Final answer:
It is true that a business records sales made on account by debiting accounts receivable and crediting sales, reflecting the owed payment as an asset and the sale as revenue.
Step-by-step explanation:
The statement is true: when a business sells merchandise on account, the seller does indeed record the sales as a debit to accounts receivable and a credit to sales. This is because the sale has generated revenue but the cash has not yet been received; instead, the buyer owes the seller money for the merchandise. To reflect this future inflow of cash, the business adds the amount to accounts receivable, an asset on the balance sheet. Simultaneously, the business records the revenue by crediting the sales account, which is part of the income statement and reflects the increase in net income from the sale.
These accounting entries are consistent with the double-entry bookkeeping system, where each transaction affects at least two accounts to keep the accounting equation (assets = liabilities + equity) in balance.