If a Company Employs the Gross Method of Recording Accounts

question 43

Multiple Choice

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as ________.

• A) sales discounts forfeited on the income statement
• B) an item of "other income and expense" on the income statement
• C) an increase to sales revenue on the income statement
• D) a deduction from sales revenue on the income statement

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Definitions:

Salary Allowances

Benefits or extra compensation provided to employees on top of their regular salary, often for specific purposes such as transportation, housing, or meals.

Original Investments

The initial capital outlay for an investment, not including any subsequent costs incurred or income earned from the investment.

Net Loss

The amount by which total expenses exceed total revenues in a business, indicating a financial loss over a specific period.

Salary Allowances

Pre-determined sums paid to employees above their regular salary to cover specific needs or expenses, such as travel or housing.