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

In the context of types of receivables, what is a primary risk associated with reducing or eliminating credit insurance coverage on accounts receivable?

Decreased need for allowance for doubtful accounts

Increased exposure to potential bad debts if customers default on payments

Improved cash flow due to lower insurance premiums

Higher likelihood of overstatement of revenue

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Verified step by step guidance

Understand the concept of accounts receivable: Accounts receivable represent amounts owed to a company by its customers for goods or services provided on credit. These are considered assets on the balance sheet.

Learn about credit insurance coverage: Credit insurance is a policy that protects businesses against the risk of non-payment by customers. It helps mitigate the financial impact of bad debts.

Identify the primary risk of reducing or eliminating credit insurance: Without credit insurance, the company is exposed to a higher risk of customers defaulting on payments, which can lead to bad debts.

Analyze the impact on financial statements: Increased exposure to bad debts can result in a higher allowance for doubtful accounts, which reduces the net realizable value of accounts receivable and impacts revenue recognition.

Evaluate the trade-offs: While reducing credit insurance may lower costs (e.g., premiums), it increases the likelihood of bad debts and potential overstatement of revenue if defaults are not properly accounted for.