Which of the Following Would Explain Why Economic Profit Might

question 180

Multiple Choice

Which of the following would explain why economic profit might be less than accounting profit?

• A)A firm's net income is less than its accounting profit.
• B)A firm has only explicit costs.
• C)A firm's net income is greater than its accounting profit.
• D)A firm has implicit costs as well as explicit costs.

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Definitions:

Accounting Cycle

The sequence of steps followed in the accounting process to track and record business transactions, culminating in the preparation of financial statements.

Post-closing Trial Balance

A financial report created after adjusting and closing entries are made, listing all accounts and their balances to ensure debits equal credits.

Accumulated Depreciation

The total amount of depreciation that has been recorded for an asset since it was acquired.

Interest Payable

A liability account that represents the amount of interest expense that has been incurred but not yet paid to creditors.