What is a business closure's impact on accounts receivable?

A business closure significantly affects accounts receivable, primarily because outstanding receivables may become uncollectible, resulting in financial losses. When a business ceases operations, its ability to collect outstanding amounts from customers is heavily compromised. Customers may be unable or unwilling to pay for goods or services once the business has officially closed.

The potential for receivables to become uncollectible arises from the uncertainty surrounding the business's future and the possible inability of customers to engage with the company. Financial losses can accumulate if these receivables, which were previously expected to generate cash flow, are written off due to non-collection.

In contrast, the other options illustrate misunderstandings of the dynamics at play in a closure scenario. Increased revenues during closure are unlikely since the business isn't generating new sales. The notion that all outstanding receivables are always collected before closure is overly optimistic and does not reflect the reality of the collection process, which can be uncertain at best. Lastly, the idea that there is no impact on accounts receivable because they are managed independently overlooks the interconnectedness of a business's operations and its financial health.