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Multiple Choice
Which of the following is not considered a type of receivable in financial accounting?
A
Notes Receivable
B
Accounts Receivable
C
Inventory Receivable
D
Interest Receivable
Verified step by step guidance
1
Understand the concept of receivables: Receivables are amounts owed to a company by customers or other parties. They are considered assets and are typically classified as current assets on the balance sheet.
Review the types of receivables listed: Notes Receivable, Accounts Receivable, and Interest Receivable are all legitimate types of receivables in financial accounting. Each represents a claim for payment under different circumstances.
Analyze the term 'Inventory Receivable': Inventory is a physical asset that a company holds for sale or production. It is not considered a receivable because it does not represent an amount owed to the company by a customer or other party.
Clarify the distinction: Receivables are financial claims, while inventory is a tangible asset. Inventory is classified separately on the balance sheet under 'Current Assets' but does not fall under the category of receivables.
Conclude that 'Inventory Receivable' is not a valid type of receivable in financial accounting, as it does not align with the definition or characteristics of receivables.