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

If you borrow \$40 from a friend and promise to pay it back in one month, what type of receivable does your friend have?

Interest receivable

Notes receivable

Other receivable

Accounts receivable

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Verified step by step guidance

Understand the concept of receivables: Receivables are amounts owed to a business or individual by others. They are classified based on the nature of the transaction and the agreement between the parties.

Analyze the scenario: Your friend lent you $40 with the promise that you will repay it in one month. This transaction does not involve a formal written agreement like a promissory note, nor does it involve interest accrual.

Differentiate between types of receivables: Interest receivable refers to interest earned but not yet received. Notes receivable involves a formal written promise to pay. Accounts receivable typically arises from sales transactions. Other receivable is a broader category for amounts owed that do not fit into the above classifications.

Classify the receivable: Since the loan does not involve a formal note, interest, or sales transaction, it falls under the category of 'Other receivable.' This classification is used for miscellaneous amounts owed.

Conclude the classification: Your friend's receivable is categorized as 'Other receivable' because it represents a personal loan without formal documentation or interest.