Positive Theory Refers to a Theory That

question 72

Multiple Choice

Positive theory refers to a theory that:

• A) explains how economic participants should act.
• B) describes how economic participants act.
• C) is optimistic.
• D) has been shown to have high explanatory power as a result of empirical testing.

---

Definitions:

Adjusting Journal Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Insurance Expense

The cost attributed to procuring insurance for business operations, properties, liability, and other risk management purposes, treated as an expense on the income statement.

Prepaid Insurance

An asset account representing insurance payments made in advance for coverage that extends to future periods.

Accrued Revenue

Revenue that has been earned but not yet received in cash or recorded, representing goods or services provided to a customer in one accounting period that are paid for in a later period.