Multiple Choice
Dividends from a mutual insurance company are typically paid to which of the following?
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7. Receivables and Investments
Types of Receivables
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When a primary care physician (PCP) office collects a $35 copay from a patient, which type of receivable is being settled?
A
Trade receivable
B
Accounts receivable
C
Nontrade receivable
D
Other receivable (such as a miscellaneous receivable)
Verified step by step guidance1
Understand the concept of receivables: Receivables represent amounts owed to a business by its customers or other parties. They are classified into categories such as trade receivables, accounts receivable, and nontrade receivables.
Define trade receivables: These are amounts owed by customers for goods sold or services rendered in the ordinary course of business. They typically arise from the company's primary operations.
Define accounts receivable: Accounts receivable is a broader term that includes trade receivables and other amounts owed by customers. It is recorded as an asset on the balance sheet.
Define nontrade receivables: Nontrade receivables are amounts owed to the business that do not arise from the sale of goods or services. Examples include loans to employees or tax refunds.
Analyze the copay transaction: A $35 copay collected by a PCP office is not directly related to the sale of goods or services but is considered a miscellaneous receivable. Therefore, it falls under the category of 'Other receivable' rather than trade, accounts, or nontrade receivables.
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