Providing Services to a Credit Customer Was Recorded with a Debit

question 92

Multiple Choice

Providing services to a credit customer was recorded with a debit to Cash and a credit to Retained Earnings.This error would cause:

• A)the period's net income to be understated.
• B)the period end liabilities to be understated.
• C)the total period end stockholders' equity to be understated.
• D)the period's net income to be overstated.

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Definitions:

Return on Total Assets

A financial ratio that measures a company's efficiency in generating profit from its assets, calculated by dividing net income by total assets.

Net Income

Refers to the profit that remains after all operating expenses, interest, taxes, and preferred stock dividends have been deducted from total revenues.

Average Total Assets

A financial metric calculated by taking the average of a company’s total assets at the beginning and the end of an accounting period to assess overall asset efficiency.

Total Asset Turnover

A financial ratio that measures a company’s efficiency in using its assets to generate revenue.