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 accounts receivable?

Amounts owed to a company by its customers for goods or services sold on credit

Amounts a company owes to its suppliers for goods or services purchased on credit

Cash held by a company in its bank accounts

Investments in stocks and bonds held for trading purposes

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Verified step by step guidance

Understand the concept of accounts receivable: Accounts receivable refers to the amounts owed to a company by its customers for goods or services that the company has sold on credit. It represents an asset on the company's balance sheet because it is money that the company expects to receive in the future.

Analyze the options provided: Carefully read each option and determine which one aligns with the definition of accounts receivable. Pay attention to keywords such as 'owed to a company,' 'customers,' and 'sold on credit.'

Eliminate incorrect options: For example, 'Amounts a company owes to its suppliers' refers to accounts payable, not accounts receivable. Similarly, 'Cash held by a company' refers to cash or cash equivalents, and 'Investments in stocks and bonds' refers to marketable securities or investment accounts.

Identify the correct option: The correct description of accounts receivable is 'Amounts owed to a company by its customers for goods or services sold on credit.' This matches the definition and is consistent with financial accounting principles.

Review the importance of accounts receivable: Accounts receivable is a critical component of a company's working capital and liquidity. It reflects the company's ability to manage credit sales and collect payments efficiently.