The Effect of an Adjustment Is

question 25

Multiple Choice

The effect of an adjustment is:

• A)to correct an entry that was not in balance.
• B)to increase the accuracy of the financial statements.
• C)to record cash receipts and payments not previously recorded.
• D)to close the books.

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers for sales made on credit.

Charge Customer

The process of recording or billing a customer for goods sold or services rendered, reflecting an obligation for payment.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with quick assets, such as cash, marketable securities, and accounts receivable, without selling inventory.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets (cash, marketable securities, and receivables).