A Credit to an Asset Account Was Posted as a Credit

question 105

Multiple Choice

A credit to an asset account was posted as a credit to the Capital account.This error would cause:

• A)assets to be overstated.
• B)liabilities to be overstated.
• C)capital to be understated.
• D)Both A and C are correct.

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Definitions:

Excess Fair Value

The amount by which the fair value of an asset exceeds the cost of acquisition or the carrying amount in the company's financial statements.

Investment Account

A financial account held at a financial institution that holds securities, shares, and other investment assets for the investor.

Equity Method

An accounting technique used to record investments in other companies, where the investment's value is adjusted based on the investor's share of the investee's profits or losses.

Acquisition Combination

The process of uniting two or more entities into one, typically through the purchase of one by another, and integrating their operations.