Multiple Choice
Which of the following best describes a method of paying an employee based on the amount of sales the employee generates?
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7. Receivables and Investments
Types of Receivables
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1. What is the term for accounts receivable that cannot be collected? (p. 412)
A
Trade receivables
B
Bad debts
C
Accrued revenues
D
Notes receivable
Verified step by step guidance1
Understand the concept of accounts receivable: Accounts receivable refers to the money owed to a company by its customers for goods or services provided on credit.
Identify the term for accounts receivable that cannot be collected: These are amounts that a company expects will not be paid by customers due to various reasons, such as financial difficulties or disputes.
Learn the definition of 'Bad debts': Bad debts are accounts receivable that are deemed uncollectible and are written off as an expense in the company's financial statements.
Differentiate between the options provided: Trade receivables refer to amounts owed by customers for goods or services sold on credit. Accrued revenues are revenues earned but not yet received in cash or recorded. Notes receivable are formal written promises to pay a certain amount at a future date.
Conclude that the correct term for accounts receivable that cannot be collected is 'Bad debts,' as it specifically refers to uncollectible amounts.
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