Only the used portion of a line of credit is recognized as a liability.

Name: Only the used portion of a line of credit is recognized as a liability.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is because a line of credit is not a traditional loan where the entire amount is disbursed at once. Instead, the borrower can draw upon the line of credit as needed, and is only required to pay interest on the amount used. Therefore, only the amount used is recognized as a liability.

Only the Used Portion of a Line of Credit Is