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Questions and Answers
Which of the following is a key function of accounting?
Which of the following is a key function of accounting?
- Inventory control
- Marketing strategy
- Human resource management
- Financial reporting (correct)
What is the purpose of double-entry accounting?
What is the purpose of double-entry accounting?
- To manage customer relationships
- To track employee attendance
- To maintain the accounting equation (correct)
- To calculate production costs
Which financial statement provides information about a company's profitability?
Which financial statement provides information about a company's profitability?
- Statement of cash flows
- Income statement (correct)
- Statement of retained earnings
- Balance sheet
What does the term 'dissolution' refer to in accounting?
What does the term 'dissolution' refer to in accounting?
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How does dissolution differ from liquidation?
How does dissolution differ from liquidation?
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What is the primary implication of dissolution for a business entity?
What is the primary implication of dissolution for a business entity?
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Study Notes
Functions of Accounting
- Identifying, recording, and reporting financial information is a key function of accounting.
Double-Entry Accounting
- The purpose of double-entry accounting is to ensure that each transaction is recorded in at least two accounts, allowing for accurate financial reporting and reduction of errors.
Financial Statements
- The income statement provides information about a company's profitability, showcasing revenues, expenses, and net income.
Dissolution vs. Liquidation
- Dissolution refers to the formal termination of a business entity, which may or may not involve the sale of its assets.
- Liquidation, on the other hand, is the process of selling a company's assets to pay off its creditors.
- The key difference between the two is that dissolution focuses on the termination of the business entity, whereas liquidation focuses on the sale of its assets.
Implications of Dissolution
- The primary implication of dissolution for a business entity is that it ceases to exist as a legal entity, and its assets are distributed among its stakeholders.
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