What is referred to as 'money owed to the business'?

What is referred to as 'money owed to the business'?

• A. Accounts Payable
• B. Accounts Receivable
• C. Working Capital
• D. Current Liabilities

Answer: (B)

The term 'money owed to the business' specifically refers to amounts that customers or clients owe for goods or services provided, which falls under the category of accounts receivable. Accounts receivable is an asset on the balance sheet, reflecting the expectation that the company will receive payment from those accounts in the future. This concept is critical in understanding cash flow management. When a business extends credit to customers, it creates a receivable for which it expects to receive cash. These amounts can significantly impact a company's liquidity, as they represent potential cash inflows that can be used for operations, investments, or paying off liabilities. In contrast, accounts payable involves money that the business owes to suppliers or creditors, working capital refers more broadly to the difference between current assets and current liabilities, and current liabilities represent obligations that the business needs to settle within a year. Hence, accounts receivable is the most accurate term for describing money that is owed to the business.

The term 'money owed to the business' specifically refers to amounts that customers or clients owe for goods or services provided, which falls under the category of accounts receivable. Accounts receivable is an asset on the balance sheet, reflecting the expectation that the company will receive payment from those accounts in the future.

This concept is critical in understanding cash flow management. When a business extends credit to customers, it creates a receivable for which it expects to receive cash. These amounts can significantly impact a company's liquidity, as they represent potential cash inflows that can be used for operations, investments, or paying off liabilities.

In contrast, accounts payable involves money that the business owes to suppliers or creditors, working capital refers more broadly to the difference between current assets and current liabilities, and current liabilities represent obligations that the business needs to settle within a year. Hence, accounts receivable is the most accurate term for describing money that is owed to the business.