Question

Which of the following is true of open accounts?

A) When political unrest requires additional caution, open accounts are the best mode of payment.
B) Sales on open accounts are generally not recommended when special merchandise is ordered.
C) Sales on open accounts are usually recommended when shipping is hazardous.
D) Sales on open accounts are recommended when the country of the importer imposes difficult exchange restrictions.
E) Sales on open accounts are generally made when the practice of the trade is to use some other method.

Answer 1

The correct statement regarding open accounts is that sales on open accounts are generally not recommended when special merchandise is ordered, due to the increased risk of non-payment. The correct option is B.

Step-by-step explanation:

Among the options provided regarding the truth about open accounts, the correct one is B) Sales on open accounts are generally not recommended when special merchandise is ordered. Open accounts involve extending credit to buyers, which implies a level of trust that the buyer will pay after receiving the goods. It is risky when dealing with special or custom orders because the seller may be left with a product that is tailored to a specific buyer's requirements and may be difficult to sell to others if the buyer defaults.

In the context of international trade, open accounts are also less desirable in situations involving political unrest, hazardous shipping conditions, or stringent exchange restrictions as these factors increase the risk of non-payment. Banks and other financial institutions facilitate trade and reduce the need to carry and transact in large amounts of cash. They provide a means for businesses to conveniently handle transactions and manage financial risks associated with various modes of payment like open accounts. This supports the economic flow and stability.