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

5. When John transfers funds online from his savings account, how should this transaction be classified in terms of receivables on his financial statement?

It creates a notes receivable, as John has issued a formal note to the bank.

It is classified as an interest receivable, since interest will be earned on the transferred funds.

It creates an accounts receivable, as John is owed money by the bank.

It does not create a receivable, as it is a transfer between John's own accounts.

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Verified step by step guidance

Understand the nature of the transaction: John is transferring funds online from his savings account to another account. This is an internal transfer between his own accounts, not involving any external party.

Review the definition of receivables: Receivables are amounts owed to a business or individual by another party, typically as a result of a credit transaction. Examples include accounts receivable, notes receivable, and interest receivable.

Analyze the options provided: A notes receivable arises when a formal written promise to pay is issued, which is not the case here. Interest receivable refers to interest earned but not yet received, which also does not apply. Accounts receivable represents amounts owed by customers or other parties, which is irrelevant in this context.

Conclude that no receivable is created: Since this is a transfer between John's own accounts, there is no external party involved, and no receivable is generated. The transaction is simply a reallocation of funds within John's financial accounts.

Classify the transaction correctly: This transaction should be recorded as a transfer between accounts in John's financial records, not as a receivable of any kind.