Dom's Motor Mart 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 earned, not when cash is received. The March 10th transaction increases both revenue and accounts receivable (an asset). The March 31st transaction converts accounts receivable to cash, so total assets remain unchanged.

Dom's Motor Mart Sold Merchandise to a Customer for $3,000