Multiple Choice
You need to track everything that involves money, including which of the following types of receivables?
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7. Receivables and Investments
Types of Receivables
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When you fail to repay a loan on time, you are referred to as being in:
A
Good standing
B
Discount
C
Default
D
Accrual
Verified step by step guidance1
Understand the concept of 'default' in financial accounting: Default occurs when a borrower fails to meet the legal obligations or conditions of a loan, typically by not making the required payments on time.
Review the other terms provided in the question to ensure clarity: 'Good standing' refers to a borrower who is current on their payments and meeting all loan obligations. 'Discount' typically refers to a reduction in the price or interest rate, and 'Accrual' relates to the recognition of revenue or expenses when they are incurred, not when cash is exchanged.
Identify the key condition in the question: The failure to repay a loan on time is the defining characteristic of being in 'default.'
Eliminate the incorrect options based on their definitions: 'Good standing,' 'Discount,' and 'Accrual' do not describe the situation of failing to repay a loan on time.
Conclude that the correct term for failing to repay a loan on time is 'default,' as it aligns with the definition provided in financial accounting.
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