In financial accounting, assets created by selling goods and services on credit are generally classified as which type of receivable?

• A. Unearned revenue
• B. Notes receivable
• C. Accounts receivable
• D. Interest receivable

Answer: (C)

Verified step by step guidance

1. Understand the nature of the transaction: When a company sells goods or services on credit, it means the customer has received the product or service but has not yet paid cash.
2. Identify the type of receivable: Since the company expects to receive payment in the future, this creates a claim against the customer, which is recorded as a receivable.
3. Differentiate between types of receivables: Notes receivable usually involve a formal written promise to pay, often with interest; interest receivable is interest earned but not yet received; unearned revenue is a liability for payments received before delivering goods or services.
4. Recognize that accounts receivable represent amounts owed by customers from credit sales without formal promissory notes, making it the typical classification for such transactions.
5. Conclude that assets created by selling goods and services on credit are classified as accounts receivable.