Internal Transactions Do Not Affect the Basic Accounting Equation Because

question 129

True/False

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

---

Definitions:

Deferred Income Tax Liability

A tax obligation that a company owes but has not yet paid, resulting from temporary timing differences between its accounting earnings and its taxable income.

Potential Benefit

The future gain or return that may be obtained as a result of an investment or action.

Earnings Quality

Pertains to the degree to which reported income provides a true representation of the company's financial performance.

Source of Cash Flow

Source of Cash Flow refers to the origins of the money coming into a business, indicating how the company is earning its income.