Which of the following statements regarding the gross and net methods for trade accounts payable is false?
A) The net method overstates accounts payable at the end of the accounting period.
B) The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired.
C) The gross method is more widely used in practice.
D) The net method more accurately measures liquidity.

Question

Quizplus · Accepted Answer

The statement that the net method overstates accounts payable at the end of the accounting period is false. In fact, it understates accounts payable because it only records the amount that will be paid after taking advantage of any available purchase discounts.

Which of the Following Statements Regarding the Gross and Net