance on the bank statement should correspond to the balance of the Bank Account in the General Ledger.

Why might the balances differ?

Transactions recorded in the Cash Journals but not yet reflected on the bank statement:

• Cheques issued but not yet presented for payment

• Deposits made on the last day of the month

• Errors in the accounting records

Transactions appearing on the bank statement but not yet recorded in the Cash Journals:

• Dishonoured (returned) cheques

• Interest charged on an overdrawn account

• Bank charges

• Errors on the bank statement

• Stop orders and debit orders

• Direct deposits made into the bank account

Bank Reconciliation Procedure

1. Compare the Cash Journals with the bank statement.

2. Tick off all matching transactions.

3. Record all items appearing on the bank statement but not yet recorded in the journals.

4. Post the journal entries to the Bank Account in the General Ledger.

5. Prepare a Bank Reconciliation Statement for the outstanding items that have been recorded in the business's books but do not yet appear on the bank statement.

Remember to review the attached documents!

There are two types of inventory systems:

• Perpetual Inventory System (Refer to Grade 10.)

• Periodic Inventory System

The Perpetual Inventory System continuously records the quantity and value of inventory on hand, and a Cost of Sales account is used to record the cost of inventory sold.

The Periodic Inventory System requires a physical inventory count at the end of each financial year to determine the amount of inventory on hand. Under this system, the Cost of Goods Sold is not recorded with each individual transaction but is calculated at the end of the accounting period.

Understanding the differences between these two inventory systems is essential for preparing accurate financial records and interpreting business performance.

Remember to review the attached documents!

Fixed assets are tangible assets that a business uses to generate economic benefits over a number of years.

Each fixed asset is recorded in a Fixed Asset Register, which provides a detailed record of the asset, including its cost, accumulated depreciation, and carrying value.

Fixed assets lose value over time as they are used. This reduction in value is known as depreciation, and the annual depreciation expense is recorded in the Income Statement.

The two main methods of calculating depreciation are:

• Straight-line Method (also known as the Fixed Instalment Method) – Refer to Grade 10.

• Diminishing Balance Method (also known as the Reducing Balance Method).

Businesses may also dispose of fixed assets by selling them. This process is known as the disposal of assets and may occur at the beginning, during, or at the end of the financial year.

Fixed assets can also be traded in, where one asset is exchanged for another. A trade-in transaction involves both the disposal of an existing asset and the purchase of a new asset.

Remember to review the attached documents!

Cost Accounting is the branch of accounting that focuses on determining, recording, and analysing the costs involved in manufacturing products. It helps businesses control costs, set selling prices, and make informed financial decisions.

Different Types of Manufacturing Costs

The three main categories of manufacturing costs are:

• Direct Materials

• Direct Labour

• Manufacturing Overhead Costs

Manufacturing costs can also be classified as:

• Fixed Costs – Costs that remain the same regardless of the level of production.

• Variable Costs – Costs that change according to the number of units produced.

Understanding these different types of costs is essential for calculating production costs, preparing manufacturing accounts, and analysing business performance.

Remember to review the attached documents!

The following manufacturing cost calculations are essential in Cost Accounting:

• Prime Cost = Direct Materials + Direct Labour

• Total Manufacturing Cost = Prime Cost + Manufacturing Overhead Costs

• Cost per Unit = Total Manufacturing Cost ÷ Number of Units Produced

• Contribution per Unit = Selling Price per Unit − Variable Cost per Unit

• Break-even Point = The number of units that must be sold for the business to make neither a profit nor a loss.

The break-even point is calculated as:

Break-even Point = Fixed Costs ÷ Contribution per Unit

Understanding these calculations will help you determine production costs, evaluate profitability, and make informed business decisions.

Remember to review the attached documents!

This lesson explains how to prepare the General Ledger accounts for a manufacturing business by recording the flow of materials, labour, manufacturing overheads, production, and sales.

1. Materials are Purchased

• Debit: Raw Materials Inventory

• Credit: Bank / Creditors Control

2. Materials are Issued for Production

• Debit: Raw Materials Issued

• Credit: Raw Materials Inventory

• Debit: Raw Materials Cost

• Credit: Raw Materials Issued

• Debit: Work in Progress Inventory

• Credit: Raw Materials Cost

3. Labour Costs are Incurred

• Debit: Wages

• Credit: Various Accounts

• Debit: Direct Labour Cost

• Credit: Wages (direct labour portion)

• Debit: Manufacturing Overhead

• Credit: Wages (indirect labour portion)

• Debit: Work in Progress Inventory

• Credit: Direct Labour Cost

4. Manufacturing Overhead Costs are Incurred

• Debit: Various Expense Accounts (e.g. Rent, Repairs and Maintenance)

• Credit: Bank / Creditors Control

• Debit: Manufacturing Overhead

• Credit: The Relevant Expense Account

• Debit: Work in Progress Inventory

• Credit: Manufacturing Overhead

5. Goods are Completed

• Debit: Finished Goods Inventory

• Credit: Work in Progress Inventory

6. Goods are Sold

• Debit: Cost of Sales

• Credit: Finished Goods Inventory

• Debit: Bank / Debtors Control

• Credit: Sales

These entries demonstrate how manufacturing costs move through the accounting system—from the purchase of raw materials to the sale of finished goods.

Remember to review the attached documents!

A budget is a financial plan for the future.

Budgets help businesses plan ahead by estimating their expected financial position and financial performance over a specific period.

Cash Budget for a Trading Business

A Cash Budget shows the cash that is expected to be received and paid during the budgeting period.

If goods are sold on credit, the cash will only be received at a later date. Therefore, a Debtors Collection Schedule must be prepared to estimate when cash will be collected from debtors.

Similarly, trading inventory may be purchased on credit, meaning payment will only be made at a later stage. A Creditors Payment Schedule is therefore prepared to estimate when creditors will be paid.

Other cash payments that may be included in the Cash Budget are:

• Monthly operating expenses

• Capital purchases

• Loan repayments

Projected Income Statement

A Projected Income Statement estimates the business's expected income and expenses during the budgeting period.

It is usually prepared by using the previous Income Statement as a starting point and adjusting it for expected changes in sales, expenses, and other financial activities.

Understanding these budgets enables businesses to plan effectively, manage cash flow, and make informed financial decisions.

Remember to review the attached documents!