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In a merchandising business, which revenue account replaces the Fees Earned account that a service business uses?
ACost of sales
BGross profit
CSales
DMerchandise inventory
Answer & Solution
Correct answer: C. Sales
1. A service business records revenue in Fees Earned.
2. A merchandiser earns revenue by selling products, recorded in the Sales account.
3. Gross profit and cost of sales are not revenue accounts; merchandise inventory is an asset.
4. Therefore Sales is the revenue account that replaces Fees Earned.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §3.1 "Introduction", p.92_