Multiple Choice
In which of the following situations is a company most likely to issue a note receivable?
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7. Receivables and Investments
Types of Receivables
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Which of the following is classified as a trade receivable?
A
Accounts receivable from customers for goods sold on credit
B
Advances to employees
C
Interest receivable on loans
D
Tax refunds receivable from the government
Verified step by step guidance1
Understand the concept of trade receivables: Trade receivables are amounts owed to a business by its customers for goods or services provided on credit as part of its normal operations.
Analyze each option provided in the problem: Determine whether each item fits the definition of trade receivables.
Option 1: Accounts receivable from customers for goods sold on credit. This fits the definition of trade receivables because it represents amounts owed by customers for goods sold as part of the business's normal operations.
Option 2: Advances to employees. This does not qualify as trade receivables because it is not related to the sale of goods or services to customers.
Option 3: Interest receivable on loans and Option 4: Tax refunds receivable from the government. Both of these are not trade receivables because they are not related to the business's core operations of selling goods or services on credit.
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