Which of the Following Is an Example of an Externality

question 55

Multiple Choice

Which of the following is an example of an externality?

• A)A paper mill dumps waste into the river.
• B)A neighbor's loud music disrupts sleep.
• C)A drunk driver causes an accident that injures another person.
• D)All of the above are correct.

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Definitions:

Liabilities

Liabilities are financial obligations a company owes to external parties, such as loans, accounts payable, and mortgages.

Accrual

An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Accrual

The accounting method that records revenues and expenses when they are incurred, regardless of when cash transactions occur.

Accounting Cycle

The process used by entities to analyze and record transactions, adjust the records at the end of the period, prepare financial statements, and prepare the records for the next cycle.