When credit sales exceed collections of cash from accounts receivable,the increase in accounts receivable is added to net sales to determine the amount of cash collected from customers during the period.

Question

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When credit sales exceed collections of cash from accounts receivable, it means that there is an increase in accounts receivable balance. This increase should be subtracted from net sales to determine the amount of cash collected from customers because the revenue is recognized at the point of sale, not when the payment is received. Therefore, the correct statement is: The increase in accounts receivable is subtracted from net sales to determine the amount of cash collected from customers during the period.

When Credit Sales Exceed Collections of Cash from Accounts Receivable,the