Which item represents the amount customers owe the business?

Which item represents the amount customers owe the business?

• A. Assets
• B. Liabilities
• C. current assets
• D. accounts receivable

Answer: (D)

When customers buy on credit, the business expects to collect that money in the future. This owed amount is recorded as accounts receivable, an asset on the balance sheet because it represents a future cash inflow. Liabilities are what the business owes to others, so they don’t fit here. While current assets is the broader category that includes accounts receivable, the specific item that names the money owed by customers is accounts receivable. In short, accounts receivable is the precise term for the amount customers owe to the business.

When customers buy on credit, the business expects to collect that money in the future. This owed amount is recorded as accounts receivable, an asset on the balance sheet because it represents a future cash inflow. Liabilities are what the business owes to others, so they don’t fit here. While current assets is the broader category that includes accounts receivable, the specific item that names the money owed by customers is accounts receivable. In short, accounts receivable is the precise term for the amount customers owe to the business.