Knell Company paid its sales employees $15,000 in sales commissions.What impact will this transaction have on the firm's working capital?

Question

Quizplus · Accepted Answer

A payment of commissions to sales employees is an asset use transaction;the current asset account Cash decreases and the expense account Sales Commissions Expense increases.Working capital is calculated by subtracting current liabilities from current assets.Since this transaction causes a decrease in current assets,it decreases the amount of working capital.

Knell Company Paid Its Sales Employees $15,000 in Sales Commissions