Insurance expense p5000 prepaid insurance p5000

Insurance Expense P5,000
Prepaid Insurance
P5,000
Preparing Cost of Goods Sold
The adjusted trial balance allows the accountant to create the basic Financial
Statements: Statement of Comprehensive Income or Income Statement, Statement of Changes
in Equity, Statement of Financial Position or Balance Sheet and Statement of Cash Flows
including notes to financial statements.
The cost of goods sold and the gross profit form part of the income statement which
reports the business’ performance from its operations over a period of time. This statement begins
with
\

sales which provide the regular operating revenues for the company Cost of goods sold which
represents the cost of the goods (purchase, price, and other cost which form part of inventory)
sold during the period is then deducted from sales to arrive at the gross profit, to wit:
Gross Profit = Sales – Cost of Goods Sold
IV. WE’RE ON OUR WAY
MULTIPLE
CHOICE.
Directions: Choose the letter of the BEST answer.
1.
These are goods purchased that remains unsold at the end of the accounting period.
2.
It is a reduction from the selling price in order to promote sale of the merchandise.
3.
The type of business that buys and sells goods.
4.
In this inventory system, the business immediately adjusts the inventory account every
time there is purchase and sale transaction.
A. Perpetual B. Periodic C. Merchandising D. Manufacturing