Which of the Following Transactions Would Cause an Asset to Decrease

question 117

Multiple Choice

Which of the following transactions would cause an asset to decrease and the Owner's Equity to decrease?

• A) The owner invested cash in the business.
• B) The business incurred an Expense on credit.
• C) The business bought supplies on account.
• D) None of the above.

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Definitions:

Indirect Method

A method used in accounting to calculate cash flows from operating activities, adjusting net income by changes in non-cash accounts.

Direct Method

A technique used in cash flow statements to present cash activities directly related to operating activities.

Investing Adjustments

Adjustments made in the accounting records related to investments in securities or fixed assets to reflect their fair values as of the financial statement date.

Indirect Method

An accounting practice used to prepare the cash flow statement, where net income is adjusted for non-cash transactions and changes in working capital to calculate cash flow from operating activities.