Which of the following are classified as types of receivables on a company's balance sheet?

• A. Accounts receivable and notes receivable
• B. Accounts payable and accrued liabilities
• C. Common stock and retained earnings
• D. Prepaid expenses and inventory

Answer: (A)

Verified step by step guidance

1. Understand the concept of receivables: Receivables are amounts owed to a company by its customers or other parties. They are classified as assets on the balance sheet because they represent future economic benefits.
2. Identify the types of receivables: The two main types of receivables are 'Accounts Receivable' and 'Notes Receivable'. Accounts receivable arise from credit sales, while notes receivable are formal written promises to pay a specific amount at a future date.
3. Eliminate incorrect options: 'Accounts payable and accrued liabilities' are liabilities, not receivables. 'Common stock and retained earnings' are part of equity, not receivables. 'Prepaid expenses and inventory' are assets, but they are not classified as receivables.
4. Focus on the correct classification: Only 'Accounts Receivable' and 'Notes Receivable' are classified as types of receivables on a company's balance sheet.
5. Review the balance sheet structure: Receivables are listed under current assets if they are expected to be collected within one year, reinforcing their classification as assets.