Generally Accepted Accounting Principles Require That the Inventory of a Company

question 26

Multiple Choice

Generally accepted accounting principles require that the inventory of a company be reported at:

• A) Net realizable value
• B) Historical cost
• C) Lower of cost and net realizable value
• D) Replacement cost
• E) Purchase price

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Definitions:

Control Accounts

General ledger accounts that consolidate and summarize the detailed information from subsidiary ledgers.

Subsidiary Accounts

Detailed accounts linked to a general ledger account that record individual transactions related to that ledger's balance.

General Ledger Control Accounts

Accounts used to summarize the total balances of several subsidiary accounts, facilitating the reconciliation and reporting process.

Subsidiary Ledgers

Detailed ledgers that contain information supporting accounts listed in the general ledger, such as details on accounts receivable, accounts payable, etc.