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 distinguishes notes receivable from accounts receivable?

Accounts receivable always include interest, while notes receivable do not.

Notes receivable are always due within 30 days, while accounts receivable have no set due date.

Notes receivable are formal written promises to pay a specific amount at a future date, while accounts receivable are informal and usually arise from sales on credit.

Accounts receivable are recorded only when cash is received, while notes receivable are recorded when goods are delivered.

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Verified step by step guidance

Step 1: Understand the concept of accounts receivable. Accounts receivable represent amounts owed to a company by customers for goods or services provided on credit. They are typically informal agreements and do not include interest unless specified.

Step 2: Understand the concept of notes receivable. Notes receivable are formal written promises to pay a specific amount of money at a future date. These notes often include interest and are legally binding.

Step 3: Compare the two concepts. The key distinction is that notes receivable are formal agreements documented in writing, often with interest and a specific due date, while accounts receivable are informal and typically arise from credit sales without a formal written agreement.

Step 4: Eliminate incorrect options. For example, accounts receivable do not always include interest, and notes receivable are not always due within 30 days. Additionally, accounts receivable are recorded when goods or services are provided, not only when cash is received.

Step 5: Identify the correct answer. Based on the definitions and comparisons, the correct distinction is that notes receivable are formal written promises to pay a specific amount at a future date, while accounts receivable are informal and usually arise from sales on credit.