Certified Paraoptometric (CPO) Practice Exam 2025

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What is meant by 'Accounts Receivable'?

  1. Supplies purchased by the business

  2. Outstanding obligations owed to the business by others

  3. Payments made by the business to suppliers

  4. Future income expected from sales

The correct answer is: Outstanding obligations owed to the business by others

'Accounts Receivable' refers to the outstanding obligations owed to the business by others, typically arising from credit sales or services provided on credit. When a business sells goods or services to a customer and allows them to pay later, the amount due is recorded as accounts receivable. This is an essential aspect of accounting because it represents money that the business expects to collect in the future, impacting cash flow and overall financial health. Therefore, recognizing accounts receivable is crucial for managing business resources effectively and understanding the company's financial position.

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