Question

Accounts receivable is:

a. A record of all monies due to the practice
b. The people the practice owes money to
c. The amount of money a practice makes each month
d. Outstanding inventory bills

Answer 1

Accounts receivable is a record of all monies due to the practice, classed as an asset on a balance sheet. It indicates future cash to be received for the services or goods provided. Balance sheets list assets and liabilities, essential for understanding a company's or bank's financial health.

Step-by-step explanation:

Accounts receivable is a record of all monies due to the practice. It represents the line item on a company’s balance sheet that indicates what customers owe to the company for goods or services delivered, but not yet paid for. This makes accounts receivable an asset since it is equivalent to cash that will be received by the company in the future. Using a balance sheet is vital in accounting to list assets and liabilities. An asset, such as cash or a home, is valuable as it can be used to produce or obtain goods, services, or to settle debts. Liabilities, like a mortgage, are obligations owed to others. A bank's balance sheet, which lists both assets and liabilities, shows the institution's financial health. Net worth is calculated by subtracting the total liabilities from the total assets, revealing the capital available to the bank.