Multiple Choice
Which of the following is an asset exchange transaction?
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1. Introduction to Accounting
Types of Accounting
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Which of the following is NOT a factor to consider when choosing different investments?
A
The expected rate of return
B
The liquidity of the investment
C
The accounting method used by the investor
D
The risk associated with the investment
Verified step by step guidance1
Understand the context of the question: The problem is asking which factor is NOT relevant when choosing investments. This requires distinguishing between factors that directly influence investment decisions and those that do not.
Review the factors listed: Expected rate of return, liquidity, and risk are all critical considerations in investment decisions. These factors directly impact the potential profitability, accessibility, and safety of the investment.
Analyze the irrelevant factor: The accounting method used by the investor does not influence the intrinsic characteristics of the investment itself. It pertains to how the investor records and reports the investment, which is separate from the decision-making process.
Clarify the concept of accounting methods: Accounting methods, such as cash basis or accrual basis, are frameworks for recording financial transactions. They do not affect the investment's performance, liquidity, or risk.
Conclude that the correct answer is 'The accounting method used by the investor,' as it is unrelated to the evaluation of investment options.
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