Generally Accepted Accounting Principles

question 44

Multiple Choice

Generally accepted accounting principles:

• A) limit recovery to those with a direct contractual relationship to the accountant.
• B) apply to the way business transactions should be recorded.
• C) give directions to accountants in auditing the books of an enterprise.
• D) protect the investor who is unknown to the accountant when the financial statements are prepared.

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Definitions:

Retained Earnings

Accumulated net income that a company decides to keep rather than distribute to shareholders as dividends, often used for reinvestment.

Dividends

Funds disbursed by a company to its shareholders, representing a share of the profits earned by the company.

Total Liabilities

The sum of all financial obligations a company owes to outside parties.

Expenses

Costs incurred by a business in the process of earning revenue, including operational costs, salaries, and utilities.