A Debit to a Liability Account Was Posted to a Revenue

question 36

Multiple Choice

A debit to a liability account was posted to a revenue account. This would cause

• A) assets to be overstated.
• B) liabilities to be overstated.
• C) capital to be overstated.
• D) revenue to be overstated.

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Definitions:

Cycle Inventory

The portion of inventory that is planned to be sold in a given cycle, as part of the regular pattern of ordering and selling goods.

Forward Buying

Purchasing inventory in larger quantities than immediately needed, often in anticipation of price increases or high demand periods.

Lot Size

The quantity of items that are produced, purchased, or moved in a single batch or order.

Cycle Inventory

Inventory that companies maintain to facilitate production in batches or cycles, as opposed to continuous production.