Which Statement Best Describes the Net Method of Accounting for Cash

question 56

Multiple Choice

Which statement best describes the net method of accounting for cash discounts?

• A)Records receivables at their face value.
• B)Records any discounts forfeited as income.
• C)Records any discounts taken as an expense.
• D)Records any discounts taken as a reduction in revenue.

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Definitions:

Depreciation

The process of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, and obsolescence.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired, reflecting its use and wear over time.

Investing Activity

A category in financial statements that represents cash flows related to the purchase or sale of long-term assets or investments.

Statement Of Cash Flows

A financial statement that highlights the major activities that impact cash flows and, hence, affect the overall cash balance.