Which of the Following Is NOT an Accounting Method That

question 7

Multiple Choice

Which of the following is NOT an accounting method that could be chosen by a company to increase reported profits in a particular year?

• A) Understating allowance for doubtful debts
• B) Classifying longer-term receivables as current assets
• C) Changing estimates of the useful life of plant and equipment
• D) Changing the method of inventory valuation

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Definitions:

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested into the business.

Comprehensive Loss

Reflects the total net expenses, including all losses and expenses, surpassing the total revenues and gains over a period, thereby showcasing a negative net income on the financial statements.

Other Comprehensive Income

Earnings that are not included in net income on the income statement and relate to gains and losses that have not yet been realized.

Retained Earnings

Retained earnings represent the cumulative amount of a company's profits that are reinvested in the business, rather than distributed to shareholders as dividends.