What Happens to the Accounting Equation When the Adjustment Is

question 144

Multiple Choice

What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue?

• A)Assets increase and liabilities increase
• B)Liabilities decrease and Stockholders' equity increases
• C)Assets decrease and liabilities decrease
• D)Stockholders' equity increases and decreases by the same amount

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Definitions:

Price Level

A gauge for the typical costs of goods and services across the economy.

Tax Rate

The tax rate is the percentage at which an individual or corporation is taxed, which can vary based on income level, type of income, or value of goods and services.

Inflation Rate

The rate of increase in prices across a broad spectrum of goods and services, resulting in reduced purchasing power.

Saving

The portion of income not spent on consumption but kept aside for future use, often in a deposit account or as an investment.