Final answer:
Tje correct answer is option C. A merchandiser should recognize an accounts receivable at the point of sale, which is the moment the buyer takes legal ownership and becomes obliged to pay.
Step-by-step explanation:
A merchandiser should recognize an accounts receivable at the point of sale. This moment marks when the buyer takes legal ownership of the item sold and becomes obliged to pay the agreed price. It is important to understand that the creation of accounts receivable does not depend on the actual receipt of cash but instead on the formal agreement or transaction that vests the right to receive cash in the future.
Typically, when goods are delivered, the risks and rewards of ownership transfer to the buyer, and the seller recognizes revenue according to the generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). At this point, assuming the sale was made on credit, an accounts receivable is recorded on the balance sheet of the merchandiser, reflecting the customer's obligation to pay for the purchased goods. To demonstrate, if a business sells merchandise to a customer on credit terms on January 1st, the accounts receivable would be recorded on January 1st, even if the customer isn't expected to make payment until a later date.
The collection process starts after the sales transaction is complete, during which the merchandiser may request payment as per the terms agreed upon, but the recognition of accounts receivable has already taken place at the point of sale. It stands in contrast to when cash is received, which can occur at a later date and essentially settles the accounts receivable, removing it from the balance sheet.
Therefore, the correct option for when a merchandiser should recognize an accounts receivable is C. at the point of sale.