In financial accounting, which of the following best describes a primary function of accounts receivable?

• A. To record the cost of long-term assets and allocate that cost through depreciation
• B. To record amounts owed by customers from credit sales that are expected to be collected in cash
• C. To record amounts owed by the company to suppliers for inventory purchased on credit
• D. To record cash set aside for future equipment purchases

Answer: (B)

Verified step by step guidance

1. Understand that accounts receivable represents amounts owed to the company by its customers, typically arising from credit sales.
2. Recognize that accounts receivable is classified as a current asset on the balance sheet because it is expected to be collected in cash within the normal operating cycle.
3. Differentiate accounts receivable from other accounts such as accounts payable, which records amounts the company owes to suppliers, and from asset accounts related to long-term assets or cash reserves.
4. Recall that the primary function of accounts receivable is to track and record the credit sales made to customers and the subsequent collection of those amounts.
5. Conclude that the best description of accounts receivable is 'to record amounts owed by customers from credit sales that are expected to be collected in cash.'