Which of the following is classified as an account receivable on the balance sheet?

• A. Interest receivable on loans
• B. Notes receivable from related parties
• C. Advances to employees
• D. Amounts owed by customers for goods sold on credit

Answer: (D)

Verified step by step guidance

1. Understand the concept of accounts receivable: Accounts receivable refers to amounts owed to a company by its customers for goods or services sold on credit. It is classified as a current asset on the balance sheet.
2. Analyze each option provided in the problem: Determine whether each item represents amounts owed by customers for goods or services sold on credit.
3. Option 1: Interest receivable on loans - This represents interest income earned but not yet received. It is not classified as accounts receivable but rather as interest receivable, a separate asset account.
4. Option 2: Notes receivable from related parties - Notes receivable are formal written promises to pay a certain amount, often including interest. While it is an asset, it is not classified as accounts receivable unless it specifically relates to credit sales.
5. Option 3: Advances to employees - Advances to employees represent amounts paid to employees in advance, often for expenses or payroll. This is not related to credit sales and is not classified as accounts receivable. The correct classification for accounts receivable is amounts owed by customers for goods sold on credit.