ACCOUNTING DISTANCE LEARNING
RESULTS OF TEST 2 AND EXAMINERS’ COMMENTS
In respect of the Advanced modules, the results are as follows:
FinAcc MAF Taxation Auditing Average mark 24/80 10/40 6/40 11/40 Average % 30% 25% 15% 28%
The top student in each Advanced module is as follows:
Financial Accounting Robyn Bassnet
MAF Ryall Bhugwandeen
Taxation Charlotte Haingura
Auditing Kudakwashe Muli
In respect of the Intermediate modules, the results are as follows:
FinAcc MAF Taxation Auditing Average mark 9/40 11/40 17/40 15/40 Average % 23% 28% 43% 38%
The top student in each Intermediate module is as follows:
Financial Accounting Swati Modi MAF Jeremy Venniker Taxation Sanele Dlamini Auditing Fidelis Chiwara
ADVANCED FINANCIAL ACCOUNTING
The question consisted of five parts and it was essential that each part be
attempted in order to obtain a good mark. Unfortunately, many students only
attempted parts 1 and 2, which meant that they were only answering half the
question (i.e. 40 marks). Students are urged to consider why they are running
into time difficulties. StudentS are also reminded not to write in pencil. I will
make some observations about where I noticed students were wasting time in the comments below.
This part of the question required students to draft journal entries relating to
the various transactions relating to the company. (Not all of these comments
apply to all students.)
An overall comment is that many students presented their JE‟s in an untidy
fashion. It takes less than 5 seconds to draw some lines onto your page so
that your work looks neat and tidy. Some specific comments are below.
1.1 No workings were shown for the FEC.
1.2 Students did not give the name of the account – They just wrote “Equity”
1.3 Some students tried to use complicated calculations to calculate the
interest in the second JE. Study the solution carefully to see what was
1.4 Some students omitted the JE‟s for the sale of ships – possibly as they
are more comfortable dealing with the purchase of items using a FEC.
You need to practice recording both the sale and the purchase of items.
1.5 Many students could not calculate the interest expense on the
preference shares (financial liability). (Some students wasted time trying
to split this between liability and capital.)
1.6 Some students showed journal entries for depreciation despite the fact
that this was specifically not required.
1.7 However, despite the comments above, many students did well in this
Here many students wasted time by showing a roll forward of the carrying
amounts of the assets. You only needed to know the CA at the end of the
year, and any workings to roll forward the balance were superfluous. Again, the marks were on the whole quite good. Other detailed comments are as
2.1 Do not use CV and TV – rather use CA (carrying amount) and TB (tax
base) – it‟s more up-to-date.
2.2 Students did not indicate the tax rate they used. 2.3 Students did not indicate whether the amounts were a debit or credit as
required by the question.
The marks were not good for this part mainly because students did not write
enough, nor did they link the recognition criteria to the specific information given in the question. The required asks you to DISCUSS – therefore it‟s not
enough to just list criteria and then make a general comment that the criteria
are met. What information in the question leads you to the conclusion that the
criteria are met? Write them down. Some specific comments are as follows:
3.1 This part of the question was for 15 marks – therefore you know that you
need to write down at least 15 points. It should have been easy to score
at least 10 marks here as all you needed to do was discuss what is
revenue – the rendering of services and the stage of completion method
– and then link that and the revenue recognition criteria to the
information in the question. The marks were very disappointing here as
there was little discussion.
3.2 Some students stated the criteria for the sale of goods and not for the
rendering of a service.
3.3 Some students considered each stage of the transaction as a separate
activity to be recognized. There were a numbers of hints in the question
to lead you to the conclusion that you needed to use the
percentage/stage of completion method. For example, the question
refers to “various activities/stages” – also that it was one contract.
This section was very disappointingly answered. Many students omitted this part and were unable to carry forward their workings from part 1 and 3. I
suggest that you go through this part again and make sure you understand
exactly how the calculations from part 1 and 3 affect the „Profit before tax‟
This section was very disappointingly answered. Many students omitted this
part and showed that they did not understand how to prepare the “Other
comprehensive income‟ section of the income statement. This part needs a lot
of attention and students are advised to consult their solutions and make sure
that they are familiar with this part of the income statement. Students are
reminded that there are no marks for no amounts. i.e. don‟t write XXXX –
please put in the amounts.
The results are rather disappointing, with averages of 17/40 and 10/40 for the
full-time (Westville) and distance learning students respectively.
This was not a difficult question although it was a comprehensive test of
standard costing and integrated aspects of divisional performance
measurement and CVP analysis. By now you should all realize that questions
are very likely to incorporate a number of topics.
Common mistakes and problems encountered:
1. Unable to calculate selling price for product Gamma using CVP principles.
2. Students with good exam technique did not waste a lot of time if they could
not do 1. above. Instead they assumed a price (and clearly stated that
they were making an assumption) and proceeded to answer the
question. Remember that errors carried forward but subsequently used
correctly are awarded method marks, e.g. sales price variance for Gamma
based on incorrect selling price.
3. Unable to identify controllable contribution. Note the divisional manager
had control over all revenues and costs other than the allocated head
4. Calculated Gamma‟s actual controllable contribution using material A‟s
(R799 500) rather than its usage, i.e. adjusting purchases for the change
in stock level valued at standard (see note (i) page 2 of solution).
5. Failure to account for finished goods stock of Gamma, valued at standard
cost, in determining actual controllable contribution.
6. Failure to calculate material mix and yield variances, only usage variance
shown. This does not give adequate information for management to
properly control material usage.
7. Problems in calculating variable overhead variances.
8. Delta: as the product is imported and then merely packaged and labeled,
the standard quantity is one unit purchased = one unit sold. Similarly, no
standard quantity of packing and wrapping was given hence the only
variances one can calculate are price/expenditure, not usage.
9. Discussion: as usual, far too many vague comments were given. To be
awarded marks you must properly explain a point e.g. it is not enough to
simply say the manager performed well, why did he perform well, on what
basis do you make this comment?
10. Too few students calculated the sales mix and quantity variances worth 5
marks, almost half the marks for requirement b).
11. Always get the easy marks first. Remember that your objective is not to
answer a question 100% correctly, rather to score as many marks as
It seems that students did not manage their time properly and consequently
were either unable to attempt the tax question or were unable to complete it
within the remaining time. Generally the questions were answered poorly and in certain instances
irrelevant information was given as students did not read the required properly. Many students gave detailed explanation without giving the calculations, although the required stated
“discuss, supported by calculations...”. As a result students failed to score the
marks allocated for the calculations Students did not provide both the normal tax and capital gains tax (CGT)
consequences as was required. Those that did failed to structure the answer
under the appropriate headings, thus leaving the examiner to figure out
whether they were dealing with the normal tax or CGT consequences.
Common errors and problems:
Garnet Stone and Estate late Garnet Stone
This part of the question was very poorly answered.
Many students did not deal with the tax consequences for the Estate Garnet
The CGT consequences of trading stock were not considered both for Garnet
Stone and his Estate. On death assets (including trading stock) held by a
deceased are deemed to be disposed of at their market value to the Estate of
As trading stock was stolen after his death, the compensation received
accrued to the executor and not to Garnet Stone and thus constituted a
revenue receipt in the hands of the Estate. Furthermore the disposal of the
trading stock transferred by Garnet Stone to the Estate was also on revenue account.
Students failed to identify the dividend and capital portions of the distribution. Many students calculated a deemed disposal and resulting CGT on the
primary residence although the primary residence was not disposed off. The disposal of the portfolio of shares and personal use assets was correctly
answered by the majority of the students.
Students failed to recognize that the Krugerrands were revenue asset and
thus did not deal with the income tax consequences of their disposal. Many students failed to deduct the annual exclusion and those who did,
incorrectly deducted R15 000 instead of R16 000.
Although they were not required to, many students dealt with the tax
implications on retirement in 2003.
Certain students did not consider the CGT implications of the lump-sum benefit and the insurance proceeds.
Garden Suburb Motors
Many students did not calculate the recoupment arising on the deemed
disposal of the „courtesy car‟ and did not correctly account for the deduction of the deemed cost and closing stock for normal tax purposes. Some students
omitted to apportion the wear and tear allowance on the vehicle transferred
from trading stock into a capital asset.
Students failed to correctly apply the dividend definition and determine the
amount of reserves subject to STC, both before and after 1 January 2009.
Certain students applied the incorrect STC rate whereas other did not apply
the STC fraction and simply applied 10% as the STC rate. Also, the CGT implications in the hands of the shareholder were not considered.
Study or exam technique suggestions: More effort needs to be dedicated to time management. Also, students
should, before attempting the question, thoroughly read the required and avoid providing the examiner with unnecessary information which will not earn
Student should practice answering the tutorial questions under exam
conditions and they should pay particular attention to the structure of the
It is indeed disappointing that even in test 2 we have +/-10% of the class not
even attempting the auditing question – mostly because of poor time management ie not having time to attempt the question.
Of the students who did attempt the question, it was depressing to observe
the poor exam technique. You were given 2,5 pages of question which
generally would mean you should use the information given to answer the
question. Yet most students disregarded the information and answered the
question as if the question was as follows:
“You have been approached by the attorneys of a bank, whose client Zoomas
Auto Parts (Pty) Ltd recently went insolvent after publishing their financial
statements and audit reports. The attorneys have requested that you assess
the quality of the work performed by the auditors of Zoomas Auto Parts (Pty)
Ltd who issued an unqualified audit report.
You are required to:
Prepare the confidential report requested by the attorneys.”
Your solutions then contained points such as:
1 Leadership responsibilities
a) assign responsibilities
b) guide the team
c) supervise clerks
d) plan the audit
2 Ethical requirements
a) provide team with info on quality control
b) particularly that relating to independence
3 Acceptance and continuance of client relationship –
a) consider whether to accept / continue with client
b) firm has necessary competence, resources and time
4 Engagement performance
a) guide and lead team
b) assess quality of work performed
c) review work done
5 Review quality control on the audit, etc, etc.
Students, after writing down all they could out of ISA 220 went onto ISA 315 and wrote down points on familiarizing themselves with the client, etc, etc.
It is very clear that none of the above was mentioned in the 2,5 pages of question which were ignored and only the required answered. Students treated this as a theory question in which they had to generate the points / solution. It must however be remembered that examiners do not give information purely to fill up space. The solution was to be based on the 2,5 pages of information provided.
If your solution resembled the above and you failed, hopefully you now realize why. Information is given so that it will be used to answer the question.
The test covered several topics covered in the test preparation, ie:
management representation letters
reliance on other parties
Students however saw quality and forgot everything else including part b of the question in which you had to discuss the audit opinions issued.
Some Specific Points:
Students are confused about the difference between a management letter (auditor points out weaknesses in control and problems to management) and a management representation letter - ISA 580 where the auditor asks management to confirm certain items which are subjective, not easy to confirm, etc.
The question mentions pirate parts which some students thought were illegal regardless of the fact the question mentions they MAY be produced and sold
at cheaper prices. Spares which are not genuine for example Ford, VW, Nissan, etc, are referred to as pirate parts. They are however not illegal.