If Accounts Payable Have Increased During a Period

question 85

Multiple Choice

If accounts payable have increased during a period,

• A)revenues on an accrual basis are less than revenues on a cash basis.
• B)expenses on an accrual basis are less than expenses on a cash basis.
• C)expenses on an accrual basis are greater than expenses on a cash basis.
• D)expenses on an accrual basis are the same as expenses on a cash basis.

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Definitions:

Acid-Test Ratio

is a financial metric that assesses a company's ability to pay off its current liabilities with its most liquid assets, excluding inventory.

Balance Sheet

An accounting document summarizing assets, liabilities, and owners' equity of a business on a specific date.

Sales On Account

Transactions where goods are sold and payment is deferred, allowing the buyer to pay at a later date, typically generating accounts receivable for the seller.

Average Sale Period

The average time it takes for a company to sell its inventory, often used to assess the efficiency of sales operations.