A Collateral Promise Is One Made by a Third Party

question 36

True/False

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

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Definitions:

Cash Discounts

A reduction in invoice amount offered by sellers to buyers as an incentive for early payment.

Trade Accounts Payable

Liabilities owed to suppliers for goods and services received that are yet to be paid for by the business.

Balance Sheet

A financial statement that presents a company's assets, liabilities, and equity at a specific point in time, showing the company's financial condition.

Scrip Dividends

A form of dividend payment made by a company to its shareholders in the form of additional stock, instead of cash.