A Decrease in Which One of the Following Accounts Increases

question 64

Multiple Choice

A decrease in which one of the following accounts increases a firm's current ratio as well as its quick ratio?

• A)Accounts payable
• B)Cash
• C)Accounts receivable
• D)Inventory
• E)Fixed assets

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Definitions:

Absorption Costing

Absorption costing is an accounting method that includes all manufacturing costs (both variable and fixed) in the cost of a product.

Variable Costing

Variable costing is an accounting method that only considers variable costs (costs that change with production levels) in the calculation of product or service costs, excluding fixed costs.

Gross Profit

The difference between sales revenue and the cost of goods sold, directly indicating the efficiency of core business activities.

Absorption Costing

A method of inventory costing that includes all manufacturing costs, both variable and fixed, in the cost of a product.