A Debit to a Liability Account Was Posted to the Capital

question 11

Multiple Choice

A debit to a liability account was posted to the Capital account. This error would cause

• A) assets to be overstated.
• B) liabilities to be overstated.
• C) Capital to be overstated.
• D) None of the above are correct.

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Definitions:

Fixed Costs

Costs that do not change with the level of output or sales, such as rent, salaries, and insurance premiums.

Cash Break-even Point

The point at which a business's cash inflows equal its cash outflows, excluding financing.

Degree of Operating Leverage

A ratio that quantifies the sensitivity of a company's operating income to its sales, demonstrating the impact of fixed and variable costs on profitability.

Fixed Costs

Fixed costs that stay the same no matter how much is manufactured or sold, including expenses for rent, employee salaries, and insurance charges.