Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Assets created by selling goods and services on credit are:

Notes Receivable

Inventory

Accounts Receivable

Prepaid Expenses

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Verified step by step guidance

Step 1: Understand the concept of 'Accounts Receivable'. Accounts Receivable refers to the amounts owed to a company by its customers for goods or services sold on credit. It is recorded as an asset on the balance sheet because it represents future cash inflows.

Step 2: Differentiate between the given options. Notes Receivable refers to written promises for amounts to be received, often including interest. Inventory represents goods available for sale, and Prepaid Expenses are payments made in advance for expenses not yet incurred.

Step 3: Recognize that selling goods and services on credit creates a claim against the customer, which is classified as Accounts Receivable. This is because the company expects to receive payment in the future for the credit sales.

Step 4: Confirm that Accounts Receivable is the correct classification for assets created by selling goods and services on credit, as it directly represents the amounts owed by customers.

Step 5: Review the importance of Accounts Receivable in financial accounting. It helps businesses track outstanding payments and manage cash flow effectively, ensuring accurate financial reporting.