Which statement best describes a cash sale transaction?

Which statement best describes a cash sale transaction?

• A. Payment is made on credit and recorded as Accounts receivable
• B. Payment is made in cash and recorded as a cash sale
• C. Payment is made in cash and recorded as a purchase
• D. Payment is made on credit and recorded as a sale on account

Answer: (B)

Cash sale means you receive payment at the time of the sale, in cash, and you record the sale as cash received. Because money is collected immediately, there’s no accounts receivable, and revenue is recognized right away. In practice, you would debit Cash and credit Sales Revenue, and if you’re also tracking inventory, you’d debit Cost of Goods Sold and credit Inventory. The other statements describe sales made on credit or purchases, which do not match the definition of a cash sale.

Cash sale means you receive payment at the time of the sale, in cash, and you record the sale as cash received. Because money is collected immediately, there’s no accounts receivable, and revenue is recognized right away. In practice, you would debit Cash and credit Sales Revenue, and if you’re also tracking inventory, you’d debit Cost of Goods Sold and credit Inventory. The other statements describe sales made on credit or purchases, which do not match the definition of a cash sale.