Which of the Following Statements Is True

question 12

Multiple Choice

Which of the following statements is true?

• A)Only the effects of internal transactions must be recognized and recorded in the accounting system.
• B)An internal transaction represents a business activity between an entity and its environment.
• C)Evidence used to record transactions affecting a business entity comes from source documents.
• D)Only the effects of external events must be recognized, measured, and recorded in an entity's accounting system.

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Definitions:

GAAP

Generally Accepted Accounting Principles, a framework of accounting standards, principles, and procedures used in the United States.

Income Statement Information

Income Statement Information includes the revenues, expenses, and profits or losses of a company over a specified period, depicting its financial performance.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, typically a fiscal quarter or year, resulting in a net profit or loss.

Profitability

The degree to which a business or activity yields profit or financial gain, measured by the ability to generate income greater than the related expenses.