As Long as a Firm Does Not Pay Out 100

question 35

True/False

As long as a firm does not pay out 100% of its earnings, the firm's annual profit that is retained in the business (i.e., the addition to retained earnings) is another source of funds for a firm's expansion.

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Definitions:

Prepaid Insurance

An asset account that represents insurance payments made in advance for coverage that will be received in the future.

Office Supplies Account

An account used to track expenses related to materials and supplies used in an office environment.

Adjusting Entry

At the closure of an accounting period, entries are documented to attribute earnings and outlays to the span during which they genuinely happened.

Supplies Purchased

Represents the purchase of tangible goods or materials used in the production of goods or for the operation of the company.