Reference no: EM132906677

Problem 1: Which of the following statements is true?

A. Cost of sales is the direct costs of the inventory that has been sold during the financial period.
B. Cost of sales is an expense that is charged against sales to calculate gross profit.
C. Both options provided.
D. Neither of the options provided.

Problem 2: Handy Traders leased a machine to a manufacturing company for a year at R2 500 per month. By the end of the year, Handy Traders had received R35 000 in total in respect of the rent, which appeared in the general ledger as follows: Bank was debited and Rent income was credited with R35 000 in total for the year. The adjustment journal entry at the end of the year will be as follows:

A. Dr Rent income, R5 000; Cr Rent received in advance, R5 000.

B. Dr Rent income, R5 000; Cr Bank, R5 000.

C. Dr Rent received in advance, R5 000; Cr Rent income, R5 000.

D. No adjustment journal entry needs to be made.

Problem 3: At the end of each financial year, the income and expense accounts must be closed off in order to determine the profit or loss for the year.

A. True

B. False

Problem 4: Accrued income is owed to the entity and must, therefore, be included as income for the current period.

A. True

B. False