An Accountant Has Debited an Asset Account for $1,000 and Credited

question 31

Multiple Choice

An accountant has debited an asset account for $1,000 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?

• A) Credit an asset account for $500.
• B) Credit another liability account for $500.
• C) Credit an equity account for $500.
• D) Debit an equity account for $500.

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Definitions:

Planning Horizon

The long-range time period the financial planning process focuses on, usually the next two to five years.

Dividend Policy

A company's strategy or policy to decide how much profit it will pay out to shareholders as dividends.

Retention Ratio

The fraction of net profits not paid out as dividends but kept within the corporation for reinvestment or other purposes.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, representing how much money a company returns to shareholders versus retaining for growth.