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 a true statement regarding certificates of deposit (CDs) in the context of receivables?

Certificates of deposit are always reported as notes receivable.

Certificates of deposit are classified as accounts receivable on the balance sheet.

Certificates of deposit are considered short-term investments, not receivables.

Certificates of deposit represent amounts owed by customers for goods sold on credit.

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Verified step by step guidance

Understand the nature of certificates of deposit (CDs): CDs are financial instruments issued by banks that represent a deposit made by an individual or entity for a fixed term, earning interest over time. They are not related to receivables, which represent amounts owed by customers for goods or services.

Clarify the classification of CDs: CDs are considered short-term or long-term investments depending on their maturity period. They are not classified as accounts receivable or notes receivable because they do not represent amounts owed by customers.

Analyze the incorrect options: Certificates of deposit are not reported as notes receivable because they are not promissory notes issued by customers. Similarly, they are not classified as accounts receivable because they do not arise from credit sales.

Identify the correct classification: CDs are considered short-term investments if their maturity is within one year, and long-term investments if their maturity exceeds one year. They are reported under the 'Investments' section of the balance sheet, not under 'Receivables.'

Conclude with the correct statement: Certificates of deposit are considered short-term investments, not receivables, as they represent deposits made with a financial institution rather than amounts owed by customers.