During Year 1,the accounts receivable balance increased.What does this indicate?

Question

Quizplus · Accepted Answer

An increase in accounts receivable balance indicates that credit sales exceeded collections on account during the period. This means that customers purchased goods or services on credit but did not pay for them immediately, resulting in an increase in the accounts receivable balance. Thus, option A is the correct choice. Option B is incorrect because an increase in accounts receivable is not added to net income in the operating activities section of a statement of cash flows prepared under the indirect method. Option C is incorrect because an increase in accounts receivable is not added to credit sales to determine the collections on account during the period. Option D is incorrect because an increase in accounts receivable does not necessarily mean there were no cash sales during the period.

During Year 1,the Accounts Receivable Balance Increased