John Taxman is a farmer growing and supplying flowers to local market. He purchases large quantities of fertilizer from MGI (Pty) Ltd. John and MGI have come to some special arrangement in respect of the delivery of fertilizer, which suits both of them. A contract is drawn up near the end of each tax year (1 February) which determines the supply of fertilizer for the following year from March to February. The terms of the contract are as follows: The fertilizer is delivered on a monthly basis to John. MGI issues one invoice for all the deliveries to be made during the following year one month prior to Johns year end i.e. an invoice is issued on 1 February 2020 in respect of supplies to be made in the period March 2020 to February 2021

You are required to: 3.1. Define gross income. (3 Marks)

3.2. Discuss what will be included in MGIs gross income for the year of assessment ended 29 February 2020 in the following circumstances:

3.2.1. In respect of deliveries which will take place during the period March 2020 to February 2021, MGI issued an invoice on 20 February 2020. (20 Marks) 3.2.2. The invoice for March 2020 to February 2021 supplies is issued on 1 February 2020, and John pays the amount in full on 10 February 2020. (7 Marks)

Mention cases where applicable and the actual time of accruals. (Ignore VAT.)