Asked by Aiden Kravitz on Jun 29, 2024
Verified
Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?
A) The net method overstates accounts payable at the end of the accounting period.
B) The net method is more widely used in practice than is the gross method.
C) The gross method more accurately measures liquidity.
D) The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired.
Gross Method
An accounting practice where purchases are recorded at the total invoice cost without deducting any purchase discounts.
Net Method
An accounting approach where discounts for early payment are assumed to be taken and thus are deducted from the cost of purchases.
Accounts Payable
Short-term liabilities representing amounts owed to suppliers or creditors for goods and services received.
- Understand the principles associated with the recording and disclosure of liabilities.
Verified Answer
Learning Objectives
- Understand the principles associated with the recording and disclosure of liabilities.
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