In financial accounting, accounts receivable refers to which of the following?

• A. Amounts owed by customers from credit sales of goods or services, usually supported by an invoice
• B. Cash collected in advance from customers for goods or services to be provided in the future (unearned revenue)
• C. Amounts owed by customers that are evidenced by a formal written promise to pay, often with interest (notes receivable)
• D. Long-term investments in debt securities such as bonds held to earn interest income

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of accounts receivable in financial accounting. Accounts receivable represents amounts that customers owe to a business as a result of credit sales of goods or services.
2. Step 2: Recognize that accounts receivable typically arise when a company sells goods or services on credit, meaning the customer has not yet paid but is expected to pay in the near future.
3. Step 3: Differentiate accounts receivable from other similar terms: for example, unearned revenue refers to cash collected in advance before goods or services are delivered, notes receivable are formal written promises to pay (often with interest), and long-term investments in debt securities are unrelated to customer credit sales.
4. Step 4: Identify that accounts receivable are usually supported by an invoice, which documents the amount owed and the terms of payment.
5. Step 5: Conclude that the correct definition of accounts receivable is the amounts owed by customers from credit sales of goods or services, usually supported by an invoice.