Multiple Choice
Which of the following best describes the role of a cosigner in relation to receivables, and what is an important consideration before agreeing to co-sign a loan?
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7. Receivables and Investments
Types of Receivables
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Which of the following is NOT a type of receivable commonly reported on a company's balance sheet?
A
Interest Receivable
B
Notes Receivable
C
Accounts Receivable
D
Inventory Receivable
Verified step by step guidance1
Understand the concept of receivables: Receivables are amounts owed to a company by customers or other parties, typically resulting from sales or lending activities. They are classified as assets on the balance sheet.
Review the types of receivables commonly reported: Common types include Accounts Receivable (amounts owed by customers for credit sales), Notes Receivable (formal written promises to pay), and Interest Receivable (interest earned but not yet received).
Analyze the term 'Inventory Receivable': Inventory is a physical asset, not a receivable. It represents goods held for sale and is reported separately on the balance sheet under current assets, not as a receivable.
Compare the options provided: Interest Receivable, Notes Receivable, and Accounts Receivable are legitimate types of receivables, while Inventory Receivable is not a valid category of receivable.
Conclude that 'Inventory Receivable' is the correct answer because it does not fit the definition or classification of receivables commonly reported on a company's balance sheet.
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