When a sale on credit is made under the cash basis of accounting, at the time of the sale, how is the transaction recorded?
A)An increase in assets and an increase in liabilities
B)An increase in assets and an increase in revenues
C)An increase in liabilities and an increase in revenues
D)It is not recorded.

Question

Quizplus · Accepted Answer

Under the cash basis of accounting, revenues are only recognized when cash is received, not at the time of sale. Therefore, a sale on credit (where cash is not received at the time of the sale) is not recorded at the time of the sale.

When a Sale on Credit Is Made Under the Cash