What Is the Effect on the Balance Sheet of Making

question 6

Multiple Choice

What is the effect on the balance sheet of making cash sales of inventory to customers for profit?

• A) Assets and stockholders' equity increase.
• B) Assets and stockholders' equity decrease.
• C) Assets decrease and stockholders' equity increases.
• D) Assets increase and stockholders' equity decreases.

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Definitions:

Deposit Account

A deposit account is a bank account that allows the holder to deposit and withdraw money, often earning interest, including savings accounts, checking accounts, and other transaction accounts.

Liabilities

Financial obligations or debts that a company or individual owes to others, which must be paid back in the future.

Government Securities

Financial instruments issued by the government to borrow money from the public.

Excess Reserves

The amounts of cash banks hold in reserve over and above the regulatory requirements, which can influence their capacity for lending and overall liquidity in the economy.