Which of the Following Statements Is Correct

question 8

Multiple Choice

Which of the following statements is correct?

• A)Economic profit takes into account all costs involved in producing a product.
• B)Accounting profit is not relevant in preparing the firm's financial statement.
• C)Economic profit always exceeds accounting profit.
• D)Accounting profit is the same as economic profit.

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Definitions:

Asset

An item of value owned by a person or company, regarded as having economic value and available to meet debts, commitments, or legacies.

Owner's Equity

The residual interest in the assets of the entity after deducting liabilities, representing the ownership's claim on the company assets.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet.

Double-Entry Accounting

A system of bookkeeping where every entry to an account requires a corresponding and opposite entry to a different account.