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

Which type of receivable is considered to have the highest liquidity and can be most easily converted into cash?

Advances to Employees

Interest Receivable

Notes Receivable

Accounts Receivable

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Verified step by step guidance

Understand the concept of liquidity: Liquidity refers to how quickly and easily an asset can be converted into cash without losing value. In financial accounting, receivables are assessed based on their liquidity.

Review the types of receivables listed: Advances to Employees, Interest Receivable, Notes Receivable, and Accounts Receivable. Each has different characteristics affecting its liquidity.

Analyze Accounts Receivable: Accounts Receivable represents amounts owed by customers for goods or services provided on credit. These are typically short-term and expected to be collected quickly, making them highly liquid.

Compare Accounts Receivable to other receivables: Advances to Employees are not directly tied to sales and may take longer to recover. Interest Receivable depends on the timing of interest payments, and Notes Receivable often involve formal agreements with longer terms, reducing their liquidity compared to Accounts Receivable.

Conclude that Accounts Receivable has the highest liquidity among the options because it is directly tied to the company's core operations and is expected to be collected in the shortest time frame.