Multiple Choice
A borrower with bad credit is likely to be charged:
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7. Receivables and Investments
Types of Receivables
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which two types of receivables are most commonly found on a company's balance sheet?
A
Interest receivable and dividends receivable
B
Inventory receivable and prepaid receivable
C
Accounts receivable and notes receivable
D
Tax receivable and rent receivable
Verified step by step guidance1
Understand the concept of receivables: Receivables are amounts owed to a company by its customers or other parties. They are considered assets and are typically recorded on the balance sheet.
Identify the most common types of receivables: Accounts receivable and notes receivable are the two most common types found on a company's balance sheet. These represent amounts owed by customers for goods or services and formal written promises to pay, respectively.
Clarify accounts receivable: Accounts receivable arise from credit sales, where customers purchase goods or services but pay at a later date. These are typically short-term and are classified as current assets.
Clarify notes receivable: Notes receivable are formal written agreements where a party promises to pay a specific amount at a future date. These can be short-term or long-term, depending on the maturity date.
Review the incorrect options: Interest receivable and dividends receivable are less common and specific to certain situations. Inventory receivable and prepaid receivable are not valid receivable types. Tax receivable and rent receivable are specialized receivables and not as commonly found as accounts and notes receivable.
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