Accounts receivable is classified as what on financial records?

Accounts receivable is classified as what on financial records?

• A. Asset
• B. Liability
• C. Revenue
• D. Equity

Answer: (A)

Accounts receivable represents amounts customers owe you for sales made on credit. Because it will bring cash into the business in the future and is controlled by the company from past transactions, it is classified as an asset on the balance sheet. It’s typically a current asset since collection usually happens within a short period. It isn’t a liability, revenue, or equity. In practice, you record a sale on credit by debiting Accounts Receivable and crediting Revenue; when you collect cash, you debit Cash and credit Accounts Receivable. Some receivables may be adjusted for doubtful accounts, reducing the asset to its net realizable value.

Accounts receivable represents amounts customers owe you for sales made on credit. Because it will bring cash into the business in the future and is controlled by the company from past transactions, it is classified as an asset on the balance sheet. It’s typically a current asset since collection usually happens within a short period. It isn’t a liability, revenue, or equity. In practice, you record a sale on credit by debiting Accounts Receivable and crediting Revenue; when you collect cash, you debit Cash and credit Accounts Receivable. Some receivables may be adjusted for doubtful accounts, reducing the asset to its net realizable value.