Question

Sales Revenue and Service Revenue are two income statement accounts that relate to Accounts Receivable. Name two other accounts related to Accounts Receivable and Notes Receivable that would be reported on the income statement and indicate whether each would appear before, or after, Income from Operations for Execusmart Consultants

Answer 1

Accounts Receivable ⇒ Bad Debt expense ⇒ Before Income from Operations

Bad debt expense is related to accounts receivable as it shows the amount that credit customers defaulted on. It is an expense and will be shown before the Income from operations is calculated.

Notes Receivable ⇒ Interest Receivable ⇒ After Income from Operations

Interest receivable will be a gain to be received from Notes receivable. It is however only added to the Income from operations after the Income has been calculated.