In the Circular-Flow Diagram

question 224

Multiple Choice

In the circular-flow diagram,

• A)factors of production flow from government to firms.
• B)goods and services flow from households to firms.
• C)income paid to the factors of production flows from firms to households.
• D)spending on goods and services flows from firms to households.

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Definitions:

Adjusting Entries

Accounting records entries registered at the conclusion of an accounting period for the purpose of assigning revenues and expenses to the period they truly took place.

Accrual Basis

A bookkeeping approach that logs income and expenses at the time they are accrued, without taking into account the timing of the cash flows.

Cash Basis

An accounting method where revenues are recognized when cash is received, and expenses are recognized when cash is paid out.

Administrative Expenses

Expenses incurred that are not directly tied to a specific function like manufacturing, production, or sales, usually including items like rent, utilities, and management salaries.