The Interests of the Individuals That Manage the Company (Agents

question 3

Multiple Choice

The interests of the individuals that manage the company (agents such as the CEO) may not align with the interest of the owners (such as stockholders) . This separation of interest creates a(n) _____.

• A) agency problem
• B) bricolage issue
• C) arbitration divide
• D) blue ocean gap
• E) execution limit

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Definitions:

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts, thereby preparing the accounts for the next period.

Revenue Account Balance

The total amount of income generated from sales before any expenses are subtracted.

Expense Account Balance

The total amount recorded as expenditures by a company within a specific period, awaiting reimbursement or allocation.

Income Summary

A temporary account used in accounting to transfer revenues and expenses, summarizing the net income or loss for a period before transferring the balance to retained earnings.