Which statement describes the difference between a receivable and a payable?

Which statement describes the difference between a receivable and a payable?

• A. A receivable is money owed to the organization; a payable is money the organization owes to others.
• B. A receivable is money owed to the organization; a payable is money the organization owes to others.
• C. A receivable is cash on hand; a payable is cash in the bank.
• D. A receivable is about expenses; a payable is about revenues.

Answer: (B)

The main idea is that a receivable is money owed to you, while a payable is money you owe to someone else. A receivable is an asset because it represents a future cash inflow from customers who owe you for goods or services you’ve already delivered. A payable is a liability because it represents a future cash outflow for debts you must settle with suppliers or vendors. On the balance sheet, receivables sit in current assets and payables in current liabilities, reflecting timing of cash receipts and payments. The other ideas don’t fit because cash on hand vs cash in the bank describes actual cash liquidity, not whether money is owed to you or you owe to others. And expenses vs revenues relate to income statement items, not the classification of amounts owed or owed to you.

The main idea is that a receivable is money owed to you, while a payable is money you owe to someone else. A receivable is an asset because it represents a future cash inflow from customers who owe you for goods or services you’ve already delivered. A payable is a liability because it represents a future cash outflow for debts you must settle with suppliers or vendors. On the balance sheet, receivables sit in current assets and payables in current liabilities, reflecting timing of cash receipts and payments.

The other ideas don’t fit because cash on hand vs cash in the bank describes actual cash liquidity, not whether money is owed to you or you owe to others. And expenses vs revenues relate to income statement items, not the classification of amounts owed or owed to you.