Which of the Following Is True of the Effect of Net

question 3

Multiple Choice

Which of the following is true of the effect of net loss on financial statements?

• A) It decreases the cash account balance.
• B) It increases expenses.
• C) It decreases the owner's capital account balance.
• D) It decreases accounts payable.
• E) It increases the owner's drawing account balance.

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Definitions:

Consumption

The use of goods and services by households, constituting a major part of the economy's total output.

Permanent Income Hypothesis

A theory proposed by Milton Friedman suggesting that an individual's consumer behavior is determined by their long-term income expectations rather than their current income.

Services

Intangible products offered to consumers and other businesses, such as banking, education, and healthcare, which unlike goods, are not physical objects.

Autonomous Consumption

The level of consumption expenditure that occurs when income is zero, reflecting the basic level of consumption necessary for survival.