The Entry to Close the Withdrawal Account Was Entered in Reverse

question 56

Multiple Choice

The entry to close the Withdrawal account was entered in reverse - the Withdrawal account was debited and Capital credited. This error would cause

• A) Capital to be understated.
• B) net income to be overstated.
• C) net income to be understated.
• D) Withdrawals to be overstated.

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Definitions:

Earnings Quality

A measure of the reliability of a company’s earnings as an indicator of its financial health and performance.

Accounting Methods

Systems used by a company to keep track of its financial transactions and to prepare financial statements, such as cash basis or accrual basis accounting.

Bad News Earnings Surprises

Occur when a company reports lower earnings than market analysts' expectations, often leading to a negative reaction in the stock market.

Stock Returns

The gain or loss on a stock investment, typically expressed as a percentage of the investment's initial cost.