When using transactional analysis, the following changes in the balance sheet account and the corresponding cash flow description would be correct except,
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A. B. C. D. E.B
The cash flow of rent payable would be cash expenses.
Transactional analysis is a method used to analyze changes in the balance sheet accounts and their corresponding cash flow descriptions. It helps identify how transactions affect different accounts and their impact on cash flows. Let's analyze each answer choice and determine the correct one.
A. Long-term debt; increase or decrease in debt: When there is a change in long-term debt, it can be an increase or decrease in debt. If a company takes on new long-term debt, it would result in an increase in debt. Conversely, if the company repays some of its long-term debt, it would lead to a decrease in debt. Therefore, this statement is consistent with transactional analysis, and it would be considered correct.
B. Rent payable; cash paid for inputs: Rent payable represents the amount owed by a company for renting a property. In transactional analysis, changes in rent payable are typically not related to cash paid for inputs. Rent payable is a liability account, and its changes reflect the accrual of rent expenses over time, which does not directly correspond to cash outflows for inputs. Therefore, this statement would be incorrect.
C. Accounts payable; cash paid for inputs: Accounts payable represents the amounts owed by a company to its suppliers for goods or services received on credit. When accounts payable increase, it means the company has received more inputs on credit. However, an increase in accounts payable does not directly indicate cash paid for inputs. Cash payments for inputs are reflected in the cash flow statement under the operating activities section, specifically in the accounts payable portion. Therefore, this statement is consistent with transactional analysis, and it would be considered correct.
D. Short-term debt; increase or decrease in debt: Similar to long-term debt, changes in short-term debt can also result in an increase or decrease in debt. Taking on new short-term debt would lead to an increase in debt, while repaying short-term debt would result in a decrease. Therefore, this statement is consistent with transactional analysis, and it would be considered correct.
E. Retained earnings; dividends paid: Retained earnings represent the accumulated profits or losses of a company that have not been distributed to shareholders as dividends. Dividends paid are cash outflows to shareholders and reduce the retained earnings balance. Therefore, when dividends are paid, it results in a decrease in retained earnings. This statement is consistent with transactional analysis, and it would be considered correct.
In conclusion, the incorrect statement based on transactional analysis is: B. Rent payable; cash paid for inputs.