What Is the Effect on the Accounting Equation When a Company

question 16

Multiple Choice

What is the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers?

• A)Expenses increase
• B)Revenues decrease
• C)Liabilities increase
• D)Net income increases

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Definitions:

Excess Reserves

The reserves that banks hold over and above the regulatory requirements set by the central bank or banking regulator.

Excess Reserves

Banking reserves exceeding the reserve requirement set by a central bank, not lent out to the bank's clients.

Interest Rate

The fee, shown as a percent of the original amount, that a borrower must pay to a lender to borrow money or other resources.

Sub-prime Housing Loan

A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans, often due to a poor credit history.