When accounting for forward contracts, what is meant by the term "executory contract"?
A) No cash changes hands
B) The CEO of the company is the only one authorized to engage in the contract
C) There must be a price paid for the option
D) The contract is valid if one of the parties sign it

Question

Quizplus · Accepted Answer

An executory contract is a contract in which both parties have made promises but neither has yet performed. In the case of forward contracts, no cash changes hands initially and both parties have made promises to execute the contract at a later date.

When Accounting for Forward Contracts, What Is Meant by the Term