Chapter 5 Obj 3

Question 1

Define “accounts receivable”

Answer 1

Money due from another business or individual as payment for services performed or good delivered; typically due in 30 to 60 days and does not involve a formal note or interest.

Question 2

Definte “notes receivable”

Answer 2

A legal document given by a borrower to a lender stating timing of repayment and the amount (principal and interest) to be repaid.

Question 3

If a note receivable has a due date over 1 year, is it classified as current or non-current receivable?

Answer 3

non-current. accounts receivable (typically due in 30-60 days) and notes receivable (typically due in 3-12 months) are often current

Question 4

What are “trade receivables”?

Answer 4

An account receivable that is due from a customer purchasing inventory in the ordinary course of business

Question 5

What are “non-trade receivables”?

Answer 5

Receivables that arise from transactions not involving inventory (ie interest receivable or cash advances to employees)