Either the Gross Method or Net Method May Be Used

question 188

True/False

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

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Definitions:

Accounts Receivable

Accounts receivable are the amounts owed to a company by its customers for goods or services delivered but not yet paid for.

Net Sales

Revenue from sales transactions after deducting returns, allowances for damaged or missing goods, and discounts.

Working Capital Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets, indicating liquidity.

Current Liabilities

Short-term financial obligations due within one year or within a company's operating cycle, whichever is longer.