How Can Theories Be of Benefit in Accounting

question 3

Multiple Choice

How can theories be of benefit in accounting?

• A)they assist us in describing and explaining current accounting practice only.
• B)they assist us to improve accounting practice and they provide principles to take into account when taking action or making decisions.
• C)they help to identify problems and deficiencies with current accounting practice but do not assist us in improving accounting practice.
• D)they assist us to predict and improve accounting practice only.

---

Definitions:

Gross Profit

The difference between the revenue generated from sales and the cost of goods sold, indicating the basic profitability of a company's products or services.

Consignment-out

The process of sending goods to another party to sell on behalf of the sender, retaining ownership until the goods are sold.

Inventory Account

An account used to track the cost of goods available for sale or use, including items purchased for resale, raw materials, work-in-process, and finished goods.

Debit Balance

An accounting entry that occurs when the total of debits in an account exceeds the total of credits, which is common in asset and expense accounts.