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 of the following best describes checks in the context of types of receivables?

Checks are negotiable instruments that represent a written order directing a bank to pay a specific sum from the drawer's account to the payee.

Checks are a type of nontrade receivable arising from advances to employees.

Checks are considered inventory until they are deposited in the bank.

Checks are classified as notes receivable because they always have a formal promissory note attached.

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Verified step by step guidance

Understand the context of the question: The problem is asking about the classification and description of checks in the context of types of receivables.

Review the definition of checks: Checks are negotiable instruments that represent a written order directing a bank to pay a specific sum from the drawer's account to the payee. This is the most accurate description of checks.

Analyze the incorrect options: Checks are not classified as nontrade receivables arising from advances to employees, as this describes a different type of receivable. Checks are also not considered inventory, as they are financial instruments, not physical goods. Lastly, checks are not classified as notes receivable because they do not always have a formal promissory note attached.

Relate checks to receivables: Checks are typically associated with accounts receivable when they are received as payment for goods or services. They are not inherently classified as notes receivable or inventory.

Conclude the correct classification: Based on the definitions and analysis, checks are best described as negotiable instruments that represent a written order directing a bank to pay a specific sum from the drawer's account to the payee.