Multiple Choice
Which of the following is NOT typically considered a factor on which credit is based when evaluating receivables?
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7. Receivables and Investments
Types of Receivables
Struggling with Financial Accounting?
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Which of the following is classified as a type of receivable in financial accounting?
A
Accounts Payable
B
Inventory
C
Prepaid Expenses
D
Accounts Receivable
Verified step by step guidance1
Understand the concept of receivables: In financial accounting, receivables represent amounts owed to a company by customers or other parties, typically arising from credit sales or other transactions.
Differentiate between receivables and other types of accounts: Accounts Payable represents amounts the company owes to suppliers, Inventory refers to goods held for sale, and Prepaid Expenses are payments made in advance for future benefits. None of these are classified as receivables.
Focus on Accounts Receivable: Accounts Receivable is a type of receivable because it represents money owed to the company by customers for goods or services provided on credit.
Review the classification criteria: Receivables are considered assets because they are expected to provide future economic benefits to the company when collected.
Confirm the correct answer: Based on the definitions and classifications, Accounts Receivable is the correct answer as it fits the criteria for a type of receivable in financial accounting.
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