Fox Auto sold merchandise to a customer for $3,000 on credit on March 10.The customer paid Fox Auto the amount due on March 31.Under the accrual basis of accounting, which of the following statements is true?

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when it is earned, not when cash is received. Therefore, the revenue was recognized on March 10 when the merchandise was sold. The March 31 transaction, which is the receipt of cash, does not affect total assets because it is simply an exchange of one asset (accounts receivable) for another (cash).

Fox Auto Sold Merchandise to a Customer for $3,000 on Credit