The Primary Difference Between Simple and Compound Interest Is That

question 55

Multiple Choice

The primary difference between simple and compound interest is that:

• A) Simple interest is only paid at the end of the investment period.
• B) Compound interest entails receiving interest payments on previously earned interest.
• C) Compound interest is paid up front and not when the investment matures.
• D) Simple interest is not taxed by the federal government.
• E) Simple interest earns a higher interest rate on reinvested interest than compound interest.

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Definitions:

Debits

Accounting entries that increase asset or expense accounts, or decrease liability, equity, or revenue accounts.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns to ensure a company's bookkeeping system is mathematically correct.

Journalizing

The process of recording financial transactions in a journal or diary, marking the first step in the accounting cycle.

General Journal

A general journal is a fundamental accounting record where all day-to-day financial transactions of a business are initially recorded.