Conboy Corporation disclosed in the notes to its financial statements that a significant number of its unsecured trade account receivables are with companies that operate in the same industry. This disclosure is required to inform financial statement users of the existence of
A) Concentration of market risk.
B) Risk of measurement uncertainty.
C) Off-balance sheet risk of accounting loss.
D) Concentration of credit risk.

Question

Quizplus · Accepted Answer

The disclosure of a significant number of unsecured trade account receivables with companies in the same industry informs financial statement users of the concentration of credit risk. This means that there is a potential for a significant loss if a large number of these companies were to default on their payments.

Conboy Corporation Disclosed in the Notes to Its Financial Statements