Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best defines 'collateral' in the context of liabilities for potential cosigners?

A legal obligation to pay debts that are due within one year.

An asset pledged by a borrower to secure a loan, which may be claimed by the lender if the borrower defaults.

A type of liability that arises from the issuance of bonds.

A person who agrees to repay a loan if the original borrower defaults.

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the term 'collateral' in the context of liabilities. Collateral refers to an asset that a borrower pledges to a lender as security for a loan. If the borrower fails to repay the loan (defaults), the lender has the right to claim the collateral to recover the owed amount.

Step 2: Analyze the options provided in the question. The correct definition of collateral should align with the concept of an asset pledged to secure a loan.

Step 3: Eliminate options that do not match the definition of collateral. For example, 'A legal obligation to pay debts that are due within one year' refers to current liabilities, not collateral. Similarly, 'A type of liability that arises from the issuance of bonds' pertains to bond liabilities, not collateral.

Step 4: Consider the option 'An asset pledged by a borrower to secure a loan, which may be claimed by the lender if the borrower defaults.' This matches the definition of collateral and is the correct answer.

Step 5: Verify that the remaining option, 'A person who agrees to repay a loan if the original borrower defaults,' refers to a cosigner, not collateral. This confirms that the correct definition of collateral is the asset pledged by the borrower.