Multiple Choice
Which of the following is classified as a type of receivable on a company's balance sheet?
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7. Receivables and Investments
Types of Receivables
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Which of the following items is NOT a type of receivable?
A
Unearned Revenue
B
Interest Receivable
C
Accounts Receivable
D
Notes Receivable
Verified step by step guidance1
Step 1: Begin by understanding the concept of 'receivables.' Receivables are amounts owed to a company by customers or other parties, typically resulting from sales or lending activities. Common types of receivables include Accounts Receivable, Notes Receivable, and Interest Receivable.
Step 2: Analyze each option provided in the question. Accounts Receivable refers to amounts owed by customers for goods or services sold on credit. Notes Receivable represents written promises for amounts to be received, often including interest. Interest Receivable is the interest earned but not yet received.
Step 3: Unearned Revenue is not a type of receivable. Instead, it represents a liability where a company has received payment for goods or services it has not yet delivered. This is the key distinction that makes Unearned Revenue different from receivables.
Step 4: Compare the nature of Unearned Revenue with the other options. While receivables are assets representing amounts owed to the company, Unearned Revenue is a liability representing obligations to deliver goods or services in the future.
Step 5: Conclude that Unearned Revenue is the correct answer to the question, as it does not fit the definition of a receivable.
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