The Retained Income, Cash Flow Statement and Financial Indicators question in Paper 1 Grade 12 Accounting, is one of the most predictable and heavily tested every year. It covers three things that learners should already know from previous grades:
- How to complete the Retained Income Note
- How to prepare the Cash Flow Statement (CFS)
- How to calculate and interpret Financial Indicators
Yet according to the 2024 national Accounting diagnostic report, thousands of learners are still failing to score properly in this section. And it is not because the question is difficult. It is because you do not apply the formulas correctly, you miss basic adjustments, and you mix up inflows and outflows.
This guide by StudyPapers.co.za shows you how to fix those exact mistakes using the same format as the exam.
How to Answer Grade 12 Retained Income, CFS and Financial Indicators Questions Like a Pro
To pass Retained Income, Cash Flow Statement and Financial Indicators question and push your marks higher, you need to focus on these 5 real issues:
1. Know how to calculate NPAT from the dividends info
Question 2.1 asked you to calculate the net profit after tax (NPAT) based on the dividends pay-out rate of 40%. That means 60% of the profit is retained. You should have used that information to work backwards from the dividends total to find the full NPAT.
But most learners did not do that. Some ignored the pay-out rate completely. Others tried complicated methods that wasted time and caused errors. The report even said that only a few candidates earned full marks on what should have been a simple question. If you understand how the pay-out ratio connects to retained income, this should be one of the easiest parts of the paper.
2. Treat brackets in the CFS like they decide your pass or fail
In Question 2.2, most learners lost marks because they used brackets incorrectly or did not show them at all. In the Cash Flow Statement, brackets are not decoration — they tell the examiner whether the figure is a cash inflow or outflow.
Here are the real examples where marks were lost:
- Income tax paid: Some learners did not add the SARS credit opening balance, which shows unpaid tax from the previous year. Others subtracted the SARS refund at year-end, which should not have been included.
- Dividends paid: Many missed that they needed to calculate final dividends using the shares at the start of the year, not end.
- Repurchase of shares: Learners used the wrong values — either forgetting the average share price or only using the Retained Income figure.
- Loan repayment: Still a common struggle. Even though it was taught before, learners confused the monthly instalment with the total repayment. You must include the interest when calculating repayment.
- Net change in cash and cash equivalents: The question gave you the closing figure, but you still had to calculate the opening balance, including the bank overdraft. No bracket = wrong direction = lost mark.
3. Learn the structure of the Cash Flow Statement inside and out
The Cash Flow Statement is not just about the numbers. It is about knowing what belongs under Operating, Investing, and Financing activities. The 2024 report showed that many learners misplaced figures or included things in the wrong section.
Even when your numbers are right, putting them in the wrong place means losing marks. Learn the format. Stick to the layout used in past exam papers. Do not make up your own order. And always show whether the amounts are positive or negative using proper bracket placement.
4. Use the correct formula and average values in Financial Indicators
In Question 2.3, you were asked to calculate indicators like stock turnover rate and interim dividends per share (DPS). These indicators are standard. The formulas are given to you. But learners still:
- Copied the formula wrong
- Swapped the numerator and denominator
- Used closing balances instead of averages
- Used opening or closing share counts instead of the correct amount at the time dividends were declared
For example, many confused the stock turnover rate with the stockholding period. These are not the same thing. One shows how fast stock is sold. The other shows how long it stays on the shelf. If you do not understand the purpose of the indicator, then your answer will never be accepted — even if the number looks right.
Same problem with dividends. Interim dividends are declared at a specific point in time, not over the whole year. If the number of issued shares changed during the year, you need to use the share count at the time of declaration, not the total from the Trial Balance.
5. Train yourself with proper full-paper CFS examples
Most learners only practise parts of the Cash Flow Statement. That is a mistake. The examiner can ask you for a full CFS, or they can test one activity (like Operating) in detail. Either way, the principles stay the same.
You must:
- Understand how each activity connects to the others
- Know which figures come from the notes
- Link your CFS with the Retained Income note and changes in share capital
The 2024 exam showed that learners forget to carry figures across from previous subquestions. Some skipped lines completely. Others did not calculate purchases or proceeds correctly. All of these are marks you can get back if you practise the whole layout properly.
If you are aiming for 60% and above in Accounting, this is one of the easiest sections to improve. The layout is predictable. The calculations are standard. The marking is clear.
Go practise it properly using past papers from StudyPapers.co.za. Work through one question at a time, check your brackets, use the correct formulas, and apply figures in the right places.
This question will show up again in your final exam. Make sure next time, you are ready for it.
Previously written exam papers for Accounting Grade 12 are loaded here