What would you include on a Balance Sheet to show the amount owed by customers?

What would you include on a Balance Sheet to show the amount owed by customers?

• A. Accounts Payable
• B. Revenue
• C. Cash
• D. Accounts Receivable

Answer: (D)

The balance sheet shows what the company owns and what it owes at a moment in time, and the item that captures money customers owe is an asset called accounts receivable. This account records credit sales and represents expected cash inflows from customers. It sits under current assets because these amounts are typically collected within a short period, and it changes when sales on credit occur or when payments are received. Sometimes it’s shown net of an allowance for doubtful accounts to reflect potential uncollectible amounts. Other items don’t fit this purpose: accounts payable is a liability representing what the company owes to suppliers; revenue is income recognized over a period and appears on the income statement, not the balance sheet; cash is money on hand or in the bank, an asset, but it does not represent what customers owe.

The balance sheet shows what the company owns and what it owes at a moment in time, and the item that captures money customers owe is an asset called accounts receivable. This account records credit sales and represents expected cash inflows from customers. It sits under current assets because these amounts are typically collected within a short period, and it changes when sales on credit occur or when payments are received. Sometimes it’s shown net of an allowance for doubtful accounts to reflect potential uncollectible amounts.

Other items don’t fit this purpose: accounts payable is a liability representing what the company owes to suppliers; revenue is income recognized over a period and appears on the income statement, not the balance sheet; cash is money on hand or in the bank, an asset, but it does not represent what customers owe.