How Does the Year-End Adjustment to Recognize Uncollectible Accounts Expense

question 53

Multiple Choice

How does the year-end adjustment to recognize uncollectible accounts expense affect the elements of the financial statements?

• A) Decrease total assets and decrease stockholders' equity.
• B) Increase total assets and decrease stockholders' equity.
• C) Increase total liabilities and increase stockholders' equity.
• D) Decrease total liabilities and increase stockholders' equity.

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Definitions:

Sales

The activity or business of selling goods or services to customers.

Net Income

The amount of money a company has left after all expenses, taxes, and costs have been subtracted from total revenue.

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the owners' share.

Expenses

are the costs incurred in the operation of a business or the execution of a project, including money spent on goods, services, and other necessary items.