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 of the following is classified as an account receivable on the balance sheet?

Advances to employees

Interest receivable on long-term investments

Notes receivable due in two years

Amounts owed by customers for goods sold on credit

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Verified step by step guidance

Understand the concept of accounts receivable: Accounts receivable refers to amounts owed to a company by customers for goods or services sold on credit. It is classified as a current asset on the balance sheet because it is expected to be collected within a short period, typically within one year.

Analyze each option provided in the problem: Determine whether each item fits the definition of accounts receivable. For example, advances to employees are not related to sales on credit, interest receivable on long-term investments is not tied to customer transactions, and notes receivable due in two years are classified as long-term assets rather than accounts receivable.

Focus on the correct answer: Amounts owed by customers for goods sold on credit directly align with the definition of accounts receivable. These amounts represent the company's claim to payment from customers for credit sales.

Relate the correct answer to the balance sheet classification: Accounts receivable is listed under current assets on the balance sheet because it is expected to be collected within the operating cycle or one year.

Conclude the analysis: The correct classification of accounts receivable is amounts owed by customers for goods sold on credit, as it meets the criteria of being a short-term claim arising from credit sales.