The Debt Created by a Business When It Makes a Purchase

question 52

Multiple Choice

The debt created by a business when it makes a purchase on account is a(n) :

• A) account receivable.
• B) revenue.
• C) prepaid expense.
• D) account payable.

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Definitions:

Investment Method

A technique for recognizing the investor's share of investee profits and adjusting the carrying amount of the investment accordingly.

Accounting

The systematic process of recording, summarizing, and reporting the financial transactions and positions of a company.

Available-for-sale

This is a classification for investments that a company plans to sell but are not actively traded, with changes in value reported in other comprehensive income.

Unrealized Gain

A profit that has occurred on paper due to an investment's increased value but has not yet been realized through a sale.