Multiple Choice
Which of the following is not considered a type of receivable in financial accounting?
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7. Receivables and Investments
Types of Receivables
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Which term describes amounts owed to a company by its customers for goods or services sold on credit?
A
Notes Payable
B
Accounts Receivable
C
Inventory
D
Prepaid Expenses
Verified step by step guidance1
Understand the question: The problem is asking for the term that describes amounts owed to a company by its customers for goods or services sold on credit.
Review the options provided: Notes Payable, Accounts Receivable, Inventory, and Prepaid Expenses.
Define each term: Notes Payable refers to amounts the company owes to others, typically documented in a promissory note. Accounts Receivable refers to amounts owed to the company by customers for credit sales. Inventory refers to goods available for sale. Prepaid Expenses are payments made in advance for future expenses.
Identify the correct term: Based on the definitions, the term that matches the description of amounts owed to the company by customers for credit sales is 'Accounts Receivable.'
Conclude: The correct answer is 'Accounts Receivable,' as it directly relates to the amounts owed by customers for goods or services sold on credit.
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