If a business allows a customer to buy on credit, which of the following increases?Group of answer choicesInventoryAccounts PayableDebtAccounts Receivable

Problem Breakdown

In this scenario, we need to analyze how allowing customers to buy on credit affects different accounts within a business. The options provided are Inventory, Accounts Payable, Debt, and Accounts Receivable.

Relevant Concepts

1. Accounts Receivable: Represents money owed to the business by customers who have purchased goods or services on credit.
2. Accounts Payable: Refers to the money a company owes to its suppliers or vendors.
3. Debt: Relates to the total amount of money borrowed by the business, typically from banks or financial institutions.
4. Inventory: The goods and materials a business holds for the purpose of resale.

Analysis and Detail

When a business allows a customer to buy on credit:

1. Accounts Receivable increases because the business is expecting to receive payment from the customer in the future for the goods sold.
2. Inventory does not necessarily increase directly due to credit sales; it might even decrease if goods are sold.
3. Accounts Payable and Debt are not directly affected by a sale on credit to a customer.

Verify and Summarize

The key impact of allowing credit sales is that it increases Accounts Receivable, as the business is essentially extending credit to its customers.

Final Answer

The correct choice that increases when a business allows a customer to buy on credit is Accounts Receivable.