A Debit to an Asset Account Was Posted as a Debit

question 114

Multiple Choice

A debit to an asset account was posted as a debit to an expense account. This error would cause:

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

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Definitions:

Contractual Agreement

A legally binding contract between two or more parties outlining terms and conditions of an agreement.

Par Value

The nominal value of a bond or stock as stated by the issuer, unrelated to its market value.

Cash Flows

The total amount of money being transferred into and out of a business, principally involving operating, investing, and financing activities.

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as an income stream for retirees.