When credit is granted by one firm to another firm this gives rise to a(n):
A)accounts receivable and is called consumer credit.
B)credit due and is called an installment note.
C)accounts receivable and is called trade credit.
D)trade receivable and is called an installment note.
E)trade receivable and is called a secured loan.

Question

Quizplus · Accepted Answer

When credit is extended by one firm to another firm, it is usually referred to as trade credit. This credit gives rise to an accounts receivable on the books of the firm extending the credit. Therefore, option C - accounts receivable and is called trade credit - is the correct answer. Option A is incorrect because consumer credit refers to credit granted to individuals. Option B is incorrect because an installment note is a type of loan agreement, not a credit due. Option D is incorrect because trade receivable and installment note are two different things. Option E is incorrect because a secured loan involves collateral, which is not mentioned in the question.

When Credit Is Granted by One Firm to Another Firm