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The expense that represents a piece of equipment's normal wear and tear over time is called what?

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Depreciation expense

Amortization expense

Administrative expense

Cost of goods sold

Depreciation expense. Depreciation refers to a tangible asset's gradual loss of value over time.

Under accrual accounting, a company records an expense when _______.

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The company delivers cash payment to a supplier

The supplier receives cash payment from a company

The company has incurred it

The company has incurred it. A company records an expense when it is incurred. Under accrual accounting, expenses are not necessarily incurred when cash is spent.

The expenses directly incurred in creating the goods or services that a company sells are called _______.

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Cost of sales

Cost of goods sold

Cost of services

All of the above

All of the above. These are all different terms used for these expenses.

A company's revenue may also be called by what other word?

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Sales

Gross profit

Retained earnings

Any of the above

Sales. For accounting purposes, it usually is called revenue.

Which of the following expenses is subtracted from sales when calculating operating profit?

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Interest

SGA

Taxes

SGA. Operating profit is sometimes called EBIT, or earnings before interest and taxes. Cost of goods sold and SGA are two of the main expenses subtracted from revenue in calculating operating profit.

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