Chapter 6, Problem 1QC

To determine

To identify: The true statement from the given statements

Answer to Problem 1QC

Option (a) Gross profit is the excess of sales revenue over cost of goods sold.

Explanation of Solution

• Gross profit is the excess of sales revenue over cost of goods sold is the true statement. Gross profit is calculated by using following formula

$\text{Gross profit = Sales Revenue – Cost of Goods Sold}$

• Purchase returns and allowances decrease the net amount of purchases.
• The sales account is used to record both cash sales and sales on account.
• A service company provides the services to the customers.

Hence, option (a) Gross profit is the excess of sales revenue over cost of goods sold is the true statement.