Multiple Choice
The following descriptions refer to taxes that are levied on the income or profits of individuals and businesses. What type of taxes are these?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
Which of the following is an example of using unsecured credit?
A
Purchasing goods with a credit card
B
Obtaining a car loan secured by the vehicle
C
Financing equipment with a secured loan
D
Taking out a mortgage to buy a house
Verified step by step guidance1
Understand the concept of unsecured credit: Unsecured credit refers to borrowing that does not require collateral. Collateral is an asset pledged by the borrower to secure the loan, which the lender can seize if the borrower defaults.
Review the examples provided in the question: Analyze each option to determine whether it involves collateral or not.
Option 1: Purchasing goods with a credit card. Credit cards are typically unsecured because they do not require collateral to make purchases.
Option 2: Obtaining a car loan secured by the vehicle. This is a secured loan because the car serves as collateral for the loan.
Option 3: Financing equipment with a secured loan and Option 4: Taking out a mortgage to buy a house. Both involve collateral (equipment and house, respectively), making them secured loans.
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