The Impact of Tangible Asset Misappropriation on Books
Question
By removing a tangible asset from the business (a debit), the books will be ___________ by the exact amount of the tangible asset misappropriated.
Answers
Explanations
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A. B. C. D.B
The correct answer is B. Out-of-balance.
When a tangible asset is removed from the business, it will result in a debit being recorded in the accounting books for that asset. This is a legitimate accounting transaction, as it reflects the reduction in the company's assets.
However, if the tangible asset is misappropriated or stolen, the debit for the asset will not be balanced by a corresponding credit entry. This will cause the books to be out of balance by the exact amount of the misappropriated asset.
An out-of-balance condition in the accounting books means that the total of all debit entries does not equal the total of all credit entries. This is an indication that there has been an error or fraudulent activity in the accounting records.
Journal entries, on the other hand, refer to the formal records of all financial transactions that have been entered into the accounting system. False debits may also be a result of fraudulent activity, but they specifically refer to entries made with the intent to deceive or misrepresent the true nature of a transaction.
In summary, the correct answer is B. Out-of-balance, as misappropriation of a tangible asset will cause the books to be out of balance by the exact amount of the misappropriated asset.
