The Business Hires an Office Manager at $700 a Week

question 42

Multiple Choice

The business hires an office manager at $700 a week.The immediate effect on the accounting equation is to:

• A)increase equity by $700 and decrease the asset cash by $700
• B)decrease the asset cash by $700 and decrease equity by $700
• C)no effect as this is not a business transaction
• D)increase wages by $700 and decrease equity by $700

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Definitions:

Allowance Method

An accounting technique that estimates and sets aside a portion of accounts receivable deemed not collectible.

Uncollectible Account

An uncollectible account is a receivable that a company is unable to collect, considered as bad debt or a write-off.

Net Amount

The remaining value after all deductions are made, such as for taxes or discounts.

Receivables

Funds that customers or clients owe to a business for products or services delivered on credit.