Because of the Short-Term Nature of Working Capital Assets and Liabilities

question 121

True/False

Because of the short-term nature of working capital assets and liabilities, it is always necessary to support working capital with short-term borrowing. To do otherwise would violate the matching principle, which is of paramount importance in financial management.

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Definitions:

Collection Fee

A charge levied for the service of collecting funds from a debtor or processing payments.

Accrued Interest

Interest that has been earned but not yet received or recorded as income by the end of the accounting period.

Journal Entry

A record in accounting that logs the debit and credit sides of a financial transaction.

Deposits In Transit

Funds that have been deposited in a bank account but not yet recorded by the bank, leading to a difference between the company's records and the bank statement.