Accounts Receivable: Understanding the Basics
What is an accounts receivable?
Which of the following would be an example of an accounts receivable? A) Charges for a pt.'s office visit. B) Charges from the electric company. C) Payment made for the maintenance of the computer. D) Charges for a new ink cartridge for the printer. E) Payment made to the maintenance person. Final answer:
Answer
An accounts receivable refers to an amount owed to a company by its customers for goods or services that have been provided on credit. In this case, the charges for a pt.'s office visit, charges from the electric company, and charges for a new ink cartridge for the printer would all be examples of accounts receivable.
Explanation
An accounts receivable refers to an amount owed to a company by its customers for goods or services that have been provided on credit. In this case, the charges for a pt.'s office visit, charges from the electric company, and charges for a new ink cartridge for the printer would all be examples of accounts receivable. These are charges that have been made but not yet paid by the customers. The payment made for the maintenance of the computer and the payment made to the maintenance person, on the other hand, are examples of payments made by the company, not amounts owed to the company, so they would not be considered accounts receivable.
Understanding accounts receivable is important for businesses to manage their cash flow effectively. By tracking accounts receivable, companies can ensure timely payments from customers and maintain a healthy financial position. It also helps in assessing the creditworthiness of customers and making informed decisions about extending credit to them.
In conclusion, accounts receivable is a crucial aspect of a company's financial health, and it is essential for businesses to have a clear understanding of what constitutes accounts receivable and how to manage it efficiently.