Companies

Companies: shares and financial statements

Since the Companies Act 71 of 2008, new shares have no par value. The whole issue price is ordinary share capital, not a share premium.

CAPS

Grade 12 · Accounting · Companies

Accounting is a system: document, journal, ledger, then the statement.

  • The papers

    Grade 12 Paper 1 is company financial statements, cash flow, and analysis with audit and ethics. Paper 2 is reconciliations, VAT, inventory and manufacturing or fixed assets as the paper sets them.

  • The logic

    Assets equal owner’s equity plus liabilities. Every entry needs a source. VAT on sales is output VAT. VAT on qualifying purchases is input VAT. Profit is not the same as cash.

  • The relation

    Ordinary share capital = shares × issue price. No-par shares: the full cash received is share capital

  • How a marker reads it

    Do not use a par value or a share premium. The 2008 Companies Act abolished par value for new issues.

Each paper is 150 marks. A foreign total that does not balance is wrong even if the individual entries look neat. Show the note or the calculation the face of the statement came from.

DrCrassetequity

Worked example

A company issues 3000 ordinary shares at R5 each for cash. The shares have no par value. Show the bank and ordinary share capital.

Before any working — hunt first

Given

Numbers and units already in the sentence: 3000 ordinary · R5 each. Copy each one into a column. A name without a number is not given.

Missing

After you copy the given, the letter that still has no number is missing. The paper is pointing at: Show the bank and ordinary share capital. Circle that word — that is the missing variable.

Find

We are required to find: Show the bank and ordinary share capital. Write that as a symbol on the left, with a question mark, before you touch a formula.

Calculate

Write Ordinary share capital = shares × issue price with empty letters. Cross out every letter that already has a number. Calculate the letter that is still standing — that gives Show the bank and ordinary share capital.

Simplified approach

Since the Companies Act 71 of 2008, new shares have no par value. The whole issue price is ordinary share capital, not a share premium.

Culture note

A new private company in Midrand, issuing its first ordinary shares.

Formulas

Ordinary share capital=shares×issue price

No-par shares: the full cash received is share capital

Step 1 / 6

Cash in

3000 × R5 = R15000 into the bank.

Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

4. Step-by-step working

  1. 01

    Cash in

    3000 × R5 = R15000 into the bank.

  2. 02

    Share capital

    Ordinary share capital increases by the full R15000. There is no share premium on a new issue.

    shares×issue price

More worked examples

Board walkthroughs on this topic. Open one, copy the working, then try the next.

Example 1 / 20

A company's net profit before tax is R840 000. Income tax is 27% of net profit. Calculate income tax and net profit after tax.

4. Step-by-step working

  1. 01

    Multiply

    Income tax=27%×840 000=R226 800.

    0,27×840 000=226 800
  2. 02

    Subtract

    Net profit after tax=840 000−226 800=R613 200.

    840 000−226 800=613 200

How we got there

Read this like a teacher at the board. We go slowly, name every number, and say why we take each step.

Explain in another language · 11

1. What is the question asking?

Read the question twice. Circle the unknown. Underline every number and unit. The paper is asking: A company's net profit before tax is R840 000. Income tax is 27% of net profit. Calculate income tax and net profit after tax.

Before any working — hunt first

Given

Numbers and units already in the sentence: R840 · 000 · 27%. Copy each one into a column. A name without a number is not given.

Missing

After you copy the given, the letter that still has no number is missing. The paper is pointing at: income tax and net profit after tax. Circle that word — that is the missing variable.

Find

We are required to find: income tax and net profit after tax. Write that as a symbol on the left, with a question mark, before you touch a formula.

Calculate

Write 0,27 × 840 000 = 226 800 with empty letters. Cross out every letter that already has a number. Calculate the letter that is still standing — that gives income tax and net profit after tax.

In other words — as if you have never seen this before

If you have never seen this before: Tax is calculated on the profit before tax. We will name a method in words, write the formula with no numbers, then substitute one line at a time.

2. What do we already know?

Net profit before tax R840 000; tax rate 27%.

3. Which method — and why this one?

Tax is calculated on the profit before tax.

4. Step-by-step working

  1. 01 / 05

    Multiply

    Income tax=27%×840 000=R226 800.

    0,27×840 000=226 800

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  2. 02 / 05

    Subtract

    Net profit after tax=840 000−226 800=R613 200.

    840 000−226 800=613 200

    Why this step: We only do one job per line so a marker can follow the marks — and so you can find a slip without starting over.

  3. 03 / 05

    Step G — Sense-check the size

    Ask: is this the kind of number a Grade 10–12 paper would want? A speed of 3 000 ms for a learner walking, or a probability bigger than 1, means a unit or algebra slip. Estimate first: round the numbers and do the sum in your head.

    Why this step: Markers write ‘unrealistic’ in the margin when the method is right but the size is wild. A 10-second head check often finds a missing 10² or a unit that never changed.

  4. 04 / 05

    Step F — Box the answer with its unit

    Income tax R226 800; net profit after tax R613 200.

    Why this step: A number without a unit is half a mark on a Physics paper, and a marker can miss a Maths answer that is buried in working.

  5. 05 / 05

    Step H — What the marker is looking for

    On an NSC memo you usually earn: (1) a method mark for naming the right formula or idea in words, (2) an accuracy mark for substituting the given numbers with units, (3) an accuracy mark for the boxed answer with its unit. Write those three lines even if you are unsure of the arithmetic — blank pages score zero.

    Why this step: First-timers chase the final number and leave the method blank. The memo still pays out for the idea and the substitution even when the last line is wrong.

5. The answer

Income tax R226 800; net profit after tax R613 200.

Copy onto your answer sheet — in this order

Formula: 0,27×840 000=226 800

Answer: Income tax R226 800; net profit after tax R613 200.

6. Check it like a marker

Net profit after tax is the figure transferred to retained income.

7. A trap first-timers fall into

First-timers often grab the first formula they remember, mix units (cm with m, minutes with seconds), or drop a minus sign. Write the formula in words first: “this equals that, because…”

Ntsako · fx-991ZA PLUS. Tap to calculate.