Which of the Following Would Result If the Business Purchased

question 82

Multiple Choice

Which of the following would result if the business purchased supplies on credit?

• A) Supplies would increase and Cash would decrease.
• B) Supplies would increase and Capital would increase.
• C) Supplies would increase and Accounts Payable would increase.
• D) The purchase of supplies is not a business transaction.

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Definitions:

Effective Interest Rate

The interest rate on a loan or financial product restated from the nominal interest rate as an interest rate with annual compound interest payable in arrears.

Effective Interest Rate

The actual annual interest rate that takes compounding into account, providing a more accurate representation of the cost of borrowing.

Net 25

A payment term indicating that the full payment is due within 25 days from the invoice date.

365-Day Year

A calendar basis used in various financial calculations, assuming the year consists of exactly 365 days for simplifying interest and other time-sensitive computations.