You need to track everything that involves money, including which of the following types of receivables?

• A. Only prepaid expenses
• B. Only cash and inventory
• C. Only accounts payable
• D. Accounts receivable, notes receivable, and other receivables

Answer: (D)

Verified step by step guidance

1. Understand the concept of receivables: Receivables represent amounts owed to a business by customers or other parties. They are considered assets because they are expected to bring future economic benefits.
2. Identify the types of receivables: The main types of receivables include accounts receivable (amounts owed by customers for goods or services provided on credit), notes receivable (formal written promises to pay a specific amount at a future date), and other receivables (such as interest receivable, tax refunds, or loans to employees).
3. Differentiate receivables from other financial items: Prepaid expenses, cash, inventory, and accounts payable are not classified as receivables. Prepaid expenses are payments made in advance for future benefits, cash is a liquid asset, inventory represents goods held for sale, and accounts payable are liabilities owed to suppliers.
4. Recognize the importance of tracking receivables: Proper tracking ensures accurate financial reporting, helps monitor customer payment behavior, and supports effective cash flow management.
5. Apply this understanding to the problem: The correct answer is accounts receivable, notes receivable, and other receivables because these are the types of receivables that involve tracking money owed to the business.