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 accounts related to receivables would normally have a credit balance?

Accounts Receivable

Notes Receivable

Interest Receivable

Allowance for Doubtful Accounts

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Understand the nature of the accounts listed: Accounts Receivable, Notes Receivable, and Interest Receivable are asset accounts, which typically have debit balances. Allowance for Doubtful Accounts, however, is a contra-asset account, meaning it offsets the value of Accounts Receivable and typically has a credit balance.

Recall the purpose of the Allowance for Doubtful Accounts: It is used to estimate and account for the portion of receivables that are expected to be uncollectible, reducing the net realizable value of Accounts Receivable.

Review the normal balance of contra-asset accounts: Contra-asset accounts, such as Allowance for Doubtful Accounts, have credit balances because they decrease the value of the associated asset account.

Compare the listed accounts: Accounts Receivable, Notes Receivable, and Interest Receivable are not contra-accounts and therefore have debit balances. Allowance for Doubtful Accounts is the only account listed that would normally have a credit balance.

Conclude that the correct answer is Allowance for Doubtful Accounts, as it is the contra-asset account designed to offset Accounts Receivable and typically carries a credit balance.