Multiple Choice
Which of the following is primarily concerned with providing information to internal users for decision-making purposes?
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1. Introduction to Accounting
Types of Accounting
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In a mortgage, the amount of money borrowed is called the:
A
Interest
B
Principal
C
Amortization
D
Equity
Verified step by step guidance1
Understand the key terms in the problem: 'Principal,' 'Interest,' 'Amortization,' and 'Equity.' Each term has a specific meaning in financial accounting.
Principal refers to the original amount of money borrowed in a loan or mortgage. It is the base amount that the borrower agrees to repay over time.
Interest is the cost of borrowing money, calculated as a percentage of the principal. It is paid to the lender as compensation for providing the loan.
Amortization is the process of gradually paying off the principal and interest of a loan over a set period, typically through regular payments.
Equity represents the ownership value in an asset, such as a home, after subtracting any liabilities like a mortgage. In this case, the correct term for the amount borrowed is 'Principal.'
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