The Accounting Convention That Requires the Activities of the Business

question 43

Multiple Choice

The accounting convention that requires the activities of the business to be kept separate from the activities of the owner is the:

• A)dual aspect convention.
• B)business entity convention.
• C)conservatism convention.
• D)accounting period convention.

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Definitions:

Arbitrage

The practice of taking advantage of price differences in different markets by buying low in one and selling high in another.

Yield Curve

A graph showing the relationship between the yields of various debt securities of the same credit quality but different maturities.

Expectations Hypothesis

A theory in finance that explains the structure of interest rates by suggesting that the long-term rate can be determined by current and future expected short-term interest rates.

Interest Rates

Interest rates are the cost of borrowing money or the reward for saving, typically expressed as a percentage of the principal, which borrowers pay to lenders or financial institutions.