The Debt Created by a Business When It Makes a Purchase

question 131

Multiple Choice

The debt created by a business when it makes a purchase on account is referred to as an

• A) account payable
• B) account receivable
• C) asset
• D) expense payable

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Definitions:

Straight-Line Method

An approach to depreciation that divides the cost of an asset evenly over its expected lifespan, resulting in the same depreciation expense annually.

Annual Interest Expense

The total cost incurred by a borrower in a year for all debts, represented as the interest payments made on any borrowed funds.

Bond Discount

The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.

Premium

The amount paid for an insurance policy, or the amount by which a bond or stock sells above its par or face value.