When the Net Price Method Is Used to Record Credit

question 121

Multiple Choice

When the net price method is used to record credit sales, the sales discounts not taken account is reported as an)

• A) addition to sales returns and allowances on the income statement.
• B) deduction from gross sales on the income statement.
• C) deduction from selling expenses on the income statement.
• D) addition to sales revenue on the income statement.

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Definitions:

Comparative Financial Statements

Financial statements that present financial information for different periods or dates side by side to facilitate comparison.

Corporations

Are legal entities that are separate and distinct from their owners. They have the ability to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.

Vertical Analysis

A method of financial statement analysis in which each entry is listed as a percentage of another item, typically used for income statements where entries are compared to total sales.

Total Assets

The sum of all resources owned by a company, valued according to accounting principles, including both current and non-current assets.