Digital Assessments: BCompt Financial Accounting I

Question 1
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Choose the correct word to fill in the blank:
According to the indirect method of deriving a cash flow statement, the purchase of inventory
would be considered a _______ cash flow.

common

uncommon

negative

stagnant

positive
The indirect method of deriving a cash flow statement starts with the profit or loss before tax, and
adjusts for non-cash items like depreciation, loss or profit on sale of assets, and any items that did not
result in cash movements during the financial year. You need to pay close attention when making
adjustments, as some items need logic if you think about them in terms of actual cash movements.
The following adjustments may be needed:

 An increase in inventory is a negative cash flow, because cash will have been
used to acquire more goods that have not yet been converted back into cash.
That is, more cash is tied up in inventory.
 An increase in receivables is also treated as negative cash flow, as debtors are
not paying cash, resulting in the debtor’s book increasing.
 An increase in payables has an opposite effect to receivables, because the
increase means that the company is retaining cash and not paying creditors.
 Depreciation charged to the profit or loss account is added back for non-cash
items; however, you will need to calculate the depreciation charge for the year.
 Profit or loss on asset disposals are adjusted, and only include the actual cash
received from the transaction.

The correct answer is:

negative
Question 2
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Page 1 of 28
 Flag question
Select the statement that correctly describes the purpose of bookkeeping. The purpose of
bookkeeping is _____________________.

To record all financial transactions of the business

To summarise the business’s financial position

To interpret double-entry records

To manage taxes

To prepare financial statements at regular intervals

Accounting is the process of record-keeping and a way to gather, document and collate the various
outcomes of a business and its related activities.
The correct answer is:
To record all financial transactions of the business
Question 3
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Member-based non-profits include: (This question has more than one correct answer so please
choose carefully. Negative marking will be applied).

All of these options

A stokvel

A church

An internet café

The local bowls club

For member-based, non-profit entities such as clubs and societies, operations and administrative
guidelines are provided in their constitutions. The determination of fees and rules governing the
conduct of members are also stipulated in the constitution that members must subscribe to. In some
instances, these non-profit entities run activities that raise supplementary revenue for themselves (e.g.
operating a coffee bar or restaurant at the club house). In such cases, the entity’s accountant or
treasurer will draw up a trading account to measure its performance (to ensure they are not losing
money or being used for profit purposes). The trading account shows items similar to those in a
statement of profit or loss and other comprehensive income of a profit company.
The correct answers are:
The local bowls club,
A stokvel
Question 4
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Which of the following options defines a trial balance?

A list of assets, liabilities, and capital of a business on a certain date

A statement of balances to be paid

A list of balances in a business’s books on a certain date

A summary of the financial position of a business at year end

A summary of all business transaction for the year

A list of balances in a business’ books on a certain date.
The correct answer is:
A list of balances in a business’s books on a certain date
Question 5
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Xolani has identified a number of errors after generating his trial balance. Where can he
correct these errors?

In an income statement

In a post-adjustment trial balance

In a balance sheet
None of these options

In his prospectus
The trial balance is used to check the correctness of the double entries by recording the total debit
and credit balances of all accounts. Thus, a trial balance is a T-account listing all debit and credit
balances respectively. These listed balances are from the GL account recorded on a particular date.
Debit balances from the GL account are entered on the debit side of the trial balance (i.e. left side of
the T-account). GL credit balances are entered on the right side of the trial balance (i.e. right side of
the T-account). Once the debit and credit balances are entered in the trial balance from the GL
account, their totals should be the same.
There are three types of trial balances a company may prepare. These trial balances are briefly
described by Myburgh et al. (2018:137):

 A pre-adjustment trial balance, which is extracted from the GL account prior to

any adjustments being made;
 A post-adjustment trial balance, which is prepared after the adjustments are
made;
 A post-closing trial balance, which is prepared after accounts have been closed
and the profit and loss determined. This trial balance becomes the opening trial
balance for the next financial year. That is, balances in this trial balance show
opening balances in accounts for the next period.

The correct answer is:

In a post-adjustment trial balance
Question 6
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Which of the options listed below is a service business?

A bakery

A book publisher

A newsagent

A hairdresser

A car showroom
A hairdresser is the correct answer, because in a service industry there is no exchange of physical
goods between the seller and buyer.
The correct answer is:
A hairdresser
Question 7
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Choose the correct word to fill in the blank:
All source documents are sorted and compiled into the relevant _________ that they pertain to.

journals

trial balances

inventories

accounts

income statements
Once source documents for a transaction are in place, they are recorded in the relevant subsidiary
journal as the next step in the accounting cycle. A journal in accounting is considered to be a book of
prime entry or original entry. It is used to record transactions before posting them to accounts in
relevant subsidiary or general ledgers. Some examples of accounting journals include:

 Sales journals;
 Purchases journals;
 Cash receipts journals;
 Cash payment journals;
 Petty cash journals;
 General journals;
 Creditors journal; and
 Debtors journals.

The correct answer is:

journals
Question 8
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From the list provided, identify those which form part of the six capitals that must be
considered in financial reporting. (This question has more than one correct answer so please
choose carefully. Negative marking will be applied).

Sound debt collection policies

Issues of human rights

Value creation

Health and safety

Efforts to maintain or improve the environment

Apart from financial capital, the King IV Report on Corporate Governance for South Africa
(effective from 2016) refers to five other capitals that companies need to address in their <IR>. These
are: manufactured capital; human capital; intellectual capital; natural capital; and social and
relationship capital. These six capitals are also articulated in the International Integrated Reporting
Council’s <IR> Framework. The idea behind the <IR> is for the company to report on how it created
value by using all the six capitals, rather than only focusing on the financial capital. Furthermore, the
Sustainability Accounting Standards Board’s (SASB) Conceptual Framework advocates that
companies should report on the five broad sustainability dimensions.
The correct answers are:
Health and safety ,
Efforts to maintain or improve the environment ,
Issues of human rights,
Value creation
Question 9
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How is inventory turnover calculated?

Current assets ÷ current liabilities

Cost of sales ÷ average inventory

Total dividend paid ÷ net income

Total tax owed - tax paid

Sales - cost of sales

A profitability ratio that measures financial performance. Shows how quickly inventory is brought in
and sold in the year. The higher the number of times, the more the company was able to buy or
produce goods and sell them. A comparison of average inventory to total cost of sales during the
year. Increase or decrease tells the user whether the company is selling more inventory or not. Also,
it indicates whether business is booming or slowing down.
The correct answer is:
Cost of sales ÷ average inventory
Question 10
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Which of the following formula represents the correct calculation of capital employed for a
business?

Long-term debt + total liabilities

Owner’s equity + noncurrent liabilities

Noncurrent assets + current assets

Owner’s equity + total liabilities

Current assets - current liabilities

Revisit the basic accounting equation and the ratios to get the formula for capital employed.
The correct answer is:
Owner’s equity + noncurrent liabilities
Question 11
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While ratios are useful, they have limitations which include the following: (This question has
more than one correct answer so please choose carefully. Negative marking will be applied).

Figures shown can be manipulated

They do not account for inflation

They are historic and cannot indicate future events

They are biased as they are not compared to similar companies

All of these options

Although ratios are used to interpret and analyse the financial performance and position of
companies, they have limitations. Some of the limitations include:

o Figures in the financial statements being susceptible to manipulation and creative

accounting.
 As such, the ratios calculated from the manipulated figures will not
give the true picture of the company, meaning the ratios cannot be
relied on.
o Financial statements are historic as they report on events and transactions that
happened during the past financial year.
 For this reason, ratios cannot forecast what will happen in the financial
future of the company. In addition, by the time financial statements are
finalised and ratios calculated, the company’s financial future might
have changed.
o Ratios do not consider the effect of inflation, especially when comparing ratios
from one year to another.
 The current year’s revenue might be much higher than last year’s
revenue. Ratios might show improved profitability when in actual fact,
they are a result of inflationary effect. One needs to consider this in the
analysis and interpretation of the ratios.
o Ratios do not factor non-financial information into their calculations.
 Non-financial information may include information contained in the
chairperson’s or CEO’s statements. This information is important as it
provides the economic outlook, company’s strategic direction and
choices, and any other pertinent information that might provide
valuable meaning to the calculated ratios.

The correct answers are:

Figures shown can be manipulated ,
They do not account for inflation ,
They are historic and cannot indicate future events
Question 12
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Choose the correct word to fill in the blank:
The <IR> approach is ________-based, so as to balance the operations and reporting on
company operations for the benefit of all stakeholders.

principle
value

ethics

moral

numbers
South Africa has adopted the ‘comply and explain’ basis for <IR> reporting, as recommended by
King IV Report on Corporate Governance for South Africa. Although this reporting is flexible, the
company’s report still needs to provide information that is:

 Presented fairly in terms of performance and position;

 Useful to all decision-makers;
 Comparable with peers within the industry;
 Complete for users to conduct analyses and interpretations;
 Verifiable and supported by robust internal controls; and
 Aligned to the regulatory framework of the jurisdiction in which the company
carries out its operations.

The correct answer is:

principle
Question 13
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Choose the correct words to fill in the blanks:
To make a decision about the financial future of her business, Zandi requires _______ and
______ information on its operations.

detailed, specific

current, noncurrent

tangible, intangible

past, future

daily, monthly
Internal users of financial information generally need specific and detailed data relevant to their
particular business functions and responsibilities. This financial information is critical for the day-to-
day administration and decision-making of business.
The correct answer is:
detailed, specific
Question 14
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The International Financial Reporting Standard 15 (IFRS 15) requires that revenue be
recognised when (or as) the entity satisfies a _____________. Choose the most appropriate
option to satisfy this IFRS 15 requirement.

Job to be completed

Obligation

Job allocation

Performance obligation

Performance done
Revenue is recognised when (or as) the performance obligation is satisfied and the customer obtains
control of that good or service. This can be at a point in time (typically for goods) or over time
(typically for services). The revenue recognised is the amount allocated to the satisfied performance
obligation.
The correct answer is:
Performance obligation
Question 15
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On 17 April 2022, a trader purchased goods worth R2000 on credit. These purchases attracted
a 10% trade discount. A further 5% discount was offered by the supplier for payments
received within 15 days of purchases. How much was entered into the purchases journal if the
trader paid after 20 days?

R1710

R2000

R1900
R1800

R1700
Feedback: R1800. The trader will only get the 10% discount since payment was made after the
further 5% eligibility time period had lapsed.
The correct answer is:
R1800
Question 16
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SeBra (Pty) Ltd. has been operating for five years. The company’s finance manager provides
you with the following current ratios for the past three years:

o Year 1: 2:1
o Year 2: 1.8:1
o Year 3: 1.6:1

The finance manager asks you to give a possible explanation for what is causing these changes
to the ratios. The reason could be _________ (select the correct option).

Inventory is increasing

Trade payables are increasing

Trade payables are stagnating

Trade receivables are increasing

Cash at bank is increasing

Trade payables are increasing. There seems to be a steady increase in trade payables from one year to
another.
The correct answer is:
Trade payables are increasing
Question 17
Correct
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What does the following formula calculate:
(Revenue-Cost of sales)/Revenue × 100
Gross profit margin

Mark-up

Gross profit

Cost of sales

Revenue
Gross profit margin is calculated as a percentage (%).
The correct answer is:
Gross profit margin
Question 18
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Choose the correct word to fill in the blank:
ABC Bank is a __________ person, which means that the business is considered separate from
its owners in terms of its ability to act.

juristic

corporate

technical

collective

unnatural
Registered companies are legal entities that are considered juristic persons. This means that
companies are their own legal entity with persona to act. Companies may own assets, they can be
sued, they can execute transactions, and they are separated from their owners (i.e. they are a separate
legal identity from the person who owns and runs the company). These companies thus have limited
liability, which means that the loss or responsibility for amounts owed by the company are limited to
the amount the owners invested in the company.
The correct answer is:
juristic
Question 19
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Choose the correct word to fill in the blank:
Winnie is a senior and trusted accountant for a large, family-owned building retailer. The
board of directors would like to take a loan to help them navigate the COVID19 pandemic. As
an accountant, Winnie has a ________ responsibility to ensure the business is able to repay the
loan.

moral

legal

fiduciary

notable

ethical
Part of responsible fiduciary action, on the part of business owners and managers, is to ensure that an
entity is always able to service its liabilities when they become due so that it continues to operate as
an ongoing concern. In times of duress or pressure, companies may need to increase liabilities to stay
afloat or to manage profitability; this is when liabilities can become as negative as they sound. A
good accountant is one who brings an unwavering commitment to applying the conceptual
framework and all related guidance to all aspects of an entity’s accounting records, especially
liabilities.
The correct answer is:
fiduciary
Question 20
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What does the following formula calculate:
(Gross Profit)/(Cost price ) × 100

Gross profit margin

Gross profit

Cost of sales
Revenue

Mark-up
When the gross profit is expressed a percentage of cost price, it is called mark-up. A mark-up is the
difference between the selling price of a product and the product’s cost.
The correct answer is:
Mark-up
Question 21
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Which of the following has the main objective of providing quality financial information to
providers of financial and other capitals?

ACCA

SAICA

FICA

<IR>

SASB
The main objective of the <IR> is to provide quality information to providers of financial and other
capitals. The <IR> is prepared annually and presented together with the annual financial statements.
Alternatively, the annual financial statements are embedded in the <IR> itself. The report can be
prepared to respond to compliance requirements or on a voluntary best practice basis.
The correct answer is:
<IR>
Question 22
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It is imperative that businesses publish their financial statements, because ________. (This
question has more than one correct answer so please choose carefully. Negative marking will be
applied).

Important financial decisions might need to be taken whether to buy or sell

Adherence to globally accepted norms

Sound debt collection policies

Management may need to be reviewed in terms of their efficacy

Political instability
The financial information must enable primary users to make informed decisions on whether to buy,
sell or hold investments or debt instruments in the company, provide or settle loans with the
company, assess company performance, and exercise their right to vote for or against management’s
decisions.
The correct answers are:
Important financial decisions might need to be taken whether to buy or sell ,
Management may need to be reviewed in terms of their efficacy
Question 23
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Which international accounting objectives are described by the two statements below?

1. Information in financial statements must be free from material error and bias.
2. Users must be able to identify similarities and differences between information
presented in various financial statements, either over years or between peers in the same
industry.

Statement I Statement II
Reliability Understandability

Statement I Statement II
Comparability Relevance

Statement I Statement II
Understandability Reliability
Statement I Statement II
Reliability Comparability

Statement I Statement II
Comparability Understandability

Statement I Statement II
Reliability Comparability

The correct answer is:

Statement I Statement II
Reliability Comparability
Question 24
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In accordance with International Accounting Standard 12 (Income Taxes), which of the
following options can be defined as: ‘The aggregated amount included in calculating net profit
or loss for the financial period in relation to current and deferred tax’?

Deferred tax

Accounting profit

Taxable profit (or loss)

Taxable expense

Current tax

Taxable expense (tax income) is the aggregated amount included in calculating net profit or loss for
the financial period. This is in respect of current tax and deferred tax.
The correct answer is:
Taxable expense
Question 25
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Choose the correct words to fill in the blanks:
A ________ can be used to calculate adjustments and facilitate the ______ process.

calculator, operations

statement, merger

journal, sale

worksheet, closing

account, debt
A worksheet, which is a document with titled columns, can be used to prepare adjustments that
facilitate the closing process, and to prepare financial statements. A worksheet helps the preparer
with the accuracy of the information and calculations during the preparation of financial statements.
For example, worksheets can be used to ensure that the financial statements are balancing before
closing journal entries. It might seem that you would doing things in reverse order, but it shortens the
closing process and preparation of the financial statements. Note that worksheets are not part of
accounting records published by reporting companies.
The correct answer is:
worksheet, closing
Question 26
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Based on the characteristics given below, which would define the function of accounts in
accounting? (This question has more than one correct answer so please choose carefully.
Negative marking will be applied.)

Showing increases and decreases

Record keeping

Being a mechanism of exchange

Being a store of value

Being a store of information for future reference

An account may be defined as a formal record of an entity’s transactions regarding a particular item.
Accounts have the following functions: they keep a record of each transaction; they distinguish
between increases and decreases; they store the transaction information for future reference, and they
show the balance or total of each account (Myburgh et al, 2018).
The correct answers are:
Record keeping,
Showing increases and decreases,
Being a store of information for future reference
Question 27
Correct
Mark 1.00 out of 1.00
Flag question
Squash Splash Club is a squash club that prepares school pupils for national team trials. The
squash club has achieved great success and now owns assets, operates on a full-time basis, and
prepares annual financial statements.
What would not appear on Squash Splash Club’s receipts and payments account?

Maintenance costs on equipment

Purchase of new equipment

Depreciation of equipment

Cost of equipment repairs

Proceeds from the disposal of old equipment

The depreciation of equipment does not belong in the receipts and payment account of the Club.
The correct answer is:
Depreciation of equipment
Question 28
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At the end of the financial year, JJ Trading had a debit balance brought down on the electricity
account. Where in the statement of financial position should this be recorded?
Capital section

Current liabilities section

Non-current assets section

Equities section

Current assets section

Current assets section.
The correct answer is:
Current assets section
Question 29
Incorrect
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International Accounting Standard 23 (IAS 23) lists a number of items that form part of
borrowing costs. Which of these is described by the following statement: ‘This item is
calculated using the effective interest rate method as per IAS 39 Financial Instruments:
Recognition and Measurement’?

Finance charges

Arrangement fees for funds raised

Bank charges

Exchange differences emanating from borrowings in other currencies

Interest expenses
Interest expense is calculated using the effective rate interest method as per IAS 39 Financial
instruments: Recognition and measurement.
The correct answer is:
Interest expenses
Question 30
Correct
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The seminal text for the accounting profession is the_____________.

Banking Code of Conduct

IFRS Conceptual Framework

Kings Code IV

Constitution of the Republic of South Africa

None of these options

The launching point for all guidance relating to accounting concepts is the Conceptual Framework of
the IFRS (2018). This collection of definitions and principles has existed for decades, but was very
recently completely revised, as evidence of financial accounting staying abreast of evolutions in the
business world. The conceptual framework ensures that there is consistency in setting accounting
standards and eliminates political pressure from various “lobby groups” and interested parties.
The correct answer is:
IFRS Conceptual Framework
Question 31
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Choose the correct word to fill in the blank:
Thandi has a hair salon as well as a cosmetic line. The products that she makes for sale are
considered __________, as opposed to the products that she uses in the hair salon, which are
considered consumables.

assets

cash

expenses

liabilities

inventories
With the obvious exception of service-oriented businesses, inventories lie at the heart of any
business, as they list the products being made or produced to be sold by the business, and more often
than not, are a material part of the assets the business holds. Depending on the exact nature of
inventory, it may also be more prone to theft and misappropriation. If you are a restaurant selling
food, the risk of your inventory being stolen (i.e. eaten against company policy) is higher than if your
business manufactures car pistons. However, virtually any inventory item has a market value and
could be the target of nefarious activities. Therefore, this is an area that warrants sound accounting
and solid internal controls.
The correct answer is:
inventories
Question 32
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Mark 1.00 out of 1.00
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The financial document commonly known as the profit and loss document is now known as
_____________.

The statement of comprehensive income

The statement of cash flows

Notes to the financial statements

The statement of financial position

The statement of changes in equity

Financial information is imparted in the following documents:

 Statements of financial position (formerly known as a balance sheet) reflect the

financial strength of the business.
 Statements in changes in equity show changes that took place in the equity of
the business.
 Statements of comprehensive income (formerly known as profit and loss)
depict financial performance.
 Statements of cash flows reflect cash flows generated by the business, and
movement in the cash flows during the financial period.
 Notes to the financial statements explain some of the figures in the financial
statement.

The correct answer is:

The statement of comprehensive income
Question 33
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From the list given, identify the individuals who have a vested interest in the financial
performance of Steinhoff as external users. (This question has more than one correct answer so
please choose carefully. Negative marking will be applied).

The Public Investment Corporation

Creditors

Investors

Debtors

Employees

External users who have a strong interest in a company’s financial performance and position include:

 Investors who invest in limited companies (individuals as well as institutional

investors such as pension funds, insurance companies, the Public Investment
Corporation);
 Employees;
 Lenders;
 Creditors; and
 Government.

There are varied reasons why different external users need to know the financial performance and
position of the company. For example:

 Investors need to know if their investments in the company are safe;

 Investors need to know if they going to receive dividends;
 Investors can compare how their investments in the company are performing
against investments in other companies;
 Employees need to know if they will continue to have a job;
 The government needs to know if it will meet its revenue targets collected
through corporate taxes; and so on.

The correct answers are:

Employees,
Investors ,
The Public Investment Corporation ,
Creditors
Question 34
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The characteristics of a partnership, as a form of ownership, do not include: (This question has
more than one correct answer so please choose carefully. Negative marking will be applied).

A prospectus

A partnership agreement

A memorandum of association

Provisions for loans to the partners by the business, or vice versa

Capital accounts
A partnership business is formed when two or more people come together to own and run a business
with a profit motive. The partners will then share the profits or losses in predetermined profit or loss
ratios or proportions. The partnership agreement or contract may be a formal or informal one;
however, it is always better to have formal contracts (written and signed) as this means that whatever
the partners agree on is recorded and can be referred to in the event of disputes. The formal
partnership agreement that governs the partnership arrangement is called a partnership deed.
The correct answers are:
A memorandum of association,
A prospectus
Question 35
Correct
Mark 1.00 out of 1.00
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Choose the correct word to fill in the blank:
Income taxes that are still owed are otherwise known as _____________.

intangible

deferred

lingering
tangible

current
IAS 12 (income taxes) deals with current and deferred tax as well as other tax issues. The standard
also provides definitions that are very important for you to understand and be able to recognise,
measure, and present in the financial statements. These definitions also provide insights on the nature
of company tax.
The correct answer is:
deferred
Question 36
Partially correct
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Accounting can be considered a ‘language’ because it __________. (This question has more
than one correct answer so please choose carefully. Negative marking will be applied).

Has unique terms, symbols and jargon

Involves gatekeepers

Makes use of these terms, symbols and jargon to communicate information

Can be misunderstood or misinterpreted

Has its own dictionary

In some ways accounting is indeed a language. This is because:

 It consists of various symbols, concepts, terminology, and practices that are

unique to itself;
 It uses these symbols, concepts, terminologies, and practices to convey specific
messages, content, and understanding to those who receive them;
 The receivers need an understanding of and experience with these elements to
fully grasp the message that is being transmitted; and
 It is prone to and capable of being misunderstood, much like any other
language.

The correct answers are:

Has unique terms, symbols and jargon,
Makes use of these terms, symbols and jargon to communicate information,
Can be misunderstood or misinterpreted
Question 37
Correct
Mark 1.00 out of 1.00
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Choose the correct answers to fill in the blanks:
__________ and___________ are two key concepts related to the quality of financial
information.

Sustainability

Transparency

Relevance

Faithful representation

Accountability
There are certain fundamental characteristics that ensure the quality of financial information.

TABLE 2: FUNDAMENTAL QUALITATIVE CHARACTERISTICS

Characteristic What it means
Relevance All of the information needed to be present is present so that decisions can be
made based on the information to assist in forecasting or confirming what happens
at the entity, and that any information of material importance is included.
Faithful All of the information is reflected in the financials in a way that is true and faithful
representation to the underlying substance of the events, instances, triggers, and transactions that
brought about the information, and that the information is complete, neutral, and
error-free.
(The Conceptual Framework, 2018)
The correct answers are:
Relevance,
Faithful representation
Question 38
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Mark 1.00 out of 1.00
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For non-for-profit entities, which statement is similar to the statement of profit or loss and
other comprehensive income drawn by profit-making companies, and serves the same purpose
of measuring financial performance?
Statement of income and expenditure

Statement of receipts

Statement of changes in funds

Statement of financial position

Statement of reconciliation of fund balances

This statement is similar to the statement of profit or loss and other comprehensive income drawn by
profit-making companies and serves the same purpose of measuring financial performance. However,
the end result or figure is not presented as profit or loss, but surplus (income exceeds expenditure) or
deficit (income is less than expenditure).
The correct answer is:
Statement of income and expenditure
Question 39
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Covid Business Solutions has a rent account that shows three payments of R750 during the
year. In addition, the business still owes the landlord R750 at the end of the financial year.
Which double entry would be made at the end of the financial year?

Debit R Credit R
a. Income statement 2,250 Rent account 2,250
b. Income statement 3,000 Rent account 3,000
c. Rent account 2,250 Income statement 2,250
d. Rent account 3,000 Income statement 3,000
e. Statement of 3,000 Rent account 2,250
Comprehensive Income

Debit R Credit R
Statement of 3,000 Rent account 2,250
Comprehensive Income
 Debit R Credit R
Income statement 3,000 Rent account 3,000

Debit R Credit R
Rent account 3,000 Income statement 3,000

Debit R Credit R
Rent account 2,250 Income statement 2,250

Debit R Credit R
Income statement 2,250 Rent account 2,250

Debit R Credit R
Income statement 3 000 Rent account 3 000

The correct answer is:

Debit R Credit R
Income statement 3,000 Rent account 3,000
Question 40
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Which of the following statements pertaining to revenue is correct?

Cost of goods sold – gross profit + sales returns = revenue

Sales returns – cost of goods sold - gross profit = revenue

Cost of goods sold – gross profit - sales returns = revenue

Cost of goods sold + gross profit + sales returns = revenue

Cost of goods sold + gross profit – sales returns = revenue

You need to understand the trading account formula for calculating gross profit and work backwards.
The correct answer is:
Cost of goods sold + gross profit + sales returns = revenue