The Return of Merchandise by a Credit Customer Was Recorded

question 16

Multiple Choice

The return of merchandise by a credit customer was recorded with a debit to Accounts Payable and a credit to Accounts Receivable and the subsidiary ledger. This error will cause

• A) the net income for the period to be overstated.
• B) the net income for the period to be understated.
• C) the control account to not agree with the subsidiary ledger.
• D) the assets to be overstated.

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Definitions:

Effective Rate

The effective rate, also known as the annual equivalent rate, is the interest rate on an investment or loan that accounts for the effects of compounding over a given period.

APR

Annual Percentage Rate, which is the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, credit card, etc.

Rate Of Return

The appreciation or depreciation of an investment over a set period, quantified as a percentage of the investment's starting value.

Cash Flows

The net amount of cash being transferred into and out of a business, reflecting operational, investing, and financial activities.