The Entry to Record the Purchase of Materials on Account

question 57

Multiple Choice

The entry to record the purchase of materials on account using a job order costing system would include a:

• A) debit to materials inventory.
• B) debit to accounts payable.
• C) debit to work in process inventory.
• D) credit to materials inventory.

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Definitions:

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from total sales revenue.

Ratio

A quantitative relationship between two numbers, often used in financial analysis to assess performance, financial health, and operational efficiency.

Income Statement

A financial report that shows a company's revenues and expenses over a specified period of time, resulting in net profit or loss.

Vertical Analysis

A technique in analyzing financial statements, where each item in the primary categories of assets, liabilities, and equity on a balance sheet is expressed as a ratio of the overall category total.