Multiple Choice
Which of the following amounts would be used to calculate net sales (net revenues) for the current year?
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4. Merchandising Operations
Net Sales
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Which of the following would be classified as a general expense on an income statement?
A
Cost of goods sold
B
Sales returns and allowances
C
Sales discounts
D
Office supplies expense
Verified step by step guidance1
Understand the classification of expenses on an income statement. Expenses are typically categorized into specific groups such as cost of goods sold, selling expenses, and general expenses.
Recognize that 'Cost of goods sold' refers to the direct costs associated with producing goods or services sold by the company. It is not classified as a general expense but rather as a separate category on the income statement.
Identify that 'Sales returns and allowances' and 'Sales discounts' are reductions in revenue rather than expenses. These are subtracted from gross sales to calculate net sales and are not classified as general expenses.
Understand that 'Office supplies expense' refers to costs incurred for supplies used in the day-to-day operations of the business, such as paper, pens, and other office materials. These are considered general expenses because they are not directly tied to production or sales activities.
Conclude that 'Office supplies expense' is the correct classification as a general expense on the income statement, based on its nature and purpose within the business operations.
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