Which of the following statements is true?
A)A/R provide part of the funding for inventory.
B)A/P provide part of the funding for A/R and inventory.
C)Inventory pays for A/R and A/P.
D)None of the above is true.

Question

Quizplus · Accepted Answer

A/P (Accounts Payable) is a source of funding for both A/R (Accounts Receivable) and inventory. A business can use the money it owes to suppliers (A/P) to finance its inventory purchases, and then sell that inventory to customers and collect the resulting A/R to pay off its A/P obligations. This creates a cyclical pattern of funding. However, inventory itself does not directly pay for A/R or A/P.

Which of the Following Statements Is True