Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

In the context of cost of goods sold and inventory systems, a large percentage of the revenue of most firms is spent on which function?

Administrative salaries

Advertising and marketing

Purchasing or producing inventory

Research and development

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Verified step by step guidance

Understand the context of the problem: The question is asking about the function where a large percentage of revenue is spent in relation to cost of goods sold (COGS) and inventory systems. This is a key concept in financial accounting, as COGS represents the direct costs attributable to the production of goods sold by a company.

Recognize that COGS is closely tied to inventory systems. Inventory systems track the costs associated with purchasing or producing inventory, which is then sold to generate revenue. This includes raw materials, labor, and overhead costs.

Eliminate unrelated functions: Administrative salaries, advertising and marketing, and research and development are important business functions but are not directly tied to the cost of goods sold or inventory systems. These functions are typically classified as operating expenses rather than direct costs.

Focus on the correct function: Purchasing or producing inventory is the function where a large percentage of revenue is spent in relation to COGS and inventory systems. This includes acquiring raw materials, manufacturing products, and managing inventory levels to meet customer demand.

Conclude that understanding the relationship between COGS and inventory systems is essential for financial accounting, as it impacts profitability, pricing strategies, and financial reporting.