Chunky Bags sold items for $20,000 cash using the cash basis of accounting and did not record a sale on account. This transaction should have been recorded under accrual accounting. The income statement defect of the cash basis with respect to this transaction is the failure to record an entry to which account?

Question

Quizplus · Accepted Answer

Under accrual accounting, sales should be recorded when earned, regardless of when cash is received. Since the sale was made for cash, the correct entry would be to record the sales revenue, which was omitted under the cash basis.

Chunky Bags Sold Items for $20,000 Cash Using the Cash