International Association of Accessibility Professionals (IAAP) Certified Administrative Professional (CAP) Practice Exam

What is the term for amounts owed to a business by its debtors?

1. Assets

2. Receivables

3. Liabilities

4. Payables

The correct answer is: Receivables

The term for amounts owed to a business by its debtors is "receivables." This represents the money that is expected to be received from customers who have purchased goods or services on credit. When a company sells something and allows the buyer to pay later, that amount becomes an account receivable on the business's balance sheet. Receivables are considered a crucial part of a business's financial health, as they indicate future cash inflows. This is distinct from assets, which are resources owned by the company, or liabilities, which are obligations or debts that the company has to pay. Payables refer specifically to amounts the business owes to suppliers or creditors, rather than amounts owed to the company itself. Understanding these distinctions is essential for effective financial management and reporting.