Which of the Following Statements Regarding the Gross and Net

question 54

Multiple Choice

Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?

• A)The net method overstates accounts payable at the end of the accounting period.
• B)The net method is more widely used in practice than is the gross method.
• C)The gross method more accurately measures liquidity.
• D)The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired.

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Definitions:

Compensation Rates

The standard amounts of money or benefits paid to employees in exchange for their labor or services.

Pay Secrecy

Policies or practices that discourage or prohibit employees from discussing their salaries with co-workers.

Wage and Salary Administration

The process of organizing and managing employee compensation based on job roles, experience, and performance.

Pay Inversion

A situation where a more junior employee ends up making more money than their more senior counterparts, often due to market rate changes or hiring practices.