Accounting Is a Sort of Transformation Process That Converts Daily

question 88

Multiple Choice

Accounting is a sort of transformation process that converts daily records of individual transactions into monthly financial reports.The ________ are the inputs,accounting is the operation that adds value,and ________ are the outputs.

• A) transaction records; financial statements
• B) financial statements; transaction records
• C) employee records; transaction records
• D) health records; transaction statements

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Definitions:

Cost of Debt

The interest rate a company pays on its borrowings, often expressed as a percentage.

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertake by investing their capital.

Separate Entities

A principle in accounting where a business is considered a separate entity from its owners or shareholders, ensuring that business transactions are kept distinct from the personal transactions of owners.

Preferred Stock

A security that is similar to bonds in some respects and to common stock in others. Preferred dividends are similar to interest payments on bonds in that they are fixed in amount and generally must be paid before common stock dividends can be paid. If the preferred dividend is not earned, the directors can omit it without throwing the company into bankruptcy.