With Regards to the Income Statement for a Retailer, Which

question 22

Multiple Choice

With regards to the income statement for a retailer, which of the following is true?

• A) The cost of sales section is identical no matter whether the periodic or perpetual system of inventory recording is used.
• B) Rent revenue is added to sales revenue to calculate gross profit.
• C) Under the periodic system freight inwards is added to the cost of purchases.
• D) Expenses are classified into the groupings selling expenses, distribution expenses and administrative and finance expenses.

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Definitions:

Relevance

The importance or usefulness of information for decision-making purposes in various contexts.

Decision Usefulness

The quality of financial information that makes it valuable for users in making informed decisions.

Revenue Recognition

The accounting principle that determines the specific conditions under which revenue is recognized as earned.

Economic Reality

The concept that financial statements and actions should reflect the true economic substance of business transactions rather than just their legal form.