Question

Karen has decided to calculate her net worth. She has these items listed so far: an antique bracelet, twenty dollars cash, a credit card bill, a checking account statement. Which of these is a liability?a. antique braceletb. twenty dollars cashc. credit card billd. checking account statement

Answer 1

Answer:

c. credit card bill

Explanation:

A credit card bill is a liability. It is a debt owned by the business to be paid within an accounting period. A credit card reflects authorization by the credit card company of a line of credit for the buyer with predetermined interest rates and payment terms- hence the term credit card. Most companies waive interest charges on the line of credit if the buyer pays its balance in full each month.

Once a credit is established with a credit card company or bank, the customer does not have to open an account with each store . Customers using these  credit cards can make single monthly payments to different creditors and can defer their payments.

Deffered payments are a liability for a customer and need to be paid within the accounting period.