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Multiple Choice
Which of the following is NOT considered a type of receivable in financial accounting?
A
Accounts Receivable
B
Notes Receivable
C
Interest Receivable
D
Inventory
Verified step by step guidance
1
Step 1: Understand the concept of receivables in financial accounting. Receivables are amounts owed to a company by customers or other parties, typically resulting from sales, loans, or other transactions.
Step 2: Review the types of receivables listed in the problem. Accounts Receivable refers to amounts owed by customers for goods or services provided on credit. Notes Receivable refers to written promises for amounts to be received, often including interest. Interest Receivable refers to interest income that has been earned but not yet received.
Step 3: Analyze the term 'Inventory' and determine why it is not considered a type of receivable. Inventory refers to goods available for sale or raw materials used in production, and it is classified as an asset rather than a receivable.
Step 4: Compare the characteristics of receivables (Accounts Receivable, Notes Receivable, Interest Receivable) with Inventory to confirm that Inventory does not fit the definition of a receivable.
Step 5: Conclude that Inventory is not a type of receivable because it does not represent an amount owed to the company by external parties, but rather a physical asset held for sale or production.