Which of the Following Is True of Service Companies

question 71

Multiple Choice

Which of the following is true of service companies?

• A) All costs of service companies are product costs.
• B) Service companies modify and resell products they buy from manufacturers.
• C) Revenues of service companies are only recorded on cash receipt.
• D) Service companies carry no inventories of products for sale.

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Definitions:

Net Cash Flows

The difference between cash inflows and outflows from operating, investing, and financing activities during a specific period.

Cash Collection

The process of gathering and processing payments received from customers.

Prior Year

Prior year refers to the last completed fiscal or calendar year used as a reference point in financial and operational analysis.

Current GAAP

The most up-to-date set of Generally Accepted Accounting Principles that companies are required to follow when preparing financial statements.