How Are "Purchase Discounts Lost" Reported in the Financial Statements

question 27

Multiple Choice

How are "purchase discounts lost" reported in the financial statements?

• A)As a reduction of sales.
• B)As an increase in liability.
• C)As an increase in inventory.
• D)As an expense item.

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Definitions:

Debit Balance

A financial situation where the total debits exceed the total credits in an account, resulting in a positive account balance.

Inventory

Assets held for sale in the ordinary course of business, as well as materials and supplies used in producing goods available for sale.

Chart of Accounts

The Chart of Accounts is an organized list of all accounts in the general ledger of a company, used for recording transactions and building financial statements, categorized by assets, liabilities, equity, revenues, and expenses.

Merchandising Business

A type of business that purchases finished products and sells them to consumers, making a profit from the markup.