Under the Perpetual Inventory System, What Is the Difference Between

question 11

Multiple Choice

Under the perpetual inventory system, what is the difference between a sales return and a sales allowance?

• A)A sales return reduces the amount receivable from the customer, but an allowance does not.
• B)A sales return involves an adjustment to Merchandise Inventory, but a sales allowance does not.
• C)A sales return requires a debit to Sales Returns and Allowances, but a sales allowance does not.
• D)A sales allowance is deducted from Sales revenue to calculate net sales, but a sales return is not.

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Definitions:

Annual Overhead Costs

The total expenses related to the operation of a business that are not directly tied to a specific product or service, accumulated yearly.

Overhead Applied

An accounting method that allocates overhead costs based on a predetermined rate to individual products or job orders.

Direct Labor Cost

The total amount of money paid to employees for the work directly associated with the production of goods or services.

Overhead Cost

Indirect expenses related to the operation of a business, such as rent, utilities, and administration costs.