Multiple Choice
Which of the following is typically required by a lender at the closing of a loan to ensure the collectibility of receivables?
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7. Receivables and Investments
Types of Receivables
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Which of the following is classified as an account receivable on the balance sheet?
A
Amounts owed by customers for goods sold on credit
B
Notes receivable due in more than one year
C
Advances to employees
D
Interest receivable on loans
Verified step by step guidance1
Understand the concept of accounts receivable: Accounts receivable refers to amounts owed to a company by its customers for goods or services provided on credit. It is classified as a current asset on the balance sheet.
Analyze the first option: 'Amounts owed by customers for goods sold on credit.' This fits the definition of accounts receivable because it represents money owed by customers for credit sales.
Evaluate the second option: 'Notes receivable due in more than one year.' Notes receivable are a separate category and, if due in more than one year, are classified as long-term assets rather than accounts receivable.
Assess the third option: 'Advances to employees.' Advances to employees are not related to customer transactions and are typically classified as other current assets, not accounts receivable.
Review the fourth option: 'Interest receivable on loans.' Interest receivable is a separate category and is not classified as accounts receivable, as it pertains to interest income rather than customer credit sales.
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