Distinguish Between Cost of Goods Sold and Operating Expenses,describing the Nature

question 3

Essay

Distinguish between cost of goods sold and operating expenses,describing the nature of these two items and their placement on the income statement.

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Definitions:

Net Income

The amount of earnings left over for a business after it has paid out all expenses, including taxes, interest, and operating expenses.

Correcting Entry

An entry made in accounting records to correct a mistake made in a previous recording.

Subsidiary Ledger

A detailed ledger that contains the individual accounts related to a specific area, like accounts receivable or payable, which rolls up into the general ledger.

Compound Journal Entry

An accounting entry that involves more than two accounts, where there are multiple debits, multiple credits, or both.