The Primary Difference Between the Gross Method and the Net

question 117

Multiple Choice

The primary difference between the gross method and the net method of recording invoices is:

• A) when the invoice is paid.
• B) when the discount is recognized.
• C) the gross method is only used when there are no discounts available.
• D) the net method does not use a voucher system.

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Definitions:

Accounting Periods

Periods of time covered by financial statements, usually consisting of 12 months.

Prepaid Expenses

Payments made in advance for goods or services, which are recognized as assets on a balance sheet and expensed over time as the benefit is received.

Asset Account

An account that records the value of resources owned by an entity, which can provide future economic benefits.

Unearned Revenue

Money received by a company for goods or services yet to be provided; it is recorded as a liability until the service or product is delivered.