When the Existence of a Contract Changes the Behavior of a Party

question 28

Multiple Choice

When the existence of a contract changes the behavior of a party to the contract, the problem is called

• A)irrational expectations.
• B)adverse selection.
• C)opportunity cost.
• D)moral hazard.

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Definitions:

Adjusted Trial Balance

A listing of all company accounts that will appear in the financial statements after adjustments have been made for journal entries.

Adjustments Column

A column in accounting ledgers or tables used to record changes or corrections to initial entries prior to preparing financial statements.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to ensure a company's bookkeeping system is mathematically correct.

Accounting Cycle

The comprehensive process of recording and processing all financial transactions of a company, from when the transaction occurs, to its representation on the financial statements.