What is the effect on the balance sheet of making cash sales of inventory to customers on profit?
A) Assets and equity increase.
B) Assets and equity decrease.
C) Assets decrease and equity increases.
D) Assets increase and equity decreases.

Question

Quizplus · Accepted Answer

Making cash sales of inventory to customers results in an increase in assets (cash) and equity (retained earnings) as revenue is recognized and recorded. Therefore, the correct choice is A where both assets and equity increase.

What Is the Effect on the Balance Sheet of Making