A Basic Assumption of Accounting That Requires That the Activities

question 35

Multiple Choice

A basic assumption of accounting that requires that the activities of an entity be kept separate from the activities of its owner is referred to as the

• A)stand alone concept.
• B)monetary unit assumption.
• C)corporate form of ownership.
• D)economic entity assumption.

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Definitions:

Preferred Stock

Equity shares that give investors a claim on a company's earnings before dividends are paid to common stockholders, often with no voting rights.

Common Equity

The amount of ownership in a corporation that is held by common shareholders, represented by common stock.

Leverage

The use of borrowed capital or financial instruments to increase the potential return of an investment.

Equity Financing

The process by which a company raises capital through the sale of shares.