A Credit to a Liability Account

question 39

Multiple Choice

A credit to a liability account

• A)indicates an increase in the amount owed to creditors.
• B)indicates a decrease in the amount owed to creditors.
• C)will always increase shareholders' equity.
• D)must be accompanied by a debit to an asset account.

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Definitions:

Lump-Sum Price

A single price that encompasses all components of a purchase rather than pricing each component individually.

Bankrupt Company

A company that has been declared legally insolvent and unable to pay its debts, leading to legal proceedings for asset liquidation or restructuring.

Past Due Taxes

Taxes that have not been paid by the date they are due, potentially incurring penalties and interest.

Title Search

An examination of public records to confirm a property’s legal ownership and find out what claims or liens are on the property.