Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?
A)The net method overstates accounts payable at the end of the accounting period.
B)The net method is more widely used in practice than is the gross method.
C)The gross method more accurately measures liquidity.
D)The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired.

Question

Quizplus · Accepted Answer

The net method records purchases at the net of the discount amount, and if the discount is not taken, the lost discount is recognized as an expense, highlighting inefficiency in managing payables.

Which of the Following Statements Regarding the Gross and Net