With regards to the income statement for a retailer, which of the following statements is correct?

Question

Quizplus · Accepted Answer

Under the periodic system, freight inwards is added to the cost of purchases. In contrast, under the perpetual system, freight inwards is added to the inventory account. The cost of sales section may differ between the periodic and perpetual systems because the periodic system requires a physical count of inventory at the end of the period to determine the cost of goods sold. Interest revenue is not added to sales revenue when calculating gross profit because it does not relate to the retailer's core operating activities. Expenses are typically classified into categories such as selling, general and administrative, or research and development, rather than groupings such as selling expenses, distribution expenses, and administrative and finance expenses.

With Regards to the Income Statement for a Retailer, Which