To begin its operating cycle, a business buys inventory for cash or on credit (increasing accounts payable).

Question

Quizplus · Accepted Answer

This statement is true because the purchase of inventory, whether paid for with cash or through credit, initiates the operating cycle of a business. If the purchase is made with cash, it reduces the company's cash balance. If the purchase is on credit, it increases accounts payable, reflecting the company's obligation to pay for the inventory in the future.

To Begin Its Operating Cycle, a Business Buys Inventory for Cash