The Philamono Bean Company reported the following accounts receivable balances for 20X8: Given that there were no bad debts written off during the year, this information means that:
A) credit sales exceeded cash collections from customers during the year.
B) cash collections from customers exceeded credit sales during the year.
C) the firm did an excellent job of collecting its receivables.
D) credit sales increased during the current year over the previous year.

Question

The Philamono Bean Company reported the following accounts receivable balances for 20X8:  Given that there were no bad debts written off during the year, this information means that:
A) credit sales exceeded cash collections from customers during the year. 
B) cash collections from customers exceeded credit sales during the year. 
C) the firm did an excellent job of collecting its receivables. 
D) credit sales increased during the current year over the previous year.

Quizplus · Accepted Answer

The fact that the accounts receivable balance increased from the beginning of the year to the end of the year indicates that credit sales exceeded cash collections from customers during the year. If cash collections exceeded credit sales, then the accounts receivable balance would have decreased. The information does not provide any indication of the firm's collection efforts or whether credit sales increased from the previous year.

The Philamono Bean Company Reported the Following Accounts Receivable Balances