Which term describes the amount paid by a business for merchandise?

• A. Cost
• B. Supplies
• C. Bad Debts
• D. Transaction

Answer: (A)

The main idea here is that the amount paid for merchandise is called its cost. In accounting, cost represents the price of the goods plus any other costs needed to get them ready for sale, such as freight-in, insurance, and handling. Knowing the cost helps determine the value of inventory on the balance sheet and the cost of goods sold when those items are sold.

Supplies refers to items used in daily operations rather than inventory intended for resale. Bad debts are amounts you don’t expect to collect from customers, which is an expense topic rather than the price paid for merchandise. A transaction is any business activity, not a specific term for the amount paid for goods.