Chapter 6, Problem 1MC

Which of the following is an example of a contra revenue account?

A. sales

B. merchandise inventory

C. sales discounts

D. accounts payable

To determine

Concept introduction:

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

$\text{Assets = Liabilities + Equity}$

To choose:

The example of a contra revenue account.

Answer to Problem 1MC

Sales Discount

Explanation of Solution

Explanation for correct answer:

Sales Discount is anexample of a contra revenue account. Hence the correct option is C.

Explanation for incorrect answers:

A. Sales accountis a simple revenue account. Hence, this option is incorrect.

B. Merchandise inventory is an asset account. Hence, this option is incorrect.

D. Accounts payable is a liability account. Hence, this option is incorrect.