Basic Financial Accounting - Goods For Resale, Cogs And Trade Creditors

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Basic Financial Accounting - Goods For Resale, Cogs And Trade Creditors

How to post goods for resale, COGS and trade creditors. A thorough course in Basic Financial accountingImage courtesy of adamr / FreeDigitalPhotos. Net


Questions and Answers
  • 1. 
    14. Journal entry of goods for resale - Cash purchase without VATA trading company just purchased goods for resale. The total purchase amount for the goods was 500.000. The goods were paid for in cash upon delivery.How should the information above be posted?
    • A. 

      The cash account (asset) is debited 500.000 while the inventory account (asset) is credited 500.000.

    • B. 

      The trade creditors account (liability) is credited 500.000 while the inventory account (asset) is debited 500.000.

    • C. 

      The cash account (asset) is credited 500.000 while the inventory account (asset) is debited 500.000.

    • D. 

      The trade creditors account (liability) is credited 500.000 while the cost of goods sold account (profit/loss) is debited 500.000.

  • 2. 
    15. Journal entry of goods for resale - Cash purchase with VATA trading company just purchased goods for resale. The total purchase amount for the goods was 250.000 of which 50.000 is VAT. The VAT amount is fully deductible. The goods were paid for in cash upon delivery. How should the information above be posted? 
    • A. 

      The cash account (asset) is debited 250.000 while the inventory account (asset) is credited 200.000. Finally the input VAT account (liability) is credited 50.000.

    • B. 

      The trade creditors account (liability) is credited 250.000 while the inventory account (asset) is debited 200.000. Finally the input VAT account (liability) is debited 50.000.

    • C. 

      The cash account (asset) is credited 250.000 while the inventory account (asset) is debited 200.000. Finally the output VAT account (liability) is debited 50.000.

    • D. 

      The cash account (asset) is credited 250.000 while the inventory account (asset) is debited 200.000. Finally the input VAT account (liability) is debited 50.000.

  • 3. 
    16. Journal entry of goods for resale - Credit purchase without VATA trading company just purchased goods for resale. The total purchase amount for the goods was 400.000. The vendor is granting a payment time of 45 days. How should the information above be posted? 
    • A. 

      The trade creditors account (liability) is debited 400.000 while the inventory account (asset) is credited 400.000.

    • B. 

      The trade creditors account (liability) is credited 400.000 while the inventory account (asset) is debited 400.000.

    • C. 

      The other creditors account (liability) is credited 400.000 while the inventory account (asset) is debited 400.000.

    • D. 

      The other creditors account (liability) is credited 400.000 while the prepaid expenses account (asset) is debited 400.000.

  • 4. 
    17. Journal entry of goods for resale – Credit purchase with VAT A trading company just purchased goods for resale. The total purchase amount for the goods was 300.000 of which 60.000 is VAT. The VAT amount is fully deductible. The vendor is granting a payment time of 45 days. How should the information above be posted? 
    • A. 

      The trade creditors account (liability) is credited 300.000 while the inventory account (asset) is debited 240.000. Finally the output VAT account (liability) is debited 60.000.

    • B. 

      The trade creditors account (liability) is credited 300.000 while the cost of goods cold account (profit/loss) is debited 240.000. Finally the input VAT account (liability) is debited 60.000.

    • C. 

      The trade creditors account (liability) is credited 300.000 while the inventory account (asset) is debited 240.000. Finally the input VAT account (liability) is debited 60.000.

    • D. 

      The trade creditors account (liability) is debited 300.000 while the inventory account (asset) is credited 240.000. Finally the input VAT account (liability) is credited 60.000.

  • 5. 
    18. Journal entry of credit note from vendors (trade creditors) – without VAT A company just received a credit note from its vendor for a part of a previous purchase. The value of the credit note is 30.000. How should the information above be posted? 
    • A. 

      The trade debtors account (asset) is debited 30.000 while the inventory account (asset) is credited 30.000.

    • B. 

      The trade creditors account (liability) is debited 30.000 while the inventory account (asset) is credited 30.000.

    • C. 

      The trade creditors account (liability) is credited 30.000 while the inventory account (asset) is debited 30.000.

    • D. 

      The revenue account (profit/loss) is credited 30.000 while the inventory account (asset) is debited 30.000.

  • 6. 
    19. Journal entry of credit note from vendors (trade creditors) – with VAT A company just received a credit note from its vendor for a part of a previous purchase. The value of the credit note is 50.000 including 10.000 in VAT. How should the information above be posted? 
    • A. 

      The trade creditors account (liability) is debited 50.000 while the inventory account (asset) is credited 40.000. Finally the input VAT account (liability) is credited 10.000.

    • B. 

      The other creditors account (liabilities) is credited 50.000 while the prepaid expenses account (asset) is credited 40.000. Finally the input VAT account (liability) is credited 10.000.

    • C. 

      The trade creditors account (liability) is credited 50.000 while the inventory account (asset) is debited 40.000. Finally the input VAT account (liability) is debited 10.000.

    • D. 

      The trade creditors account (liability) is debited 50.000 while the inventory account (asset) is credited 40.000. Finally the output VAT account (liability) is credited 10.000.

  • 7. 
    20. Journal entry of return of goods for resale The company just received returned goods from a customer. The goods are undamaged and the company expect that the goods can be sold to another customer. The cost of the goods previously posted was 45.000.How should the information above be posted? 
    • A. 

      The inventory account (asset) is credited 45.000 while the cost of goods sold account (profit/loss) is debited 45.000.

    • B. 

      The trade creditors account (liabilities) is debited 45.000 while the cist of good sold (profit(loss)is credited 45.000.

    • C. 

      The trade debtors account (asset) is debited 45.000 while the inventory account (asset) is credited 45.000.

    • D. 

      The inventory account (asset) is debited 45.000 while the cost of goods sold account (profit/loss) is credited 45.000.

  • 8. 
    21. Journal entry of cost of goods sold - always ignoring VATA company has just sold a quantity of goods to a costumer. The sales transaction (the invoice to the costumer) has already been posted. The cost of the sale has however not been calculated nor posted. The company is using the FIFO method (first in first out) in valuing its inventory. At the beginning of the year the company had an inventory of 15 pieces with the corresponding value of 200.000. During the year the company has purchased 20 pieces for the amount of 240.000 and then later on another 10 pieces for the amount of 100.000.  The quantity sold was 31 pieces leaving the company with a quantity of 14 pieces in inventory.How should the information above be posted?
    • A. 

      The inventory account (asset) is debited 392.000 while the impairment of inventory account (profit/loss) is credited 392.000.

    • B. 

      The inventory account (asset) is credited 392.000 while the impairment of inventory account (profit/loss) is debited 392.000.

    • C. 

      The inventory account (asset) is credited 392.000 while the cost of goods sold account (profit/loss) is debited 392.000.

    • D. 

      The inventory account (asset) is debited 392.000 while the cost of goods sold account (profit/loss) is credited 392.000.

    • E. 

      The inventory account (asset) is credited 148.000 while the cost of goods sold account (profit/loss) is debited 148.000.

    • F. 

      The inventory account (asset) is debited 148.000 while the cost of goods sold account (profit/loss) is credited 148.000.

  • 9. 
    23. Journal entry of payment to trade creditors (vendors) - always ignoring VAT A company has paid its debt to a vendor from an earlier credit purchase. The amount paid was 70.000. The amount was transferred from the company’s bank account into the vendor’s bank account. How should the information above be posted?
    • A. 

      The trade creditors account (liability) is debited 70.000 while the inventory account (asset) is credited 70.000.

    • B. 

      The trade creditors account (liability) is debited 70.000 while the bank account (asset) is credited 70.000.

    • C. 

      The inventory account (asset) is debited 70.000 while the cost of goods sold account (profit/loss) is credited 70.000.

    • D. 

      The inventory account (asset) is credited 70.000 while the cost of goods sold account (profit/loss) is debited 70.000.

  • 10. 
    22. Journal entry of impairment of goods for resaleA company has an inventory with a total booked value of 120.000. Sadly some of this inventory can no longer be sold due to new legislation prohibiting this and must therefore be disposed of. The net realisable value of this particular inventory is 13.000.How should the information above be posted?
    • A. 

      The inventory account (asset) is debited 13.000 while the impairment of inventory account (profit/loss) is credited 13.000.

    • B. 

      The inventory account (asset) is credited 107.000 while the impairment of inventory account (profit/loss) is debited 107.000.

    • C. 

      The inventory account (asset) is credited 13.000 while the impairment of inventory account (asset) is debited 13.000.

    • D. 

      The inventory account (asset) is credited 13.000 while the cost of goods sold account (profit/loss) is debited 13.000.

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