Multiple Choice
Which of the following is an example of managerial accounting?
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1. Introduction to Accounting
Types of Accounting
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Which of the following best defines a cosigner for a loan?
A
A person who receives the loan funds and is solely responsible for repayment.
B
A person who agrees to repay a loan if the primary borrower fails to do so.
C
A financial institution that provides the loan to the borrower.
D
A person who manages the borrower's bank account.
Verified step by step guidance1
Understand the concept of a cosigner: A cosigner is someone who agrees to take responsibility for a loan if the primary borrower fails to repay it. This provides additional assurance to the lender.
Eliminate incorrect options: Review each option carefully and rule out those that do not align with the definition of a cosigner.
Option 1: 'A person who receives the loan funds and is solely responsible for repayment' is incorrect because a cosigner does not receive the loan funds and is not solely responsible unless the borrower defaults.
Option 3: 'A financial institution that provides the loan to the borrower' is incorrect because a cosigner is an individual, not a financial institution.
Option 4: 'A person who manages the borrower's bank account' is incorrect because managing a bank account is unrelated to the role of a cosigner. The correct answer is Option 2: 'A person who agrees to repay a loan if the primary borrower fails to do so.'
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