Which of the following would be the proper treatment of a significant credit balance in an account receivable?
A) Contra-asset
B) Owner's equity
C) Liability
D) Asset

Question

Quizplus · Accepted Answer

A significant credit balance in an account receivable indicates that the customer has paid more than the amount due or there are other reasons leading to a negative balance in the account receivable. This overpayment or credit balance is not an asset to the company but rather an obligation or liability because the company owes this amount back to the customer, either as a refund or as a credit for future purchases. Therefore, it should be treated as a liability on the company's balance sheet.

Which of the Following Would Be the Proper Treatment of a Significant