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 is classified as a note receivable rather than an account receivable?

A customer purchases goods on credit with payment due in 30 days.

A customer signs a formal written promise to pay a specific amount plus interest at a future date.

A business advances cash to an employee for travel expenses.

A company expects to receive a tax refund from the government.

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Verified step by step guidance

Understand the difference between a note receivable and an account receivable. A note receivable is a formal written promise to pay a specific amount, often including interest, at a future date. An account receivable, on the other hand, is an informal agreement where payment is expected for goods or services provided, typically within a short period.

Analyze the first option: 'A customer purchases goods on credit with payment due in 30 days.' This describes an account receivable because there is no formal written promise, only an informal agreement for payment within a short period.

Evaluate the second option: 'A customer signs a formal written promise to pay a specific amount plus interest at a future date.' This is classified as a note receivable because it involves a formal written agreement and includes interest, which is a key characteristic of notes receivable.

Consider the third option: 'A business advances cash to an employee for travel expenses.' This is not classified as either a note receivable or an account receivable. It is typically recorded as an advance or prepaid expense.

Review the fourth option: 'A company expects to receive a tax refund from the government.' This is not classified as a note receivable or an account receivable. It is recorded as a receivable from the government, specifically a tax refund receivable.