An Assumption About Cost Flow Is Used

question 186

Multiple Choice

An assumption about cost flow is used

• A)because it is required by the income tax regulation.
• B)even when there is no change in the purchase price of inventory.
• C)only when the flow of goods cannot be determined.
• D)because prices usually change, and tracking which units have been sold is difficult.

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Definitions:

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by the average accounts receivable.

Sales On Account

Transactions where goods or services are sold with the understanding that payment will be made at a later date, typically recorded as accounts receivable.

Working Capital

Refers to the difference between a company's current assets and current liabilities, indicating its short-term liquidity and ability to fund its operations.

Financial Data

Information related to money matters of a company, including its revenue, expenses, profits, and losses.