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

Which one of the following types of receivables is considered the most liquid?

Advances to Employees

Accounts Receivable

Notes Receivable

Interest Receivable

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Verified step by step guidance

Understand the concept of liquidity: Liquidity refers to how quickly an asset can be converted into cash without losing its value. In the context of receivables, the most liquid type is the one closest to cash conversion.

Analyze each type of receivable: Advances to Employees are payments made to employees that are expected to be repaid or offset against future wages, which may not be quickly converted to cash. Notes Receivable are formal written promises to pay a certain amount, often with interest, but they may have longer terms. Interest Receivable represents interest earned but not yet received, which depends on the timing of interest payments.

Focus on Accounts Receivable: Accounts Receivable represents amounts owed by customers for goods or services provided on credit. These are typically collected within a short period, making them highly liquid compared to other receivables.

Compare Accounts Receivable to other receivables: Since Accounts Receivable is directly tied to the operating cycle of a business and is expected to be collected quickly, it is considered more liquid than Notes Receivable, Interest Receivable, or Advances to Employees.

Conclude that Accounts Receivable is the most liquid type of receivable because it is closest to cash conversion and is typically collected within the shortest timeframe.