Accounting for a Merchandising Business

The difference between sales and cost of goods sold for a merchandising business is _____

• sales.

• net sales.

• net profit.

• gross profit.

The revenue cycle of a business is the process it takes for the business to spend cash to generate revenue, earn revenues, and receive cash from customers.

• True

• False

Cost of sales is the cost of the inventory that was sold during an accounting period.

• True

• False

A multi-step income statement calculates income by grouping certain revenues and expenses together and then calculating several subtotals of income.

• True

• False

_____ are subtracted from the operating income to arrive at the net income.

• Tax expense

• Interest expenses

• Both "Tax expenses" and "Interest expenses"

• Neither "Tax expenses" and "Interest expenses"

Multiple-step income statements show:

• gross profit but not net income.

• neither gross profit nor net income.

• gross profit but not cost of merchandise sold.

• gross profit, COGS, income from operations, and net income.

On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

• True

• False

Inventory shrinkage will increase Inventory.

• True

• False

Inventory shrinkage is recorded when

• merchandise is returned by a buyer.

• merchandise purchased from a seller is incomplete or short.

• merchandise is returned to a seller.

• there is a difference between a physical count of inventory and inventory records.

The cost of goods sold is subtracted from sales to arrive at _____.

• gross profit.

• fees earned.

• net sales.

• operating income.