When merchandisers and manufacturers prepare income statements for their annual reports to shareholders, they usually begin the statement with net sales. For internal reporting purposes, however, the income state-ments will show gross sales and the related contra-revenue accounts of sales returns and allowances and sales discounts. What might explain this difference in the financial information disclosed to external parties and management? Do you consider the more limited disclosure
When merchandisers and manufacturers prepare income statements for their annual reports to shareholders, they usually begin the statement with net sales. For internal reporting purposes, however, the income state-ments will show gross sales and the related contra-revenue accounts of sales returns and allowances and sales discounts. What might explain this difference in the financial information disclosed to external parties and management? Do you consider the more limited disclosure
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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When merchandisers and manufacturers prepare income statements for their annual reports to shareholders, they usually begin the statement with net sales. For internal reporting purposes, however, the income state-ments will show gross sales and the related contra-revenue accounts of sales returns and allowances and sales discounts. What might explain this difference in the financial information disclosed to external parties and management? Do you consider the more limited disclosure in the annual reports to be inconsistent with the full disclosure principle? Briefly explain your point of view
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