Chapter 3

What are earnings that are history, or earnings from past accounting periods called?

• The Earnings

• Retained Earnings

• Dividends

• Accountss Receivable

Answer explanation

The earnings we had were good for the first week of business, however, the earnings are now history so we roll them up making room for the earnings of a new week.

Is the ending inventory of the past week the beginning inventory of this week?

• True

• False

Somethings we got for our business which we have to pay for someday

• Accounts Payable

• Interest Payable

• Pay Forward Account

• Credit

Answer explanation

- Credit account

- Short term

Money owed to someone else for money received

• Interest Payable

• Notes recievable

• Prepaid Notes

• Notes Payable

Answer explanation

- We got Cash

- Loan from a bank

- Long term

In order to update our ending balance sheet to make it a beginning balance sheet, are we going to roll up the earnings and retain them in the company?

• False

• True

Answer explanation

You either retain them in the business or distribute them to the owners of the company. Earnings that have not been distributed are retained in the company.

Which of the following has interest?

• None of them

• Notes Payable

• Accounts Payable

• Both

Answer explanation

Accounts Payable does not have interest unless you don’t pay on time.

Another word for notes payable from the bank is?

• Agreements

• Loans

• Accounts Payable

• Assets

What does “purchase on credit mean”?

• Goods bought on credit are received now and pay for them is made later

• Use of a Bank Debit Card to purchase goods or services from a merchant

• It indicates trade payable owes money to the business.

• None of them

Are accounts payable a liability?

• True

• False

Answer explanation

It is money owed to creditors.