Multiple Choice
Which of the following types of investments typically generate interest income?
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1. Introduction to Accounting
Types of Accounting
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Which of the following best describes an ETF?
A
A type of investment fund traded on stock exchanges, similar to stocks.
B
A method of recording business transactions using double-entry bookkeeping.
C
A government regulation that sets accounting standards for public companies.
D
A type of liability account used to record unpaid expenses.
Verified step by step guidance1
Understand the term 'ETF' (Exchange-Traded Fund). ETFs are investment funds that are traded on stock exchanges, similar to individual stocks.
Eliminate options that do not align with the definition of an ETF. For example, double-entry bookkeeping is a method of recording transactions, not an investment fund.
Consider the option related to government regulations. While regulations set accounting standards, they are unrelated to ETFs.
Evaluate the option about liability accounts. Liability accounts record unpaid expenses, which is unrelated to ETFs.
Conclude that the correct description of an ETF is 'A type of investment fund traded on stock exchanges, similar to stocks.'
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