Multiple Choice
It's your responsibility to know about all of the different types of receivables before choosing a bank. 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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Under which type of receivable would amounts owed by employees for their share of insurance costs typically be classified?
A
Trade receivables
B
Other receivables
C
Accounts receivable
D
Notes receivable
Verified step by step guidance1
Understand the concept of receivables: Receivables are amounts owed to a company by customers or other parties. They are classified into categories such as trade receivables, accounts receivable, notes receivable, and other receivables.
Define trade receivables: These are amounts owed by customers for goods sold or services rendered in the ordinary course of business. They typically arise from the company's primary operations.
Define accounts receivable: Accounts receivable is a subset of trade receivables and refers specifically to amounts owed by customers for credit sales of goods or services.
Define notes receivable: Notes receivable are formal written promises to pay a certain amount of money at a future date, often including interest. These are typically more formal than accounts receivable.
Define other receivables: Other receivables include amounts owed to the company that do not arise from the sale of goods or services, such as employee advances, insurance reimbursements, or tax refunds. Since amounts owed by employees for their share of insurance costs do not arise from sales, they are classified under 'Other receivables.'
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