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

A(n) ______ is the legal right to receive cash from a credit sale and represents an asset of the company.

unearned revenue

accounts receivable

notes payable

prepaid expense

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Verified step by step guidance

Understand the concept of accounts receivable: Accounts receivable is the legal right to receive cash from a credit sale. It represents an asset because it is money owed to the company by customers who have purchased goods or services on credit.

Analyze the options provided: Unearned revenue refers to cash received before goods or services are provided, which is a liability. Notes payable is a liability representing amounts owed by the company. Prepaid expense is an asset but represents payments made in advance for future expenses, not cash owed to the company.

Identify the correct term: Based on the definition provided in the question, the term that matches the description of 'the legal right to receive cash from a credit sale and represents an asset of the company' is accounts receivable.

Relate accounts receivable to financial statements: Accounts receivable is reported as a current asset on the balance sheet because it is expected to be converted into cash within the operating cycle of the business.

Review the importance of accounts receivable: It is crucial for businesses to manage accounts receivable effectively to ensure timely collection of cash and maintain healthy cash flow.