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 earned, not when cash is received. On March 10, Fox Auto recognizes revenue and accounts receivable, increasing assets. When the customer pays on March 31, cash increases and accounts receivable decreases, with no net effect on total assets.

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