TASK 3.

11  Impilo (Pty) Ltd: Financial statements

3.11.1 IMPILO (PTY) LTD
INCOME STATEMENT (STATEMENT OF COMPREHENSIVE INCOME) FOR THE YEAR
ENDED 31 AUGUST 20.4
Note
Sales [2 980 000 – 26 000] 2 954 000
Cost of sales (1 701 000)
Gross profit 1253 000
Other operating income 113 400
Sundry income 5 400
Rent income 108 000
Gross operating income 1 366 400
Operating expenses (822 730)
Advertising 12 000
Audit fees 48 200
Bad debts 8 600
Depreciation 34 850
Directors’ fees 275 000
Lease of vehicles 66 000
Medical aid contributions 21 800
Pension contributions 32 180
Salaries and wages 305 000
Sundry expenses 19 100
Operating profit 543 670
Interest income 1 23 400
Profit before interest expense 567 070
Interest expense / financing cost 2 (49 070)
Net profit before tax 518 000
Income tax [28% x 518 000] + [10% x 56 400] (150 680)
Net profit after tax 8 367 320

New Era Accounting: Grade 12 55 Teacher’s Guide

3.11.2 IMPILO (PTY) LTD
BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) ON 31 AUGUST 20.4
ASSETS Note
Non-current assets 863 360
Fixed/Tangible assets 3 723 360
Financial assets:
Fixed deposit at East Bank 90 000
Shares in PQR Limited 50 000
Current assets 524 160
Inventory 4 468 750
Trade and other receivables 5 53 660
Cash and cash equivalents 6 1 750
Total assets 1 387 520

EQUITY AND LIABILITIES

Shareholders’ equity 830 920
Ordinary share capital 7 402 000
Retained income 8 428 920
Non-current liabilities 302 400
Loan from Northern Lenders [388 800 – 86 400] 302 400
Current liabilities 254 200
Trade and other payables 9 213 000
Bank overdraft 41 200
Total equity and liabilities 1 387 520

IMPILO (PTY) LTD

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 20.4
1. INTEREST INCOME
From fixed deposit 5 400
Dividends on shares in PQR Ltd 18 000
23 400

2. INTEREST EXPENSE
On loan from Northern Lenders 41 800
On overdraft 7 270
49 070

3. FIXED/TANGIBLE ASSETS Land &

Equipment Total
buildings
Carrying value at beginning of year 325 710 348 500 674 210
Cost 325 710 410 000 735 710
Accumulated depreciation - (61 500) (61 500)
Movements 84 000 (34 850) 49 150
Additions at cost 84 000 - 84 000
Disposals at carrying value - - -
Depreciation - (34 850) (34 850)
Carrying value at end of year 409 710 313 650 723 360
Cost 409 710 410 000 819 710
Accumulated depreciation - (96 350) (96 350)

New Era Accounting: Grade 12 56 Teacher’s Guide

4. INVENTORY
Trading inventory 465 000
Consumable stores on hand 3 750
468 750
5. TRADE AND OTHER RECEIVABLES
Net trade debtors 44 270
Trade debtors 46 600
Provision for bad debts (2 330)
Accrued income/Income receivable 4 490
Prepaid expenses 4 900
53 660

6. CASH AND CASH EQUIVALENTS

Cash float 750
Petty cash 1 000
1 750

7. ORDINARY SHARE CAPITAL

AUTHORISED
Number of authorised ordinary shares: 100 000 shares

ISSUED
60 000 ordinary shares in issue at beginning of financial year 318 000
15 000 shares issued at 560 cents each during the year 84 000
75 000 ordinary shares in issue at end of financial year 402 000

8. RETAINED INCOME
Retained income at beginning of year 118 000
Net profit after tax for the year 367 320
Dividends on ordinary shares (56 400)
Paid 29 400
Recommended 27 000
Retained income at end of year 428 920

9. TRADE AND OTHER PAYABLES

Trade creditors 38 900
Creditors for salaries 19 100
Pension fund 4 600
Medical aid fund 4 320
SARS: Income tax (150 680 – 140 000) 10 680
SARS: PAYE 4 460
Deferred income 13 500
Expenses payable 4 040
Current portion of loan 86 400
Shareholders for dividends 27 000
213 000

New Era Accounting: Grade 12 57 Teacher’s Guide

3.11.3 In your opinion, should the directors be satisfied with their performance in managing
the company?
Various answers possible.
The profit of R367 320 in relation to equity of R830 920 indicates a very good return (over 30%).
Only R56 400 was distributed in dividends which means that about 85% of profit earned is retained in the
business, which will benefit performance in the future.
The current assets are more than double the current liabilities which means that liquidity should not be a
problem.
The stock represents about ¼ of cost of sales which means stock of approximately 3 months is on hand,
which should satisfy customers.
Profitability is generally good as operating profit is 18% of sales.
Learners could add their own comments – Teacher to assess validity of comments.

Note to Teachers:
Extend a bright class by asking them how much each shareholder would get per share if the company closed
down and sold its assets at the values in the books (R11.07). They could then query why the directors is-
sued shares to the new shareholders at only 560 cents per share when there is such a high retained income,
which makes the value of each share more than 1 100 cents (they have paid about half of what the share is
worth).

TASK 3.12  Uptoni Limited: Financial statements

3.12.1 UPTONI LIMITED
INCOME STATEMENT (STATEMENT OF COMPREHENSIVE INCOME) FOR THE YEAR
ENDED 30 JUNE 20.2
Note
Sales [1 942 000 – 24 000] 1 918 000
Cost of sales (1 080 000)
Gross profit 838 000
Other operating income 160 650
Commission income 82 400
Bad debts recovered 5 200
Rent income [78 400 – 11 200] 67 200
Discount received 1 530
Provision for bad debts adjustment 4 320
Gross operating income 998 650
Operating expenses (798 000)
Salaries & wages 406 000
Directors fees 220 000
Advertising 8 000
Audit fees [36 000 + 8 000] 44 000
Lease of vehicle [52 000 – 4 000] 48 000
Bad debts [2 800 + 4 000] 6 800
Insurance [29 040 – 4 840] 24 200
Sundry expenses [9 200 – 2 400] 6 800
Trading stock deficit 5 000
Depreciation 7 200
Repairs 22 000
Operating profit 200 650
Interest income 1 10 600
Profit before interest expense 211 250
Interest expense / financing cost 2 (39 250)
Net profit before tax 172 000
Income tax (51 600)
Net profit after tax 8 120 400

New Era Accounting: Grade 12 58 Teacher’s Guide