In an Accrual Adjustment for Expenses Incurred but Not Yet

question 173

Multiple Choice

In an accrual adjustment for expenses incurred but not yet paid:

• A)a liability is decreasing since cash is being paid for an expense incurred at the time of the adjustment.
• B)the liability recorded when cash was received is increasing as the expense is incurred.
• C)the liability recorded when cash was received is decreasing as the expense is incurred.
• D)a liability is increasing since cash will be paid in the future due to the expense incurred.

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Definitions:

Stockholders' Equity

The owners' claim after subtracting total liabilities from total assets, representing the net value of a company to its shareholders.

Net Income

The residual financial gain of a company after deducting every cost, tax, and expense from the total earnings.

Note Payable

A written agreement where one party promises to pay another party a certain amount of money at a future date or on demand.

Accounting Equation

The foundational principle of accounting that maintains that assets equal the sum of liabilities and owner's equity.