Which of the Following Is a True Statement for a Company

question 107

Multiple Choice

Which of the following is a true statement for a company using a perpetual inventory system?

• A)Purchase returns and allowances is a contra-account to revenue.
• B)Sales returns and allowances is a contra-account to revenue.
• C)Purchase returns and allowances is a contra-account to accounts receivable.
• D)Sales returns and allowances is a contra-account to inventory.

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Definitions:

Responsibility Accounting

A system of accounting that segments financial information by areas of responsibility, allowing managers to be held accountable for their areas' financial performance.

Managers

Managers are individuals in an organization responsible for directing and overseeing the work of a group of people towards the achievement of goals.

Residual Income

The income that exceeds the minimum rate of return, often used as a measure of the performance of investment centers within organizations.

Net Operating Income

Profit generated from a company's normal business operations, excluding deductions of interest and taxes.