Question

Classify the balance sheet and income statement accounts and compute the current ratio for Shoprite Holdings Ltd. The following accounts are selected from its annual report for the fiscal year ended June 28, 2020. The amounts below are in millions of South African Rand.

a) Identify the accounts as balance sheet or income statement.

b) Compute the current ratio for Shoprite Holdings Ltd.

c) Classify the accounts as assets, liabilities, or equity.

d) Determine the net income for the fiscal year.

Answer 1

This response explains how to classify accounts, compute the current ratio, classify accounts as assets, liabilities, or equity, and determine net income.

Step-by-step explanation:

a) To classify the accounts as balance sheet or income statement, you would need to analyze the accounts and determine whether they represent assets, liabilities, equity, revenue, or expenses. Examples of balance sheet accounts include cash, accounts receivable, and inventory, while examples of income statement accounts include sales revenue and operating expenses.

b) To compute the current ratio, you would need to divide the current assets by the current liabilities. The current assets typically include cash, accounts receivable, and inventory, while the current liabilities include accounts payable and short-term debt.

c) To classify the accounts as assets, liabilities, or equity, you would need to analyze the nature of the accounts. Assets represent what a company owns, liabilities represent what a company owes, and equity represents the ownership interest in the company.

d) To determine the net income for the fiscal year, you would need to subtract the total expenses from the total revenue. This information is typically found in the income statement, where revenue represents the inflows of economic benefits and expenses represent the outflows of economic benefits.