Identify Which of the Following Statements Is True

question 18

Multiple Choice

Identify which of the following statements is true.

• A) Accrued compensation not paid within three and one- half months after the close of the corporation tax year is deducted in the year following the accrual.
• B) Accrued compensation that is deductible in the year of accrual is considered to be part of an IRS deferred compensation plan.
• C) A corporation that accrues compensation payable to an employee must pay the amount within two and one- half months after the close of the taxable year to deduct the amount in the year of the accrual.
• D) All of the above are false.

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Definitions:

Asset Account

An account that represents a resource owned by a business from which future economic benefits are expected.

Expense Account

An account used to record expenses incurred by a business, which are then used to reduce income on the profit and loss statement.

Understated

Understated means that a financial amount has been reported or recorded as less than its actual or true value.

Posting

The process of recording financial transactions in the accounting ledger from the journal.