When a Company Accepts a Note in Settlement of a Past

question 110

Multiple Choice

When a company accepts a note in settlement of a past due account, what is the effect on the accounting equation?

• A) an increase in a liability and a decrease in an asset
• B) an increase in an asset and a decrease in an asset
• C) a decrease in an asset and a decrease in stockholders' equity (expense)
• D) a decrease in a liability and an increase in stockholders' equity (revenue)

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Definitions:

Investment Policy Statement

A document that outlines an individual's or entity's investment objectives and strategies.

Relevant Constraints

Factors or limitations that affect the choices available to a business or individual when making decisions.

Investment Guidelines

Rules or criteria laid out by an investor or fund manager to guide the selection and management of investments.

Money Market Accounts

Financial accounts that typically offer higher interest rates compared to savings accounts, often used for short-term financial needs.