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

When a customer uses a credit or debit card to make a purchase, how are the resulting amounts typically classified on the seller's balance sheet?

As cash, since the seller receives immediate payment from the customer

As accounts receivable, since the seller is waiting for payment from the card company or bank

As notes receivable, because the card transaction creates a formal written promise to pay

As inventory, because the goods have not yet been delivered to the customer

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Verified step by step guidance

Understand the nature of the transaction: When a customer uses a credit or debit card, the seller does not receive immediate cash from the customer. Instead, the payment is processed by the card company or bank, which will transfer the funds to the seller after a short delay.

Analyze the classification options: The seller is waiting for payment from the card company or bank, which means the amount is not yet cash. It is also not inventory, as the goods have already been delivered to the customer.

Consider the definition of accounts receivable: Accounts receivable represents amounts owed to the seller by customers or third parties (such as card companies or banks) for goods or services provided. This aligns with the situation described in the problem.

Evaluate why notes receivable is not applicable: Notes receivable typically involves a formal written promise to pay, such as a promissory note, which is not created in standard credit or debit card transactions.

Conclude the classification: Based on the analysis, the resulting amounts from credit or debit card transactions are typically classified as accounts receivable on the seller's balance sheet until the payment is received from the card company or bank.