Which of the Following Is the Best Definition of Shortage

question 330

Multiple Choice

Which of the following is the best definition of shortage costs?

• A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
• B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
• C) The time period between the acquisition of inventory and when cash is collected from receivables.
• D) Loan negotiated with banks for day-to-day operations.
• E) Costs that fall with increases in the level of investment in current assets.

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Definitions:

Gross Method

An accounting practice where purchases are recorded at their full invoice price without deducting discounts that may later be received.

Merchandise

Goods that are bought and sold within a retail or wholesale environment, comprising the primary source of revenue for merchandising companies.

Perpetual Inventory System

An approach to inventory accounting that directly records transactions of inventory sales or purchases through the use of computerized point-of-sale and enterprise asset management software.

Gross Method

An accounting method for recording purchases at the gross invoice amount before any trade discounts are deducted.