The Reason That Both Expenses and Dividends Are Recorded by Debit

question 122

Multiple Choice

The reason that both expenses and dividends are recorded by debit entries is that:

• A) All dividend and expense transactions involve offsetting credit entries to the Cash account.
• B) Both expenses and dividends are offset against revenues in the income statement.
• C) Both expenses and dividends reduce equity.
• D) The statement is untrue-expenses are recorded by debits, but dividends are recorded by credits to the equity account.

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Definitions:

Gross Profit Rate

A financial metric that indicates the percentage of revenue that exceeds the cost of goods sold, reflecting a company's operational efficiency.

Accounts Receivable Turnover

A financial metric indicating how many times a company collects its average accounts receivable balance in a period.

Price-earnings Ratio

A valuation metric used to measure a company's current share price relative to its per-share earnings.

Acid-test Ratio

A financial metric that assesses a company's ability to pay off its short-term liabilities with its most liquid assets, excluding inventory.