The Adjustment to Account for Future Bad Debts Has the Effect

question 109

True/False

The adjustment to account for future bad debts has the effect of (1)reducing assets and (2)increasing liabilities.

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Definitions:

Current Liability

A financial obligation that is due to be paid within one year or within the normal operating cycle of the business, whichever is longer.

Premium on Bonds Payable

The surplus by which bonds exceed their nominal value when sold.

Contra-Liability Account

An account on a company's balance sheet that reduces the amount of a liability, serving as a negative balance to that liability.

Straight-Line Amortization

A technique for distributing the expense of an intangible asset uniformly across its lifespan.