Which of the Following Is the Best Definition of Letter

question 255

Multiple Choice

Which of the following is the best definition of letter of credit?

• A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
• B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
• C) The time period between the acquisition of inventory and when cash is collected from receivables.
• D) Loan negotiated with banks for day-to-day operations.
• E) Costs that fall with increases in the level of investment in current assets.

---

Definitions:

Leased Receivable

An asset account that represents amounts owed by lessees to the owner of leased property, under the terms of lease agreements.

AASB 16

An Australian accounting standard that introduces a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases.

IFRS 16

An International Financial Reporting Standard that provides guidance on accounting for leases, requiring lessees to recognize most leases on their balance sheets.

Lease Receipts

Income received from leasing out an asset to a lessee under a lease agreement.