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 most likely created when a customer, such as J, chooses to pay a monthly premium for an insurance policy?

Premium Receivable

Accounts Receivable

Interest Receivable

Notes Receivable

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Verified step by step guidance

Understand the concept of receivables: Receivables are amounts owed to a company by its customers or other parties. They are classified based on the nature of the transaction that created them.

Analyze the scenario: The problem mentions a customer paying a monthly premium for an insurance policy. This indicates a recurring payment obligation tied to an insurance contract.

Identify the type of receivable: Premium Receivable is specific to insurance companies and represents amounts owed by policyholders for their insurance premiums. This aligns with the scenario described.

Compare with other options: Accounts Receivable generally refers to amounts owed for goods or services sold on credit, which is not specific to insurance premiums. Interest Receivable arises from interest earned but not yet received, and Notes Receivable represents amounts owed under formal promissory notes. None of these fit the context of monthly insurance premiums.

Conclude: Based on the nature of the transaction and the definitions of the receivable types, Premium Receivable is the most appropriate classification for the receivable created in this scenario.