Performing Services on Account

question 21

Multiple Choice

Performing services on account:

• A)decreases both assets and liabilities.
• B)increases assets and decreases stockholders' equity.
• C)decreases revenues and decreases stockholders' equity.
• D)increases both net income and stockholders' equity.

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Definitions:

Allowances

Funds set aside or discounts offered to account for various factors such as potential returns, defective goods, or customer satisfaction initiatives.

Income-Sharing Ratio

An agreed upon proportion used to distribute profits or losses among partners in a partnership.

Limited Liability Company

A corporate model that integrates the flow-through taxation characteristic of partnerships and sole proprietorships with the protective limited liability found in corporations.

Business Entity

A legal organization created by individuals, stockholders, or shareholders, with the purpose of operating for profit.