A Credit to an Asset Account Was Posted to a Liability

question 19

Multiple Choice

A credit to an asset account was posted to a liability account. This would cause

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

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Definitions:

Foreign Debtors

Individuals or entities located outside a country's borders that owe money to creditors within that country.

Insolvent

A financial condition where liabilities exceed assets, rendering an entity incapable of meeting its financial obligations.

Owe Money

The condition of being under obligation to pay or repay someone or something in return for something received.

Chapter 7

A provision under the U.S. Bankruptcy Code that deals with the process of liquidation, where an individual's or company's assets are sold to pay off creditors.