A supplier extends what type of credit if there is no security other than the contractor's reputation for paying debts when due?

A supplier extends what type of credit if there is no security other than the contractor's reputation for paying debts when due?

• A. Secured credit
• B. Open account
• C. Line of credit
• D. Cash on delivery

Answer: (B)

Open account credit is when a supplier extends credit based on the buyer’s established reputation and credit history, with no collateral beyond that trust. Goods are shipped or delivered first, and payment is due later under an agreed terms window. In this case, there’s no security other than the contractor’s reputation for paying debts when due, which is classic open account credit. The other options involve different arrangements: secured credit requires collateral backing the debt; a line of credit is a pre-approved borrowing limit from a lender; cash on delivery requires payment at the moment of delivery.

Open account credit is when a supplier extends credit based on the buyer’s established reputation and credit history, with no collateral beyond that trust. Goods are shipped or delivered first, and payment is due later under an agreed terms window. In this case, there’s no security other than the contractor’s reputation for paying debts when due, which is classic open account credit.

The other options involve different arrangements: secured credit requires collateral backing the debt; a line of credit is a pre-approved borrowing limit from a lender; cash on delivery requires payment at the moment of delivery.