In the Income Statement for a Retailer It Is True

question 5

Multiple Choice

In the Income Statement for a retailer it is true that:

• A)The cost of sales section is identical no matter whether the periodic or perpetual system of inventory recording is used
• B)Rent revenue is added to sales revenue to calculate gross profit
• C)Under the periodic system freight inwards is added to the cost of purchases
• D)Expenses are classified into the groupings Selling Expenses; Distribution Expenses and Administrative and Finance expenses.

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Definitions:

Quick Assets

Highly liquid assets that can be quickly converted into cash without losing value, often including cash, marketable securities, and accounts receivable.

Current Assets

Items of value that are likely to be turned into cash, sold off, or used up within the span of one year or the length of the operating cycle, whichever period extends further.

Current Liabilities

Obligations that a company needs to pay off within one year or within its operating cycle, whichever is longer.

Credit Terms

Conditions under which a seller extends credit to a buyer, detailing the repayment time frame and any interest or penalties for late payment.