Which type of receivable is typically recorded in an account called 'Accounts Receivable'?

• A. Interest receivable
• B. Notes receivable
• C. Trade receivables
• D. Advances to employees

Answer: (C)

Verified step by step guidance

1. Understand the concept of 'Accounts Receivable': Accounts Receivable refers to amounts owed to a business by its customers for goods or services provided on credit. It is a current asset on the balance sheet.
2. Identify the types of receivables listed in the problem: The options provided are Interest Receivable, Notes Receivable, Trade Receivables, and Advances to Employees.
3. Clarify the nature of each type of receivable: Interest Receivable represents interest earned but not yet received, Notes Receivable refers to amounts owed under formal promissory notes, Trade Receivables are amounts owed by customers for goods or services sold on credit, and Advances to Employees are funds given to employees that are expected to be repaid.
4. Determine which type of receivable is most commonly recorded in 'Accounts Receivable': Trade Receivables are typically recorded in the 'Accounts Receivable' account because they arise from the core business operations of selling goods or services on credit.
5. Conclude that other types of receivables, such as Interest Receivable, Notes Receivable, and Advances to Employees, are usually recorded in separate accounts to distinguish them from Trade Receivables.