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A business’s financial statements show a significant increase in the asset account for deferred expenses. What is the likely impact of this on the business’s borrowing needs?
A) borrowing needs will likely increase during the period
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Question & Answer: A business's financial statements show a significant increase in the asset account for deferred expenses…..
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B) borrowing needs will likely decrease during the period
C) borrowing needs will remain the same during the period
Expert Answer
Solution: borrowing needs will remain the same during the period
Explanation: Deferred expense refers a payment that has been incurred more than one year before the cost is expensed. It won’t be reported as an expense until a future accounting period, thus borrowing needs will remain the same during the period
