When the Account Receivable of an Individual Customer Has a Credit

question 32

Multiple Choice

When the account receivable of an individual customer has a credit balance of a material amount, this amount:

• A) must be included separately in the liability section of the balance sheet.
• B) may be deducted from the debit balances in other customers' accounts on the balance sheet.
• C) may be shown under "credit balances of customers' accounts" in the current asset section of the balance sheet.
• D) should be omitted from the current balance sheet.

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Definitions:

Joint And Several

A legal term referring to the liability shared by two or more parties, where each party is individually responsible for the entire obligation, as well as collectively with the others.

Corporate Veil

A legal concept that separates the personal liability of shareholders and officers from that of the corporation itself.

Artificial Legal Person

A non-human entity that is given legal rights and responsibilities, such as a corporation or a government body.

Bylaws

The internal rules of management adopted by a corporation at its first organizational meeting.