A Collateral Promise Is One Made by a Third Party

question 56

True/False

A collateral promise is one made by a third party to assume the debts or obligation of a primary party to a contract if the primary party does not perform.

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Definitions:

Accounts Receivable

Money owed to a business by its customers for products or services delivered on credit.

Significant Accounting Policies

The specific accounting principles and methods of computation adopted by a business to prepare its financial statements, reflecting its transactions in a consistent manner.

Management's Discussion

A section of a company's annual report where management discusses the firm's performance, trends, and future outlook.

Related-Party Transactions

Financial transactions that occur between individuals or entities that have a particular relationship, typically one that can influence the management or operating policies of the entities involved.