Accounting

Choose the correct definition of ‘capital’ in an informal business.

Which ONE of the following is the correct definition of ‘stock’?

Select the correct definition of ‘fixed assets’.

Choose the correct meaning of ‘labour cost’.

In an informal business, ‘drawings’ are…

Grace keeps a notebook in which she writes the money that comes in and goes out of her stall. In formal bookkeeping this habit grows into…

Vusi lets neighbours take airtime and sweets on credit and remembers who owes him. The formal version of this habit is…

Every Friday Palesa looks at her shelves and counts what is left. The formal bookkeeping procedure this grows into is…

Mama Thandi sets her prices by guessing what people will pay. In formal bookkeeping a business sets its prices by…

Bongani takes R200 from the till every Friday to buy groceries for his home. The formal bookkeeping name for this is…

Which ONE of the following correctly compares the records kept in an informal and a formal business?

Which ONE of the following correctly compares how an informal and a formal business get and keep their capital?

Which ONE of the following correctly compares the way an informal and a formal business deal with stock?

Which ONE of the following correctly compares how an informal and a formal business deal with labour?

Which ONE of the following correctly compares the controls in an informal and a formal business?

Nandi’s spaza starts the week with stock worth R650 at cost, buys stock worth R3 900 and ends the week with stock worth R820 at cost. What is her cost of sales?

A stall starts the week with 25 packs of mealie meal and buys 120 more. Each pack costs R14 and sells for R20. At the end of the week 30 packs are left. What is the cost of sales?

A hair-care stall starts the week with products worth R300 at cost, buys R2 100 of products and ends the week with R900 of products at cost. What is the cost of sales?

Lwazi’s vegetable stall starts Monday with stock worth R520 at cost. He buys R1 760 of stock on Tuesday and R2 240 on Friday, and on Saturday evening R610 of stock is left. What is his cost of sales?

A fruit seller starts the week with 14 crates of apples and buys 46 more. Each crate costs R95. She has 10 crates left at the end of the week. What is her cost of sales?

Busi buys 10 kg bags of rice at R80 a bag and adds a mark-up of 25% on cost. She starts the week with 6 bags, buys 56 bags more and has 12 bags left at the end; prices do not change. She pays a packer R90 a day for 2 days and R60 for transport, and takes R200 from the takings for her family. What is her profit for the week?

Zandile buys school socks at R25 a pair and adds a mark-up of 40% on cost. She starts the week with 20 pairs, buys 80 pairs more and has 12 pairs left at the end; prices do not change. She pays a helper R90 a day for 2 days and R120 for her market stall, and takes R150 from the takings for her phone. What is her profit for the week?

Mandla buys phone covers at R30 each and adds a mark-up of 60% on cost. He starts the week with 10 covers, buys 40 covers more and has 14 covers left at the end; prices do not change. He pays R130 for data and R48 for transport, and takes R100 from the takings for his lunch. What is his profit for the week?

Thabiso buys oranges at R12 a kilogram and adds a mark-up of 50% on cost. He starts the week with 15 kg, buys 135 kg more and has 20 kg left at the end; prices do not change. He pays a helper R40 an hour for 5 hours and R70 for crates, and takes R180 from the takings for his children’s school shoes. What is his profit for the week?

Nomsa buys bread rolls at R5 each and adds a mark-up of 60% on cost. She starts the week with 40 rolls, buys 360 rolls more and has 60 rolls left at the end; prices do not change. She pays a helper R150 a day for 2 days and R120 for gas, and takes R130 from the takings for herself. What is her profit for the week?

A learner works out the cost of sales: ‘Opening stock R400 + purchases R2 600 + closing stock R500 = R3 500.’ Which correction is needed?

Crates cost a trader R100 each and sell for R130 each. A learner works out the income: ‘Opening stock 14 crates, bought 46 crates, 8 crates left. Number sold = 14 + 46 = 60 crates. Income = 60 × R130 = R7 800.’ Which correction is needed?

A learner works out the week’s profit: ‘Income R4 800 − cost of sales R3 200 − labour R400 − transport R100 − groceries for the owner’s family R250 = R850.’ What is the correct profit, and why?

In one week a trader has income of R3 600 and cost of sales of R2 400, and pays a helper R300 and R150 for transport. A learner writes: ‘Profit = R3 600 − R2 400 = R1 200.’ Which correction is needed?

A learner works out a mark-up percentage: ‘Cost price R120; selling price R150. Step 1: mark-up = R150 − R120 = R30. Step 2: mark-up % = R30 ÷ R150 × 100 = 20%.’ Which statement about the working is correct?

Compare an informal business with a formal business with reference to (i) capital, (ii) stock, (iii) pricing and (iv) profit. Name BOTH systems each time (4)

1. Content: capital. Informal: own savings, a stokvel or a family loan, mixed with home money; formal: the owner’s contribution and loans, recorded and kept apartOne mark for capital described in BOTH systems. Informal capital is the owner’s savings, a stokvel or a family loan mixed with home money; formal capital is recorded and kept apart from private money.
2. Content: stock. Informal: counted by eye with no record; formal: stock records and a stock countThe informal trader judges stock by eye and writes nothing down; the formal business keeps stock records and counts the stock so the cost of sales can be calculated.
3. Content: pricing. Informal: a rule of thumb, what customers will pay; formal: cost price plus a planned mark-up percentageInformal prices follow feel or what customers will pay; formal prices add a planned mark-up percentage to the cost price. Naming only one side earns nothing.
4. Content: profit. Informal: guessed from the cash left in the box; formal: income less expenses shown in the financial statementsThe informal owner reads profit from the cash left over; the formal business works it out as income less expenses and shows it in the financial statements.

An informal owner’s capital is her own savings, a stokvel or a family loan, mixed with home money, whereas a formal business records the owner’s contribution and loans and keeps them apart from private money. The informal trader counts stock by eye with no record, but the formal business keeps stock records and does a stock count. Informal prices follow a rule of thumb about what customers will pay, while a formal business adds a planned mark-up percentage to the cost price. The informal owner guesses profit from the cash left in the box, whereas the formal business works out income less expenses in its financial statements.

Mrs Khumalo sells fruit and vegetables at a taxi rank. She keeps the stall’s money and her household money in one purse, uses a trolley and a scale that nobody has ever written down, and leaves tomatoes at the back of the crate until they rot. Explain how she should manage (a) her capital, (b) her fixed assets and (c) her stock (6)

1. Content: capital. Keep the stall’s money apart from the household moneyCapital is protected by keeping business money in its own tin, purse or account so the stall’s money is not spent on the household.
2. Content: capital. Write down what goes into the stall and what comes outWithout a written record of money in and money out, the owner cannot tell what the stall really has.
3. Content: fixed assets. List each item with its priceA list with the price of each item shows what the business owns and proves what was lost if something is stolen.
4. Content: fixed assets. Repair and look after them, lock them away safely and keep them for the stall onlyFixed assets earn income for years, so they are maintained, secured and not shared with the household.
5. Content: stock. Count the stock regularly, for example every weekA regular count shows what is left, what has been sold and what has gone missing.
6. Content: stock. Store it safely and sell the oldest first so that it does not spoil, and record every purchaseSelling the oldest stock first and storing it well stops goods from spoiling, and a record of purchases lets her check the stock against what she bought.

She should keep the stall’s money apart from her household money, in its own purse or account. She should write down every amount that goes into the stall and every amount that comes out. For the trolley and the scale she should list each item with its price. She should repair and look after them, lock them away safely and keep them for the stall only. For the stock she should count the crates regularly, for example every week. She should store the stock safely and sell the oldest tomatoes first so that they do not go to waste, and record every purchase.

Khanyi sells 5 kg bags of sugar at a market stall. She pays R60 a bag and sells each for R78. She starts the week with 9 bags, buys 61 and has 10 left at the end. She pays a packer R130 a day for 2 days and R90 for transport, and takes R250 from the till for school fees. Show every line of working and calculate (a) her mark-up percentage (2), (b) the cost of sales (2) and (c) her profit for the week (2)

1. Method: mark-up = selling price − cost price = R78 − R60 = R18The mark-up is the extra on top of what she paid: R78 − R60 = R18.
2. Accuracy: mark-up % = R18 ÷ R60 × 100 = 30%The mark-up percentage is worked out on the COST price: 18 ÷ 60 × 100 = 30%. Dividing by the selling price gives the wrong figure.
3. Method: opening stock + purchases − closing stock (9 + 61 − 10 bags, or their values)Cost of sales is the stock that was sold: what she started with plus what she bought, less the 10 bags left.
4. Accuracy: cost of sales R3 60060 bags sold × R60 = R3 600. Taking off everything she bought (R3 660) is the common slip.
5. Method: income R4 680 and other expenses R350 set out; the R250 for school fees is drawings and stays outIncome = 60 × R78 = R4 680. Other expenses = 2 × R130 labour + R90 transport = R350. School fees are the owner’s own spending: drawings, not an expense.
6. Accuracy: profit R730Profit = R4 680 − R3 600 − R350 = R730.

Mark-up = R78 − R60 = R18. Mark-up % = R18 ÷ R60 × 100 = 30%. Cost of sales = opening stock + purchases − closing stock = 9 + 61 − 10 = 60 bags. 60 bags × R60 = R3 600. Income = 60 × R78 = R4 680 and other expenses = 2 × R130 + R90 = R350; the R250 for school fees is drawings and stays out. Profit = R4 680 − R3 600 − R350 = R730.

Explain to a Grade 8 learner why an answer to ‘compare informal and formal bookkeeping’ loses its mark if it describes only one of the two systems.

Explain to a Grade 8 learner why the cost of sales is opening stock plus purchases minus closing stock, and not simply everything the trader bought in the week.

Explain to a Grade 8 learner how a trader’s notebook and a business’s journals and ledgers are the same idea in two sizes.