FAC1502
Financial Accounting Concepts, Principles and
Procedures
May June 2020
Question 1 of 20 3 Points
The pre-adjustment trial balance of PMT Traders as at 28 February 2019, reflected the following balances:
Trading inventory R9 770
Office supplies R1 121
Cleaning material R740
Packaging material R2 670
A physical inventory count conducted at year-end, revealed the following inventory were on hand:
Trading inventory, R9 560
Office supplies, R230 Cleaning
material, R121 Packaging
material, R926
No adjustment journal entries have been processed as yet in the accounting books of PMT Traders regarding the
inventory count.
The effect that the adjustment journal entries for consumables stock on hand will have on the basic accounting
equation of PNT Traders for the year ended 28 February 2019 will be …?
A. Assets will increase by R1 277; equity will increase by R1 277 and liabilities will not be affected.
B. Assets will increase by R1 047; equity will decrease by R1 047 and liabilities will not be affected.
C. Assets will decrease by R1 487; equity will decrease by R1 487 and liabilities will not be affected.
D. Assets will not be affected; equity will increase by R1 047 and liabilities will decrease by R1 047.
E. Assets will increase by R1 487; equity will increase by R1 487 and liabilities will not be affected.
Answer:
6.3.2 Consumable inventory on hand
Adjustments of consumables, for example stationery, arise when an entity purchases consumables during a financial
year and they are not completely consumed by the end of the period. Expenditure on the item becomes an expense
only when the item has in fact been consumed. The consumables on hand are classified as inventory on
hand.
Consumables stock increase the value of inventory (asset). They reduce the value of expenses and increase profit
(equity).
Financial Accounting Concepts, Principles and
Procedures
May June 2020
Question 1 of 20 3 Points
The pre-adjustment trial balance of PMT Traders as at 28 February 2019, reflected the following balances:
Trading inventory R9 770
Office supplies R1 121
Cleaning material R740
Packaging material R2 670
A physical inventory count conducted at year-end, revealed the following inventory were on hand:
Trading inventory, R9 560
Office supplies, R230 Cleaning
material, R121 Packaging
material, R926
No adjustment journal entries have been processed as yet in the accounting books of PMT Traders regarding the
inventory count.
The effect that the adjustment journal entries for consumables stock on hand will have on the basic accounting
equation of PNT Traders for the year ended 28 February 2019 will be …?
A. Assets will increase by R1 277; equity will increase by R1 277 and liabilities will not be affected.
B. Assets will increase by R1 047; equity will decrease by R1 047 and liabilities will not be affected.
C. Assets will decrease by R1 487; equity will decrease by R1 487 and liabilities will not be affected.
D. Assets will not be affected; equity will increase by R1 047 and liabilities will decrease by R1 047.
E. Assets will increase by R1 487; equity will increase by R1 487 and liabilities will not be affected.
Answer:
6.3.2 Consumable inventory on hand
Adjustments of consumables, for example stationery, arise when an entity purchases consumables during a financial
year and they are not completely consumed by the end of the period. Expenditure on the item becomes an expense
only when the item has in fact been consumed. The consumables on hand are classified as inventory on
hand.
Consumables stock increase the value of inventory (asset). They reduce the value of expenses and increase profit
(equity).
