Multiple Choice
For a large retailer, the time that an obligation remains as an account payable (A/P) is typically:
17
views
7. Receivables and Investments
Types of Receivables
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Accounts receivable are normally classified as which of the following on the balance sheet?
A
Long-term investments
B
Current assets
C
Current liabilities
D
Noncurrent assets
Verified step by step guidance1
Understand the concept of accounts receivable: Accounts receivable represent amounts owed to a company by its customers for goods or services provided on credit. These are expected to be collected within a short period, typically within one year.
Review the classification of assets on the balance sheet: Assets are categorized as current or noncurrent based on their liquidity and the time frame within which they are expected to be converted into cash or used.
Define current assets: Current assets are resources that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer. Examples include cash, inventory, and accounts receivable.
Analyze why accounts receivable are classified as current assets: Since accounts receivable are typically collected within one year, they meet the criteria for current assets. They are not long-term investments, liabilities, or noncurrent assets.
Conclude the classification: Based on the definitions and criteria, accounts receivable are classified as current assets on the balance sheet.
Related Videos
Related Practice
Types of Receivables practice set
Problem sets built by lead tutorsExpert video explanations