In Each Succeeding Payment on an Installment Note

question 253

Multiple Choice

In each succeeding payment on an installment note:

• A) The amount of interest paid increases.
• B) The amount of principal paid increases.
• C) The amount of principal paid decreases.
• D) The amounts paid for both interest and principal increase proportionately.

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Definitions:

Accounts Payable

Liabilities representing amounts owed by a company to suppliers or creditors for goods and services received.

Prepaid Insurance

An asset account on the balance sheet representing insurance premiums that have been paid in advance and have not yet expired.

Supplies

Materials and items that are used in the day-to-day operations of a business, not directly tied to a finished product.

Liability

A financial obligation or debt that an entity owes to another party, which is expected to be paid in the future.