If a Transaction Is Properly Analyzed and Recorded

question 13

Multiple Choice

If a transaction is properly analyzed and recorded,

• A) only two accounts will be used to record the transaction.
• B) one account balance will increase and another will decrease.
• C) one asset account will be debited and one liability account will be credited.
• D) the total dollar amount debited will equal the total dollar amount credited.

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Definitions:

Adverse Selection

A situation where asymmetric information leads to the selection of undesirable alternatives in transactions.

Efficient Outcomes

Situations in economics where resources are allocated in a way that maximizes the net benefit to society, meaning no individual can be made better off without making someone else worse off.

Market Conditions

The features that characterize the current state of the market, including supply, demand, competition, and pricing dynamics.

Asymmetric Information

Asymmetric information occurs when one party in a transaction has more or better information than the other, often leading to imbalances in decision making and potentially unfair outcomes.