Which of the Following Is Not a Basic Assumption of the Gross

question 40

Multiple Choice

Which of the following is not a basic assumption of the gross profit method?

• A) The beginning inventory plus the purchases equal total goods to be accounted for.
• B) Goods not sold must be on hand.
• C) If the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result is the amount of inventory on hand.
• D) The total amount of purchases and the total amount of sales remain relatively unchanged from the comparable previous period.

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Definitions:

IFRS

International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that guide how financial events are reported in financial statements globally.

GAAP

Generally Accepted Accounting Principles, standard guidelines and procedures for financial accounting and reporting in the U.S.

Indirect Method

A method used in cash flow statements where net income is adjusted for items that affected reported net income but did not result in an actual cash flow.

Direct Method

A cash flow statement presentation that lists actual cash inflows and outflows from operating activities.