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 an example of a noncash item on an income statement?

Accounts receivable collected

Cash sales revenue

Depreciation expense

Inventory purchased with cash

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Verified step by step guidance

Understand the concept of noncash items: Noncash items are expenses or revenues reported on the income statement that do not involve actual cash transactions during the period. These items are typically accounting adjustments rather than cash flows.

Review the options provided: Analyze each option to determine whether it involves a cash transaction or is a noncash item. For example, accounts receivable collected and cash sales revenue involve actual cash inflows, while inventory purchased with cash involves a cash outflow.

Focus on depreciation expense: Depreciation is a noncash item because it represents the allocation of the cost of a tangible asset over its useful life. It does not involve any cash movement but is recorded as an expense on the income statement.

Understand why depreciation is noncash: Depreciation is calculated using methods such as straight-line or declining balance, and it reduces the book value of an asset without affecting cash flow. This makes it a noncash item.

Conclude that depreciation expense is the correct answer: Based on the analysis, depreciation expense is the only option that qualifies as a noncash item on the income statement.