Which accounts are affected by a sale on account for $1,000?

Which accounts are affected by a sale on account for $1,000?

• A. Debit Sales; Credit Accounts Receivable
• B. Debit Cash; Credit Sales
• C. Debit Accounts Receivable; Credit Sales
• D. Debit Revenue; Credit Accounts Receivable

Answer: (C)

The key idea is how to record a sale made on credit. When you sell on account, you earn revenue now but will receive cash later, so you create a receivable and recognize the revenue. Since the company is now owed money, Accounts Receivable increases, which is shown by a debit. Revenue from the sale increases as well, and revenue accounts are increased by a credit. So for a $1,000 sale on account, you record a debit to Accounts Receivable for 1,000 and a credit to Sales for 1,000. That matches the correct choice because it reflects the two effects: an asset increase (receivable) and a revenue increase (sales). The other options would either involve cash (which would be used if the sale were paid immediately), or would debit revenue (which would wrongly decrease revenue) or credit receivable (which would not establish the receivable).

The key idea is how to record a sale made on credit. When you sell on account, you earn revenue now but will receive cash later, so you create a receivable and recognize the revenue.

Since the company is now owed money, Accounts Receivable increases, which is shown by a debit. Revenue from the sale increases as well, and revenue accounts are increased by a credit. So for a $1,000 sale on account, you record a debit to Accounts Receivable for 1,000 and a credit to Sales for 1,000.

That matches the correct choice because it reflects the two effects: an asset increase (receivable) and a revenue increase (sales). The other options would either involve cash (which would be used if the sale were paid immediately), or would debit revenue (which would wrongly decrease revenue) or credit receivable (which would not establish the receivable).