The Sales Returns and Allowances Account Does NOT Provide Information

question 21

Multiple Choice

The Sales Returns and Allowances account does NOT provide information to management about

• A) possible inferior merchandise.
• B) the percentage of credit sales versus cash sales.
• C) inefficiencies in filling orders.
• D) errors in overbilling customers.

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Definitions:

Depreciation Expenses

The systematic allocation of the cost of a tangible asset over its useful life.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Accounts Payable

Liabilities of a firm that are due to be paid to creditors within a short period of time, usually within a year.

Net Income

The total revenue minus total expenses, indicating the profit made by a business over a period.