ZJ Purchases Raw Materials on Credit from BD for £5,000

question 20

Multiple Choice

ZJ purchases raw materials on credit from BD for £5,000. However, when they arrive, half the raw materials turn out to be unsuitable so ZJ returns these goods to BD. Which one of the following is the correct double entry to record the £2,500 goods returned in ZJ's books of account?

• A) Debit purchases £2,500, Credit trade payables £2,500
• B) Debit purchases £2,500, Credit cash £2,500
• C) Debit trade payables £2,500, Credit purchases £2,500
• D) Debit cash £2,500, Credit purchases £2,500

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Definitions:

Cost-plus Pricing

A pricing strategy where the selling price is determined by adding a specific markup to a product's cost.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the investment's cost.

Markup

A markup on the base cost of goods intended to cover the expenses of operation and ensure a profit margin.

Absorption Costing

This financial documentation style accounts for all costs arising from manufacturing activities, encompassing direct materials, direct labor, and all overhead costs, both variable and fixed, in the product cost calculation.