Accounts receivable would be an example of what kind of account?

Accounts receivable would be an example of what kind of account?

• A. An asset account.
• B. A liability account.
• C. A revenue account.
• D. An equity account.

Answer: (A)

Accounts receivable represents money customers owe to the company for goods or services already provided, so it is classified as an asset. It reflects future economic benefits—the cash the company expects to receive. On the balance sheet, it sits among current assets and changes when credit sales are made (you debit accounts receivable and credit revenue) or when cash is collected (you debit cash and credit accounts receivable). It isn’t a liability, because liabilities are what the company owes to others; it isn’t revenue, since revenue is income earned from operations, not amounts owed by customers. It also isn’t equity, which represents the owners’ claim on assets.

Accounts receivable represents money customers owe to the company for goods or services already provided, so it is classified as an asset. It reflects future economic benefits—the cash the company expects to receive. On the balance sheet, it sits among current assets and changes when credit sales are made (you debit accounts receivable and credit revenue) or when cash is collected (you debit cash and credit accounts receivable). It isn’t a liability, because liabilities are what the company owes to others; it isn’t revenue, since revenue is income earned from operations, not amounts owed by customers. It also isn’t equity, which represents the owners’ claim on assets.