How Does the Year-End Adjusting Entry to Recognize Uncollectible Accounts

question 17

Multiple Choice

How does the year-end adjusting entry to recognize uncollectible accounts expense affect the elements of the financial statements?

• A)Decrease total assets and decrease stockholders' equity.
• B)Increase total assets and decrease stockholders' equity.
• C)Increase total liabilities and increase stockholders' equity.
• D)Decrease total liabilities and increase stockholders' equity.

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Definitions:

Exercise Care

The obligation to act with the prudence, caution, and attentiveness of a reasonable person in order to avoid harm to others.

Duties Under Tort Law

Obligations recognized by law for individuals or entities to avoid causing harm or injury to others, breach of which may result in liability.

Agent

A person authorized to act on behalf of another, known as the principal, in business transactions or legal matters.

Principal

The main party to a transaction or contract who has authorized another party (agent) to act on their behalf.