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2. Which Liabilities would tend to spontaneously increase with sales? Why?

2. Which Liabilities would tend to spontaneously increase with sales? Why?

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Answer #1

Liabilities such as accounts payable and accrued expenses.

They increase due to increase in production and activity level. They increase due to increase in cost of goods sold which increase because of increase in Sales. Some current liabilities such as notes payable are non spontaneous and do not increase with increase in Sales since they are short term financing and do not increase due to the activity level.

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2. Which Liabilities would tend to spontaneously increase with sales? Why?
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