Which Statement Is Correct About Offsetting

question 29

Multiple Choice

Which statement is correct about offsetting?

• A)It deteriorates key financial ratios.
• B)It shows the net amount of related assets and liabilities.
• C)It shows the related assets and liabilities as contra accounts.
• D)It makes it easier for borrowers to fulfill covenants.

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Definitions:

Supplies

Items that are consumed during the operation of a business, such as office supplies, which are essential for day-to-day activities but not directly tied to the product being sold.

Accounts Payable

A liability account that records amounts a company owes to suppliers for goods or services purchased on credit.

Withdrawals

Amounts of money taken out from a business by its owner(s) for personal use, not considered business expenses.

Credit Side

The right side of an accounting ledger where increases in liabilities, equity, and income or decreases in assets and expenses are recorded.