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

Which statement is true about Lillie’s past due account(s)?

Past due accounts are considered notes receivable until collected.

Past due accounts are always written off immediately as bad debt.

Past due accounts are not reported on the balance sheet.

Past due accounts are typically classified as accounts receivable and may require an allowance for doubtful accounts.

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Verified step by step guidance

Understand the concept of past due accounts: Past due accounts are accounts receivable that have not been paid by the due date. They remain part of accounts receivable unless specific actions are taken, such as writing them off or converting them to notes receivable.

Analyze the first statement: 'Past due accounts are considered notes receivable until collected.' This is incorrect because past due accounts remain classified as accounts receivable unless they are formally converted into notes receivable through an agreement with the debtor.

Analyze the second statement: 'Past due accounts are always written off immediately as bad debt.' This is also incorrect because past due accounts are not written off immediately. Instead, they are evaluated for collectability, and an allowance for doubtful accounts may be created to account for potential losses.

Analyze the third statement: 'Past due accounts are not reported on the balance sheet.' This is incorrect because past due accounts are still part of accounts receivable and are reported on the balance sheet, typically net of any allowance for doubtful accounts.

Evaluate the correct statement: 'Past due accounts are typically classified as accounts receivable and may require an allowance for doubtful accounts.' This is correct because past due accounts remain in the accounts receivable category and are subject to an allowance for doubtful accounts to estimate potential uncollectible amounts.