The accounts receivable generated by credit sales transactions are nearly always material to the balance sheet

Question

The accounts receivable generated by credit sales transactions are nearly always material to the balance sheet. True or False ?

If False What is needed to make the statement True?

Answer 1

Actually, it should not be true. If it's true, then you're financing your debtors. It will only be true, i.e. material to the balance sheet, if the co. does not have much of other assets in the balance sheet like fixed assets, investments of marketable securities, inventories, prepayments & cash and cash equivalents, etc

Answer 2

True.
The accounts receivable are reported on the balance sheet. If credit sales are made, sales (revenue) account is credited and accounts receivable is Debited. In this case, it is material. When cash is collected from the transaction, Cash account is debited and Accounts Receivable is credited, nothing is done to sales (revenue) account until you close out all other temporary (nominal) accounts.

To make it false, you would say "... material to the income statement." While the sales transaction would be material to the income statement, accounts receivable is not material in the income statement, not even cash.

Answer 3

When you are debiting A/R you are stating that the sale was made but the cash hasnt been received yet. A debit in A/R is actually an asset. When you receive the cash from the sale that was made you would be crediting A/R and debiting cash. Dont look at debits as a subtraction of assets and dont look at credits as an addition to assets. You have to understand what each account is and how it is impacted by debit/credit. Please remember to vote on your answer

Answer 4

accounts receivable are a current asset. Therefore, they go on the balance sheet.

TRUE