When a Company Accepts a Note in Settlement of a Past

question 147

Multiple Choice

When a company accepts a note in settlement of a past due account, the effect on the accounting equation is

• A) an increase in a liability and a decrease in an asset
• B) an increase in an asset and a decrease in an asset
• C) a decrease in an asset and a decrease in stockholders' equity (expense)
• D) a decrease in a liability and an increase in stockholders' equity (revenue)

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Definitions:

Informal Groups

Social groups that form naturally within an organization, workplace, or community based on common interests or friendships, without formal structure.

Formal Group

A type of group in an organization formed by its structure, with designated tasks and roles.

Collegial Inclusiveness

The practice of ensuring participation, respect, and equal opportunities for all members within a professional community or organization.

Judgment

A cognitive process where conclusions are made based on criteria and evidence.