Multiple Choice
Which of the following types of receivables is most likely to appear on a company's credit report?
19
views
7. Receivables and Investments
Types of Receivables
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is classified as an accounts receivable on a company's balance sheet?
A
Loans made to employees
B
Interest receivable from investments
C
Advances to suppliers
D
Amounts owed by customers for goods sold on credit
Verified step by step guidance1
Understand the concept of accounts receivable: Accounts receivable refers to amounts owed to a company by its customers for goods or services provided on credit. It represents a current asset on the balance sheet.
Analyze each option provided in the problem: Loans made to employees, interest receivable from investments, and advances to suppliers are not amounts owed by customers for goods sold on credit. These are classified differently on the balance sheet.
Focus on the correct answer: Amounts owed by customers for goods sold on credit are classified as accounts receivable because they directly relate to the company's core operations of selling goods or services.
Relate accounts receivable to the balance sheet: Accounts receivable is recorded under current assets because it is expected to be converted into cash within a short period, typically within one year.
Conclude the classification: Based on the definition and analysis, amounts owed by customers for goods sold on credit are the correct classification for accounts receivable on the balance sheet.
Related Videos
Related Practice
Types of Receivables practice set
Problem sets built by lead tutorsExpert video explanations