Interpreting Receivable Balances as Income Timing Steps:

• Note commission receivable shows a debit balance of 250, indicating income advanced for future periods.
• Note rent receivable shows a credit balance of 500, indicating income already collected.
• Link debit to prepaid status (liability-like for future earning) and credit to received status (immediate availability).
• Compare to choices: B matches prepaid for debit and received for credit.

Why B is correct:

• In accrual accounting, a debit balance in an income receivable account represents income prepaid (received but deferred to future periods), while a credit balance represents income received (earned or collected upfront), per double-entry principles.

Why the others are wrong:

• A: Labels both as outstanding, ignoring credit balance's received nature.
• C: Assigns outstanding to credit balance, which signifies received income, not pending.
• D: Calls both prepaid, overlooking credit balance as fully received.

Final answer: B