Asked by Writes Wanderlust on Jun 17, 2024
Verified
With respect to the income statement
A) contra-revenue accounts do not appear on the income statement.
B) sales discounts increase the amount of sales.
C) contra-revenue accounts increase the amount of operating expenses.
D) sales discounts are included in the calculation of gross profit.
Contra-Revenue Accounts
Accounts used to record reductions in gross revenue, such as sales returns, allowances, and discounts, to arrive at net revenue.
Gross Profit
The financial metric calculated by subtracting the cost of goods sold from total sales revenue, representing the efficiency of a company in managing its production and sales.
- Investigate how sales transactions influence the acknowledgment of revenue and the computation of net sales.
- Identify the components and structure of income statements for merchandising companies.
Verified Answer
KM
Kaira MarinezJun 20, 2024
Final Answer :
D
Explanation :
Sales discounts are subtracted from gross sales to calculate net sales, which is used in the calculation of gross profit. Contra-revenue accounts like sales discounts and returns reduce the total revenue figure on the income statement, rather than increasing sales or operating expenses.
Learning Objectives
- Investigate how sales transactions influence the acknowledgment of revenue and the computation of net sales.
- Identify the components and structure of income statements for merchandising companies.