A bookkeeper for a construction company sends out bills once a month. How should the company file its copy of each bill?

A bookkeeper for a construction company sends out bills once a month. How should the company file its copy of each bill?

• A. Accounts payable
• B. Cash receipts
• C. Petty cash
• D. Accounts receivable

Answer: (D)

When you bill a customer, you are creating money that is owed to your firm, an accounts receivable situation. Keeping the copy of each bill with the accounts receivable records helps track who owes what, when payments are due, and how much is still outstanding. Accounts payable is the opposite—money you owe to suppliers. Cash receipts track money you’ve actually collected, not what you expect to collect. Petty cash is a small, on-hand fund for minor expenses. When the customer pays, you would debit cash and credit accounts receivable to reduce what is owed.

When you bill a customer, you are creating money that is owed to your firm, an accounts receivable situation. Keeping the copy of each bill with the accounts receivable records helps track who owes what, when payments are due, and how much is still outstanding. Accounts payable is the opposite—money you owe to suppliers. Cash receipts track money you’ve actually collected, not what you expect to collect. Petty cash is a small, on-hand fund for minor expenses. When the customer pays, you would debit cash and credit accounts receivable to reduce what is owed.