Regarding the Cost of Goods sold account, which of the following statements is i

Question

Regarding the Cost of Goods sold account, which of the following statements is incorrect?
A) In a perpetual inventory system, the Cost of Goods Sold account keeps a current balance through the period B) Cost of Goods Sold represents the Cost of inventory that has been sold to customers C) Cost of Goods Sold is a contra revenue account D) Cost of Goods Sold is based on the company’s Cost, not the retail price Regarding the Cost of Goods sold account, which of the following statements is incorrect?
A) In a perpetual inventory system, the Cost of Goods Sold account keeps a current balance through the period B) Cost of Goods Sold represents the Cost of inventory that has been sold to customers C) Cost of Goods Sold is a contra revenue account D) Cost of Goods Sold is based on the company’s Cost, not the retail price
A) In a perpetual inventory system, the Cost of Goods Sold account keeps a current balance through the period B) Cost of Goods Sold represents the Cost of inventory that has been sold to customers C) Cost of Goods Sold is a contra revenue account D) Cost of Goods Sold is based on the company’s Cost, not the retail price

Explanation / Answer

C) Cost of Goods Sold is a contra revenue account - Incorrect

Explanation : Contra revenue account is a deduction from gross revenue to arrive at net revenue from the business operations. Generally sales return , sales allowance & discount are regarded as items of Contra revenue account. Whereas COGS is seperate line item in Income statement. COGS is an Expense Account & not Contra revenue account.

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