Which of the Following Transactions Results in the Recognition of an Expense

question 154

Multiple Choice

Which of the following transactions results in the recognition of an expense?

• A)Expiration of the usefulness of equipment during the accounting period.
• B)Payment on an account payable.
• C)Withdrawal of cash by the owner.
• D)Payment on the principal portion of a loan.

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Definitions:

Minimum Financial Tests

Financial benchmarks or ratios a company must achieve or maintain to comply with certain agreements, often related to debt covenants.

Borrower Must

Obligations or conditions a borrower needs to fulfill as per the terms of the loan agreement.

Debt Covenants

Specific agreements entered into by a borrower and lender, included in the terms of a loan or bond issuance, which place restrictions on the borrower to protect the lender.

Repayment Capacity

An assessment of a borrower's ability to repay a loan based on their financial situation.