Question

Costs associated with the extension of credit include credit checks, collection efforts, and uncollectible accounts.

a. True
b. False

Answer 1

Costs associated with extending credit include credit checks, collection efforts, and uncollectible accounts, and this statement is true.

Step-by-step explanation:

True, costs associated with the extension of credit indeed include expenses such as credit checks, collection efforts, and uncollectible accounts. When a business offers credit to its customers, it must assess the creditworthiness of those customers, which often involves a cost. Furthermore, if payments are late or not received at all, the business will incur additional costs for collection efforts to recover the debt, and sometimes, despite these efforts, some accounts may remain uncollectible leading to financial losses.