Which of the Following Statements Regarding the Gross and Net

question 54

Multiple Choice

Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?

• A)The net method overstates accounts payable at the end of the accounting period.
• B)The net method is more widely used in practice than is the gross method.
• C)The gross method more accurately measures liquidity.
• D)The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired.

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Definitions:

Processing Errors

Mistakes that occur during the processing of data, transactions, or operational tasks, which can lead to inaccurate results or outputs.

Regular Audits

Periodic and systematic examinations of financial records and operations to ensure accuracy, compliance, and fairness.

Separation of Duties

A key internal control that involves dividing responsibilities among different people to reduce the risk of error or fraud.

Fraud

Dishonest or illegal trickery used to achieve financial or personal advantages.