The Debt Created by a Business When It Makes a Purchase

question 80

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) prepaid expense

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Definitions:

Fannie Mae

A government-sponsored enterprise established to expand the flow of mortgage money by creating a secondary market for mortgage loans.

Money Market Instrument

Short-term financial instruments that are highly liquid and considered safe, such as treasury bills and certificates of deposit.

Preferred Stock

A class of ownership in a corporation with a fixed dividend, senior to common stock but junior to bonds in claim on assets and earnings.

Commercial Paper

Short-term unsecured promissory notes issued by companies to finance their short-term liabilities.