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

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Why do banks receive financial assets when they make loans?

Because banks record the loan as an expense on their income statement.

Because banks exchange cash for physical assets like equipment.

Because the loan agreement itself is a financial asset representing the bank's right to receive future payments.

Because banks purchase stocks from borrowers as collateral.

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Verified step by step guidance

Understand the concept of financial assets: Financial assets are intangible assets that derive their value from a contractual claim, such as cash, receivables, or loans. They represent the right to receive future payments.

Recognize the nature of loans: When banks make loans, they are essentially creating a financial agreement with the borrower. This agreement specifies the terms under which the borrower will repay the loan, including interest and principal payments.

Identify why the loan agreement is a financial asset: The loan agreement is considered a financial asset because it represents the bank's right to receive future payments from the borrower. This right has monetary value and is recorded as an asset on the bank's balance sheet.

Clarify why the other options are incorrect: Banks do not record loans as expenses on their income statement; instead, they record interest income from loans. Banks do not exchange cash for physical assets like equipment in this context, nor do they purchase stocks from borrowers as collateral.

Conclude with the correct reasoning: The correct answer is that the loan agreement itself is a financial asset because it represents the bank's right to receive future payments, which is a key characteristic of financial assets.