On a Balance Sheet, What Is the Preferable Presentation of Notes

question 21

Multiple Choice

On a balance sheet, what is the preferable presentation of notes or accounts receivable from officers, employees, or affiliated companies?

• A) As trade notes and accounts receivable if they otherwise qualify as current assets
• B) As assets but separately from other receivables
• C) As offsets to capital
• D) By means of notes or footnotes

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Definitions:

Corporate Form

A legal structure for businesses characterized by the business being considered a separate legal entity from its owners or shareholders.

Limited Liability

Limited liability is a form of legal protection for shareholders and owners that limits their loss to the amount invested in the company.

Transferability

Transferability is the ability of an asset to be transferred or moved from one party to another with ease.

Pre-tax Profit

Earnings of a business before any tax is applied; also known as gross profit or operating profit.