Interest is usually associated withGroup of answer choicesbad debts.doubtful accounts.notes receivable.accounts receivable.
Question
Interest is usually associated with
- bad debts.
- doubtful accounts.
- notes receivable.
- accounts receivable.
Solution
Interest is usually associated with notes receivable.
Here's why:
-
Bad debts: These are amounts that are uncollectible. They are not associated with interest because they represent the money that the business will never receive.
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Doubtful accounts: These are the amounts that the business thinks it may not collect. Again, these are not associated with interest because they represent potential losses.
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Notes receivable: These are written promises for amounts the business will receive. They are typically used for longer-term receivables and they usually do involve interest. The business will receive the amount of the note plus interest.
-
Accounts receivable: These are amounts the business expects to receive in the short term. They do not usually involve interest.
So, out of these options, interest is usually associated with notes receivable.
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