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When a primary care physician (PCP) office collects a \$35 copay from a patient, which type of receivable is being settled?
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7. Receivables and Investments
Types of Receivables
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Amounts owed to the firm by customers who bought goods and services on credit are called:
A
Interest Receivable
B
Unearned Revenue
C
Accounts Receivable
D
Notes Receivable
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Understand the concept of Accounts Receivable: These are amounts owed to a company by customers who purchased goods or services on credit. It represents an asset on the company's balance sheet.
Differentiate between the options provided: Interest Receivable refers to interest income earned but not yet received, Unearned Revenue is a liability representing payments received before delivering goods or services, and Notes Receivable are formal written promises to pay a certain amount, often including interest.
Recognize that Accounts Receivable specifically pertains to credit sales where customers owe money for goods or services already delivered.
Relate Accounts Receivable to the accounting equation: It increases assets and is recorded when revenue is recognized under accrual accounting principles.
Conclude that the correct term for amounts owed by customers for credit sales is Accounts Receivable, as it matches the definition provided in the problem.
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