Question

Which of the following statements is true?

a) The revenues and cost of goods sold should be netted together and reported as a single line item.
b) All revenue sources should be added together and shown as one line item and all cost of goods sold should be added together and shown as one line item.
c) Each revenue line should be shown separately with a corresponding cost of goods sold line for each revenue source.
d) Each revenue source should be reported separately, but all cost of goods sold should be added together and reported as a single amount.

Answer 1

The true statement is that each revenue line should be shown separately with a corresponding cost of goods sold line for each revenue source.

Step-by-step explanation:

The statement that is true is c) Each revenue line should be shown separately with a corresponding cost of goods sold line for each revenue source.

When preparing financial statements, it is important to provide a clear and detailed breakdown of the revenue and cost of goods sold. Each revenue source should be reported separately to give a comprehensive view of the different income streams of the business. Similarly, each revenue source should have a corresponding cost of goods sold line to accurately reflect the expenses related to each revenue source.