For companies that sell goods or services on account, if revenue is recognized prematurely, what would be overstated: sales or accounts receivable?
A)Both sales and accounts receivable
B)Sales, not accounts receivable
C)Accounts receivable, not sales
D)Neither sales nor accounts receivable

Question

Quizplus · Accepted Answer

When revenue is recognized prematurely, both sales and accounts receivable are overstated. Sales are recorded higher than they should be at the time, and accounts receivable are increased to reflect the sales that have been recorded but not yet collected in cash.

For Companies That Sell Goods or Services on Account, If