One of the Most Fundamental Determinants of the Exchange Rate

question 104

Multiple Choice

One of the most fundamental determinants of the exchange rate is ______________ whereby the exchange rate between the currencies of two countries is in equilibrium when it equates the prices of a basket of goods and services in both countries.

• A)free float
• B)free float (dirty)
• C)managed float
• D)purchasing power parity (PPP)
• E)absolute cost advantage

Distinguish between the gross and net methods for recording purchases and payments.

Recognize the importance and application of purchase discounts and their accounting treatment.

Analyze the impact of paying an invoice within or outside the discount period using the gross method.

Understand the control features of a voucher system and how it strengthens internal control.

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Definitions:

Sales Revenue

The earnings accumulated from the sale of products or services during a specific timeframe.

Cash

A company's most liquid asset, representing currency or assets that can be immediately converted into currency.

Sales Tax Payable

A liability account that represents the sales tax collected from customers by a selling entity and owed to the tax authority.

Cash

Money in the form of currency, which includes bills, coins, and money in bank accounts that is available for immediate use.