What Is the Legal Effect of Using a Credit Card

question 44

Multiple Choice

What is the legal effect of using a credit card?

• A)A cheque is drawn on a financial institution to pay for goods and services purchase by the credit holder.
• B)The vendor selling the product advances credit to the purchaser and the debt is later paid by the card issuer.
• C)The bank undertakes payment on behalf of the card issuer and the amount becomes a debt payable to the card holder.
• D)The card issuer undertakes payment on behalf of the card holder and the amount becomes a debt payable by the card holder to the card issuer.

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Definitions:

Accounting Records

Documents and books that capture all the financial transactions of a business or individual.

Closing Process

The procedure in accounting that involves the transfer of all income and expense account balances to the retained earnings to prepare the ledger for the next accounting period.

Real Accounts

Accounts that relate to assets, liabilities, and equity, which are not closed at the end of the accounting period and carry their balances into future periods.

Permanent Accounts

Accounts that carry their balances over into the next accounting period, such as assets, liabilities, and equity accounts.