Which term describes the amounts owed by customers?

Which term describes the amounts owed by customers?

• A. Accounts payable
• B. Revenue
• C. Accounts receivable
• D. Liabilities

Answer: (C)

Accounts receivable is the term for the amounts owed by customers. It represents money a business expects to collect from customers who bought on credit, so it’s an asset on the balance sheet because it will become cash in the future. These receivables increase when a sale is made on credit and decrease when customers pay or when the business adjusts for possible uncollectibles. This differs from accounts payable, which are amounts the company owes to others; from liabilities in general, which are obligations the company must satisfy; and from revenue, which is the income earned from sales, not the outstanding balances owed by customers.

Accounts receivable is the term for the amounts owed by customers. It represents money a business expects to collect from customers who bought on credit, so it’s an asset on the balance sheet because it will become cash in the future. These receivables increase when a sale is made on credit and decrease when customers pay or when the business adjusts for possible uncollectibles. This differs from accounts payable, which are amounts the company owes to others; from liabilities in general, which are obligations the company must satisfy; and from revenue, which is the income earned from sales, not the outstanding balances owed by customers.