Which of the following statements is correct?
A) A service company does not have Cost of Goods Sold account because it does not sell goods.
B) A service company does have a Cost of Goods Sold account because it sells a service.
C) A merchandising company does not have a Cost of Goods Sold account because it does not sell goods.
D) A merchandising company does not have a Cost of Goods Sold account because it only sells a service.

Question

Quizplus · Accepted Answer

Service companies do not have a Cost of Goods Sold (COGS) account because they do not sell physical goods, but rather provide services. COGS is associated with companies that sell physical products.

Which of the Following Statements Is Correct