Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Which of the following statements about credit sales is true?

Credit sales are recorded only when cash is received from the customer.

Credit sales decrease both assets and equity on the balance sheet.

Credit sales increase accounts receivable and revenue at the time of sale.

Credit sales require no journal entry until payment is collected.

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Verified step by step guidance

Understand the concept of credit sales: Credit sales occur when a company sells goods or services to a customer and allows the customer to pay at a later date. This creates an account receivable for the company.

Analyze the first statement: 'Credit sales are recorded only when cash is received from the customer.' This is incorrect because credit sales are recorded at the time of the sale, not when cash is received.

Analyze the second statement: 'Credit sales decrease both assets and equity on the balance sheet.' This is incorrect because credit sales increase assets (accounts receivable) and revenue, which ultimately increases equity.

Analyze the third statement: 'Credit sales increase accounts receivable and revenue at the time of sale.' This is correct because when a credit sale is made, the company records an increase in accounts receivable (an asset) and revenue (which impacts equity).

Analyze the fourth statement: 'Credit sales require no journal entry until payment is collected.' This is incorrect because a journal entry is required at the time of the sale to record the increase in accounts receivable and revenue.