One Effect on the Accounting Equation When a Firm Borrows

question 175

Multiple Choice

One effect on the accounting equation when a firm borrows money is that

• A)stockholders' equity decreases.
• B)assets increase.
• C)liabilities decrease.
• D)assets decrease.

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Definitions:

Internal Controls

Processes put in place by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

NSF Check

A check that cannot be processed due to insufficient funds in the account it's drawn against; stands for "Non-Sufficient Funds."

Bank Reconciliation

A bank reconciliation is a process that explains the difference between the bank balance shown in an organization's bank statement and the corresponding amount shown in the organization's own accounting records.

Credit Memo

A document issued by a seller that reduces the amount a buyer owes, typically related to returns or adjustments.