Asked by Shaylie Pickrell on Jul 01, 2024
Verified
When ABC Co. makes a sale of inventory on credit to XYZ Co., then a receivable is created for ABC
and XYZ's inventory is increased.
Receivable
An amount of money owed to a company by its customers or clients for goods or services delivered but not yet paid for.
Inventory Increase
A rise in the quantity of products or materials that a company has available for sale or use, which is often an indicator of production levels or sales expectations.
- Comprehend the influence of the average collection period and credit sales on the company's balance of receivables.
- Comprehend the implications of different types of sales contracts on revenue recognition and credit risk.
Verified Answer
SS
SULAKKHANA SANGSUBSIN6 days ago
Final Answer :
True
Explanation :
When ABC Co. sells inventory on credit to XYZ Co., ABC records a receivable (indicating XYZ owes ABC money), and XYZ records the inventory as an asset, thus increasing its inventory.
Learning Objectives
- Comprehend the influence of the average collection period and credit sales on the company's balance of receivables.
- Comprehend the implications of different types of sales contracts on revenue recognition and credit risk.