A Double-Entry Accounting System Is an Accounting System

question 3

Multiple Choice

A double-entry accounting system is an accounting system:

• A)That records each transaction twice.
• B)That records the effects of transactions and other events in at least two accounts with equal debits and credits.
• C)In which each transaction affects and is recorded in two or more accounts but that could include two debits and no credits.
• D)That may only be used if T-accounts are used.
• E)That insures that errors never occur.

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Definitions:

Equity Capital

Funds raised by a company in exchange for a share of ownership in the company, often through the sale of stock.

Depreciation

The process of allocating the cost of a tangible or physical asset over its useful life, reflecting the decrease in value over time.

Economic Profit

Economic profit is the surplus that remains when total revenue exceeds the total costs, including both explicit and implicit costs.

Explicit Costs

Direct payments made to others in the course of running a business, such as wages, rent, and materials.