An Important Rule to Remember When Analyzing the Impact of Business

question 93

Multiple Choice

An important rule to remember when analyzing the impact of business transactions on accounts is:

• A) net income increases stockholders' equity.
• B) if expenses exceed revenues, the company will have a net income.
• C) a net loss does not affect stockholders' equity.
• D) stockholders' equity includes the two categories of income statement accounts, revenues and liabilities.

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Definitions:

Amortized

The process of gradually writing off the initial cost of an asset over a period, or systematically reducing a loan balance through periodic payments of principal and interest.

Economic Life

The expected period of time during which an asset is useful to the average owner.

Amortization Expense

The periodic expense recognized in the financial statements for the gradual write-off of the cost of intangible assets over their useful life.

Research and Development Costs

Expenses associated with the investigation and creation of new products or services, which can include salaries, materials, and overhead costs.