What term describes money a customer owes that was put on credit?

What term describes money a customer owes that was put on credit?

• A. Accounts receivable
• B. Accounts payable
• C. Doubtful accounts
• D. Accounts uncollectible

Answer: (A)

Money a customer owes after a credit sale is called accounts receivable. It represents a claim against customers and is recorded as a current asset on the balance sheet because it will convert to cash in the near term. This occurs when goods or services are delivered on credit; cash will be received later. Accounts payable, in contrast, is money the company owes to others, a liability. Doubtful accounts is an allowance that estimates how much of the receivables may not be collected. There isn't a standard term "accounts uncollectible." Since the question asks for the term for money customers owe on credit, accounts receivable is the correct term.

Money a customer owes after a credit sale is called accounts receivable. It represents a claim against customers and is recorded as a current asset on the balance sheet because it will convert to cash in the near term. This occurs when goods or services are delivered on credit; cash will be received later. Accounts payable, in contrast, is money the company owes to others, a liability. Doubtful accounts is an allowance that estimates how much of the receivables may not be collected. There isn't a standard term "accounts uncollectible." Since the question asks for the term for money customers owe on credit, accounts receivable is the correct term.