Which of the Following Statements Is Correct About Accounting for Expected

question 35

Multiple Choice

Which of the following statements is correct about accounting for expected sales returns?

• A)Expected returns are disclosed in the notes to the financial statements,but journal entries are not required.
• B)Since no inventory has yet been received,a liability,Inventory-Estimated Returns,is credited for the cost of the expected returned items.
• C)Since no cash has yet been paid,a liability,Refund Liability,is credited for the sales price of expected returns.
• D)Sales Revenue will be debited and Cost of Goods Sold will be credited for the sales price of expected returns.

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Definitions:

Administrative Expenses

Costs related to the general management and administration of a business, such as salaries of executive officers and costs of the legal department.

Net Operating Income

A financial metric that shows a company's profitability from its core business operations, excluding expenses and incomes from other sources.

Planning Budget

An estimate of future revenues and expenses that serves as a financial roadmap for an organisation.

Wages And Salaries

Compensation paid to employees for their services, where wages are often hourly rates and salaries are fixed annual amounts.