In a fictitious revenue scheme, what happens to accounts receivable if the customers never pay?

• A. They are quickly collected.
• B. They stay on the books as an asset until collected.
• C. They are written off immediately.
• D. They are never recorded.

Answer: (B)

When a sale is made on credit, you record an asset called accounts receivable equal to the amount owed. That receivable represents expected future cash inflows, so it stays on the balance sheet as an asset until the cash is actually collected. If customers never pay, you don’t immediately remove that asset; instead, you assess collectibility and, if needed, set up a bad debt allowance or write off the amount. The key idea is that the receivable is created at the time of the sale and remains on the books as an asset until collection occurs or the account is written off as uncollectible.