BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Accounts Receivable is credited for the total sale and sales tax.
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the accounts receivable account balance is increased.
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Sales is debited for the price of the goods.
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the sales tax is not reported.
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Detailed explanation-1: -Since an increase in A/R signifies that more customers paid on credit during the given period, it is shown as a cash outflow (i.e. “use” of cash) – which causes a company’s ending cash balance and free cash flow (FCF) to decline.
Detailed explanation-2: -Accounts receivable are unpaid bills from customers who have purchased goods or services on credit. The government does not levy taxes directly on a company’s accounts receivable balance. Those accounts, however, represent revenue to the company, which means they ultimately contribute to the company’s profit.
Detailed explanation-3: -Answer and Explanation: Goods sold on account are credited to sales to record the sale of the goods then debit to accounts receivable.
Detailed explanation-4: -Accounts receivable amounts, which represent transactions you have made for which payment has not been received, count as sales once you have provided the product or service to the customer. They increase your net profit by contributing to your reported sales revenue.