Multiple Choice
Which of the following is a good strategy for an agent representing a seller as the closing date approaches?
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3. Accrual Accounting Concepts
Closing Entries
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
On the closing statement, what is the term for an amount that appears in the party’s favor?
A
Debit
B
Deferral
C
Credit
D
Accrual
Verified step by step guidance1
Understand the concept of a closing statement: A closing statement is a financial summary that outlines the final amounts owed or received by parties involved in a transaction.
Learn the meaning of 'Credit' in accounting: A credit represents an amount that increases liabilities or equity, or decreases assets. In the context of a closing statement, it refers to an amount in the party's favor.
Compare the given terms: Debit, Deferral, Accrual, and Credit. Debit typically represents an amount that decreases liabilities or equity, or increases assets. Deferral refers to postponing recognition of revenue or expenses. Accrual involves recording revenues or expenses when they are incurred, regardless of cash flow.
Identify why 'Credit' is correct: On a closing statement, an amount in the party's favor is recorded as a credit because it represents a positive balance or benefit to the party.
Apply this understanding to similar scenarios: Whenever you encounter a closing statement, look for credits to identify amounts that are favorable to the party in question.
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