What Is the Effect of the Following Error? the Owner

question 25

Multiple Choice

What is the effect of the following error? The owner withdrew $3,000 for personal use. The accountant debited Wages Expense for $3,000 and credited Cash for $3,000.

• A)Net Income was understated.
• B)Cash was understated.
• C)Total Owner's Equity was understated.
• D)Cash was overstated.
• E)Wages Expenses were understated.

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Definitions:

Wrongful Dissociation

The inappropriate or unauthorized withdrawal of a partner from a partnership, potentially leading to legal consequences.

Buyout Price

The agreed upon amount for which one party can purchase another party's interest in a company or investment.

Dissolution

The process of formally ending or dissolving a legal entity, such as a corporation, partnership, or marriage.

LLP

Stands for Limited Liability Partnership, a legal structure that offers some of the benefits of a partnership while limiting personal liability of the partners.