Many Current Liabilities Are Affected by Accrual Accounting Entries

question 9

Multiple Choice

Many current liabilities are affected by accrual accounting entries. This happens because:

• A) liabilities are usually paid when they are incurred.
• B) accrual accounting involves recognizing liabilities before they are paid.
• C) the only way to reduce a liability account balance is with an adjusting entry.
• D)accrual accounting frequently involves recognizing liabilities before they are incurred.

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Definitions:

Warranty Obligations

The responsibility of a seller to repair or replace defective goods during a specified period.

Quarterly Entries

are journal entries made in the financial records at the end of each quarter, summarizing the period’s transactions and adjustments.

Transactions

Financial events or operations that result in a change to the accounting equation, affecting an entity's assets, liabilities, or equity.

Working Capital

An indicator of a company's short-term financial health, calculated as current assets minus current liabilities.