How Are Drawing Accounts Used

question 78

Multiple Choice

How are drawing accounts used?

• A)to provide a steadier income for salespeople who work on commission
• B)to motivate employees who receive a straight salary
• C)to attract salespeople who are willing to sell low-margin items
• D)to reward the best salespeople in each department
• E)to pay employees for performing customer service activities

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Definitions:

LIFO Reserve

The difference between the cost of inventory calculated under the Last In, First Out (LIFO) method and another inventory costing method like First In, First Out (FIFO).

Deferred Taxes

Taxes that are owed but not yet paid, arising from temporary differences between accounting and tax treatments of income and expenses.

Retrospective Adjustment

A change applied to the accounting records of prior periods to correct an error or implement a change in accounting principle.

Cumulative Effect

The aggregate impact of an accounting change or policy on a company's financial statements over time.