What Is the Effect on the Statement of Financial Position

question 14

Multiple Choice

What is the effect on the statement of financial position when the business buys inventory on credit?

• A)Increase asset inventory; increase liability creditor.
• B)Increase asset inventory; increase equity.
• C)Decrease asset inventory; decrease liability creditor.
• D)Decrease asset inventory; increase liability creditor.

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Definitions:

Transportation Costs

Expenses incurred in the process of moving goods from one location to another, including freight, shipping, and handling fees.

Inventory Carrying Cost

The total cost associated with holding and storing unsold goods, including storage, insurance, and opportunity costs.

Periodic Inventory Systems

An inventory system that updates inventory levels at specified intervals, requiring physical counts to determine cost of goods sold.

Management Control

Management control refers to the processes and procedures implemented by an organization's management to ensure that its resources are being used effectively and efficiently toward the achievement of its objectives.