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

7. Which of the following would be considered a red flag or suspicious item related to receivables on John’s credit report?

A large accounts receivable balance from a customer with a history of late payments

A note receivable that is due in 30 days from a reputable customer

A small balance in interest receivable from a long-term investment

A trade receivable that is fully secured by collateral

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Verified step by step guidance

Understand the concept of receivables: Receivables represent amounts owed to a company by customers or other parties. They can include accounts receivable, notes receivable, and interest receivable. Suspicious items in receivables may indicate potential risks or issues in financial reporting.

Analyze the first option: 'A large accounts receivable balance from a customer with a history of late payments.' This could be a red flag because it suggests a risk of non-payment or delayed payment, which may impact the company's cash flow and financial stability.

Evaluate the second option: 'A note receivable that is due in 30 days from a reputable customer.' This is generally not suspicious because the customer is reputable, and the note is short-term, indicating a lower risk of default.

Assess the third option: 'A small balance in interest receivable from a long-term investment.' This is not typically considered suspicious because it represents accrued interest from an investment, which is normal and expected in financial accounting.

Review the fourth option: 'A trade receivable that is fully secured by collateral.' This is not suspicious because the receivable is backed by collateral, reducing the risk of non-payment. Collateral provides security for the company in case the debtor defaults.