A business buys office equipment for cash. What effect will this transaction have on the accounts?
a. Debit an asset account and credit an expense account
b. Debit an asset account and credit an asset account
c. Debit an expense account and credit an asset account
d. Debit a liability account and credit an asset account
e. None of these
Question 2
Which of the following best defines the term earnings management?
A) It is the intervention by the management in the internal financial reporting process, with the intent of boosting the earnings of an organization.
B) It is the purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain.
C) It is the legitimate alteration of internal reports by the management to influence contractual outcomes that depend on reported accounting numbers.
D) It is a systematic management of earnings of an organization by its external shareholders, with the intent of increasing future profits.
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