Which of the Following Statements Is True About Open Account

question 24

Multiple Choice

Which of the following statements is true about open account?

• A) It is the most preferred method of payment in international business.
• B) Exporters can sell any open accounts in their possession, to avoid having to wait weeks or months to be paid for their exports.
• C) Exporters use this approach only with customers of long-standing or excellent credit, or with a subsidiary owned by the exporter because of the risk involved.
• D) It is a contract between the banks of the buyer and seller that ensures payment from the buyer to the seller upon receipt of an export shipment.

---

Definitions:

Unadjusted Trial Balance

A preliminary report of all accounts in the general ledger before any adjusting entries are made to ensure debits equal credits.

Adjustments

Journal entries made to correct or update accounting records and financial statements, often at the end of an accounting period.

Prepayment of Expenses

The payment for goods or services before they are received or consumed, often recorded as an asset on the balance sheet until used.

Adjusting Entry

An accounting entry made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred, ensuring that financial statements reflect accurate and up-to-date information.