Question

True or False? Typically, increasing sales also leads to an increase in accounts receivable. The increase in accounts receivable is typically financed by both short and long-term assets.

Answer 1

Typically, increasing sales also leads to an increase in accounts receivable. The increase in accounts receivable is typically financed by both short and long-term assets.

True : Sales are not always cash sale, customers can avail credits means they pays the company for its service and goods after they received it. But company records it as sales when it delivers the goods or services. So this sales which is credit based and company have not received cash against it is mentioned as sales receivables in balance sheet asset side. Generally company has predefined credit policy for it's customer hence in general as sales increases account receivables also increases.