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

Accounts receivable should be classified as a(n):

long-term liability

current asset

owner's equity

current liability

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Verified step by step guidance

Understand the definition of accounts receivable: Accounts receivable represents amounts owed to a company by its customers for goods or services provided on credit. It is considered an asset because it is expected to bring future economic benefits.

Determine the classification of accounts receivable: Assets are classified as either current or non-current (long-term) based on their liquidity, i.e., how quickly they can be converted into cash.

Review the criteria for current assets: Current assets are expected to be converted into cash, sold, or consumed within one year or the operating cycle of the business, whichever is longer.

Analyze accounts receivable in the context of current assets: Since accounts receivable is typically collected within a short period (e.g., 30 to 90 days), it meets the criteria for a current asset.

Conclude the classification: Based on the above analysis, accounts receivable should be classified as a current asset, not a long-term liability, owner's equity, or current liability.