Question 1

When posting is up-to-date, the balance in the accounts receivable subsidiary ledger must equal the balance in the general ledger.

Accepted Answer

This is because the accounts receivable subsidiary ledger contains detailed information about individual customer balances, which should be summarized and reconciled with the general ledger balance to ensure accuracy and completeness of the accounts receivable account.

Question 2

Trade receivables can be accounts receivable or notes receivable.

Accepted Answer

Trade receivables include both accounts and notes receivable, which are both forms of debt owed to a company by its customers for goods or services provided.

Question 3

Other receivables include nontrade receivables such as loans to company officers.

Accepted Answer

Other receivables can include nontrade receivables such as loans made to company officers.

Question 4

A subsidiary ledger is a group of accounts that provides details about a control account in the general ledger.

Accepted Answer

This statement is true. A subsidiary ledger is a collection of accounts that are grouped together to provide more detailed information about a specific control account in the general ledger. Examples of subsidiary ledgers include accounts receivable, accounts payable, and inventory.

Question 5

Interest revenue is never earned on accounts receivable.

Accepted Answer

Interest revenue can be earned on accounts receivable if the terms of the sale include a provision for interest on overdue payments. However, if there is no such provision, interest revenue would not be earned on accounts receivable.

Question 6

Receivables are considered to be financial assets.

Accepted Answer

Receivables are financial assets as they represent the money owed to a company by its customers or clients. They are recorded as assets in the balance sheet of a company.

Question 7

Advances to employees are a type of accounts receivable.

Accepted Answer

Advances to employees are considered a type of asset for the company, specifically a current asset under the category of "other receivables" or "other current assets," not accounts receivable, which typically arise from sales to customers.

Question 8

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.

Accepted Answer

An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the less likely it is to be collected.

Question 9

Account for bad debts.

Accepted Answer

The answer of Account for bad debts....

Question 10

Both accounts receivable and notes receivable represent claims that are expected to be collected in cash.

Accepted Answer

Both accounts receivable and notes receivable are assets that represent money that is owed to a company and expected to be collected in cash. This can be from customers making purchases on credit (accounts receivable) or from individuals or entities who have borrowed money and promised to repay it with interest (notes receivable).

Question 11

Account for notes receivable.

Accepted Answer

The answer of Account for notes receivable....

Question 12

If a company such as Sears sponsors its own credit card, when customers use their Sears card the sale is recorded as a cash sale.

Accepted Answer

The sale is recorded as a credit sale because the customer is essentially borrowing money from Sears to make the purchase with the credit card.

Question 13

A receivable is recognized when the sales effort is substantially complete.

Accepted Answer

A receivable is recognized when the sales effort is substantially complete, which means that the product or service has been delivered or rendered to the customer, and no significant uncertainties remain related to payment. At this point, the seller can recognize revenue and record an account receivable in its books.

Question 14

When a subsidiary ledger and a control account are used, each journal entry that affects accounts receivable must be posted twice.

Accepted Answer

Each journal entry will be posted to the subsidiary ledger for accounts receivable and also to the control account for accounts receivable.

Question 15

Explain the statement presentation of receivables.

Accepted Answer

The answer of Explain the statement presentation of receivables....

Question 16

A receivable is recognized regardless of collection risk.

Accepted Answer

The answer of A receivable is recognized regardless of collection...

Question 17

Under the allowance method for uncollectible accounts, bad debts expense is not recorded until a customer defaults.

Accepted Answer

Under the allowance method, bad debts expense is estimated and recorded in the same period as the sale, even though the specific customer may not have defaulted yet. This is done to match expenses with revenues and to properly reflect the estimated amount of uncollectible accounts in the financial statements.

Question 18

Identify the types of receivables and record accounts receivable transactions.

Accepted Answer

The answer of Identify the types of receivables and record...

Question 19

Accounts receivable can be the result of either cash or credit sales.

Accepted Answer

Accounts receivable arise from credit sales only, not cash sales, as they represent the amount of money owed to a company by its customers for goods or services delivered but not yet paid for.

Question 20

Trade receivables occur when two companies trade or exchange notes receivables.

Accepted Answer

Trade receivables refer to the amount owed to a company by its customers for goods or services sold on credit. It does not involve the exchange of notes receivables between two companies.

Quiz 8: Reporting and Analyzing Receivables