If an entity sells on credit, the risk that the customer will not pay is called
A) price risk.
B) credit risk.
C) commercial substance.
D) credit policy.

Question

Quizplus · Accepted Answer

Credit risk refers to the potential financial loss that a company may face if its customers fail to pay their debts. It is the risk of non-payment by customers who purchase goods or services on credit. Choice A, price risk, refers to the potential increase or decrease in the price of goods or services due to market changes. Commercial substance (choice C) is a term used in accounting to refer to transactions that materially affect a company's financial position. Credit policy (choice D) refers to the guidelines and procedures that a company uses to manage its credit risk.

If an Entity Sells on Credit, the Risk That the Customer