What Effect Does "Recognizing Revenue at the End of the Accounting

question 102

Multiple Choice

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for the insurance company?

• A)Assets increase and liabilities decrease.
• B)Assets increase and Stockholders' equity increases.
• C)Assets decrease and liabilities decrease.
• D)Liabilities decrease and Stockholders' equity increases.

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Definitions:

Short-Term Debts

Liabilities due within a short period, typically one year, used to fund immediate operational needs or current liabilities.

Debt Financing

The process of raising capital through borrowing money, often via loans or bond issuance.

Accounts Receivable Turnover

A financial metric that measures how effectively a company collects debts from its customers over a period, indicating the efficiency of credit policies and collection efforts.

Net Credit Sales

The net sales of a company, calculated by subtracting returns, discounts, and allowances for damaged or missing merchandise from the total sales.