Accounts receivable are almost always considered current assets because they are expected to be:

• A. Used to acquire long-term assets and therefore not convertible to cash in the near term
• B. Held for resale to customers in the ordinary course of business
• C. Collected in cash within one year or the entity’s operating cycle, whichever is longer
• D. Due only after the entity refinances the receivable balance with a long-term lender

Answer: (C)

Verified step by step guidance

1. Understand the definition of current assets: Current assets are assets expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.
2. Recognize that accounts receivable represent amounts owed by customers from sales made on credit, which are typically collected in cash.
3. Identify that accounts receivable are classified as current assets because they are expected to be collected in cash within the normal operating cycle or one year, whichever is longer.
4. Eliminate options that do not align with the nature of accounts receivable, such as being used to acquire long-term assets or being due only after refinancing with a long-term lender.
5. Conclude that the correct classification is based on the expectation of collection in cash within one year or the operating cycle, making accounts receivable current assets.