Trade receivables are money owed to the business by whom?

• A. A credit customer who owes the business money
• B. A supplier who is owed money by the business
• C. A bank account held by the business
• D. The owner of the business

Answer: (A)

Trade receivables are money owed to the business by customers who have bought goods or services on credit. They appear as a current asset on the balance sheet because the business expects to be paid soon. For example, if a customer buys £500 on credit, that amount becomes a trade receivable until payment is received. This is different from money the business owes to others (trade payables), or from cash in the bank, or from the owner’s equity. So trade receivables specifically refer to amounts customers owe the business after credit sales.