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ACCA Knowledge Level Merchandising Business Basics — practice questions

Explore 2 free Merchandising Business Basics questions in ACCA Knowledge Level Financial Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Merchandising Business Basics questions and exercises with answers

Showing questions 1–2 of 2.

A retailer holds glass cleaner that it uses to wipe down its own checkout counters. How should this item be classified?Read the answer and worked solution →In a merchandising business, which revenue account replaces the Fees Earned account that a service business uses?Read the answer and worked solution →

Worked practice questions

A retailer holds glass cleaner that it uses to wipe down its own checkout counters. How should this item be classified?

  1. As equipment
  2. As inventory
  3. As a supply
  4. As cost of sales
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Correct answer: C. As a supply

1. Inventory is items purchased for resale to customers. 2. Supplies are items purchased to be used in operating the business, not to be sold. 3. The glass cleaner is used to keep counters clean, not resold, so it is a supply. 4. It is not equipment (a fixed asset used in operations) and not cost of sales (an expense for goods already sold). _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.1 "Introduction", p.92_

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In a merchandising business, which revenue account replaces the Fees Earned account that a service business uses?

  1. Cost of sales
  2. Gross profit
  3. Sales
  4. Merchandise inventory
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Correct answer: C. Sales

1. A service business records revenue in Fees Earned. 2. A merchandiser earns revenue by selling products, recorded in the Sales account. 3. Gross profit and cost of sales are not revenue accounts; merchandise inventory is an asset. 4. Therefore Sales is the revenue account that replaces Fees Earned. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.1 "Introduction", p.92_

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More Financial Accounting topics

Ratio AnalysisStatement of Cash FlowsThe Mechanics of the Accounting ProcessInventory ValuationAsset, Liability and Equity AccountsFinancial StatementsAccounting EquationBonds Payable