Under accrual accounting, a TV sold on credit would appear as which immediately?

Under accrual accounting, a TV sold on credit would appear as which immediately?

• A. Revenue recognized immediately; Cash decreases.
• B. Revenue recognized; Accounts Receivable increases.
• C. Revenue not recognized until cash is received.
• D. Revenue recognized; Cash increases.

Answer: (B)

Under accrual accounting, revenue is recognized when the goods are delivered or the service is performed, not when cash is collected. If a TV is sold on credit, the seller records revenue at the time of sale and creates an accounts receivable to reflect the amount the customer owes. Cash does not change yet because payment hasn’t been received. So the correct treatment is revenue recognized and accounts receivable increases. The other options imply cash changes or delayed revenue, which isn’t how accrual accounting works.

Under accrual accounting, revenue is recognized when the goods are delivered or the service is performed, not when cash is collected. If a TV is sold on credit, the seller records revenue at the time of sale and creates an accounts receivable to reflect the amount the customer owes. Cash does not change yet because payment hasn’t been received. So the correct treatment is revenue recognized and accounts receivable increases. The other options imply cash changes or delayed revenue, which isn’t how accrual accounting works.