The Treating of Repayment of Debt as an Expense in the Cash

question 28

Multiple Choice

The treating of repayment of debt as an expense in the cash flow statement is an example of:

• A)The blurring or elimination of the distinctions between assets and liabilities,income and expenses,and cash inflows and outflows.
• B)The underestimation of expenses.
• C)The overestimation of expenses.
• D)None of the above.
• E)Both a and b above.

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, preparing the books for the next period.

Adjusting Entries

Journal entries made in accounting at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Unadjusted Trial Balance

A listing of all accounts in the general ledger with their balances before any adjustments are made for the end of the accounting period.

Drawing Account

A drawing account is used to track the money or goods withdrawn by the business owner for personal use from the business.