The Collection of Cash from a Customer on Account Would

question 26

Multiple Choice

The collection of cash from a customer on account would:

• A) have no effect on net income or shareholders' equity
• B) increase assets and decrease liabilities
• C) increase assets and increase net income
• D) increase net income and shareholders' equity

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Definitions:

Expensing R&D

The process of charging research and development costs as expenses in the period they are incurred rather than capitalizing them.

Conservatism Principle

an accounting principle that guides companies to report lower values for assets and revenues, higher values for liabilities and expenses when in doubt, ensuring that financial statements do not overstate the company’s financial position.

Impairment Loss

The amount by which the carrying amount of an asset exceeds its recoverable amount, leading to a decrease in the asset's value on the balance sheet.

Carrying Value

The book value of assets and liabilities recorded on the financial statements, often differing from market value.