Multiple Choice
Which of the following best describes the primary difference between financial accounting, managerial accounting, and tax accounting?
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1. Introduction to Accounting
Types of Accounting
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Which term is commonly used to refer to an employee's take-home pay after all deductions have been made?
A
Gross pay
B
Retained earnings
C
Net pay
D
Revenue
Verified step by step guidance1
Understand the concept of gross pay: Gross pay refers to the total earnings of an employee before any deductions such as taxes, insurance, or retirement contributions are made.
Learn about deductions: Deductions are amounts subtracted from an employee's gross pay, including mandatory deductions (e.g., income tax, Social Security) and voluntary deductions (e.g., health insurance premiums, retirement savings).
Define net pay: Net pay, also known as take-home pay, is the amount an employee receives after all deductions have been subtracted from their gross pay.
Differentiate net pay from other terms: Retained earnings refer to profits retained by a company for reinvestment, and revenue refers to the total income generated by a business. These terms are unrelated to an employee's pay.
Apply the concept: When asked about an employee's take-home pay after deductions, the correct term to use is 'Net pay,' as it represents the final amount received by the employee.
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