Multiple Choice
Which type of accounting is primarily concerned with recording and reporting transactions such as '90-days-same-as-cash' deals used to encourage the purchase of higher-priced items?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Clark’s Cleaners is a housekeeping service. The company’s expenses include the cost of cleaning supplies, wages for employees, and utility bills. These expenses are best classified as:
A
Financing expenses
B
Non-operating expenses
C
Operating expenses
D
Capital expenditures
Verified step by step guidance1
Understand the definition of operating expenses: These are costs incurred during the normal course of business operations, such as wages, utilities, and supplies.
Review the nature of Clark’s Cleaners’ expenses: Cleaning supplies, wages for employees, and utility bills are all directly related to the company’s primary business activity of providing housekeeping services.
Differentiate operating expenses from other types of expenses: Financing expenses are related to borrowing costs, non-operating expenses are unrelated to core business activities, and capital expenditures are investments in long-term assets.
Classify the expenses: Since cleaning supplies, wages, and utility bills are necessary for the day-to-day operations of Clark’s Cleaners, they fall under operating expenses.
Conclude that these expenses are correctly classified as operating expenses because they are essential for the company’s housekeeping service operations.
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