Which type of sale involves extending credit and creates accounts receivable?

Which type of sale involves extending credit and creates accounts receivable?

• A. Cash sale
• B. Credit sale
• C. Pro forma sale
• D. Export sale

Answer: (B)

Extending credit in a sale means the buyer pays later, so the seller creates an asset called accounts receivable representing the amount owed. A credit sale delivers the goods or services now but records revenue and accounts receivable at the time of sale, since payment is expected in the future. For example, selling 1,000 on credit would debit Accounts Receivable 1,000 and credit Revenue 1,000, with the receivable becoming cash later when the customer pays. A cash sale, by contrast, collects payment immediately, so no receivable is created. A pro forma sale is just a preliminary document or estimate, not a final sale, so it doesn’t generate a receivable. An export sale describes the sale’s market (to another country) and doesn’t by itself define whether payment is on credit or cash. Thus, the type that inherently involves extending credit and creates accounts receivable is a credit sale.

Extending credit in a sale means the buyer pays later, so the seller creates an asset called accounts receivable representing the amount owed. A credit sale delivers the goods or services now but records revenue and accounts receivable at the time of sale, since payment is expected in the future. For example, selling 1,000 on credit would debit Accounts Receivable 1,000 and credit Revenue 1,000, with the receivable becoming cash later when the customer pays.

A cash sale, by contrast, collects payment immediately, so no receivable is created. A pro forma sale is just a preliminary document or estimate, not a final sale, so it doesn’t generate a receivable. An export sale describes the sale’s market (to another country) and doesn’t by itself define whether payment is on credit or cash. Thus, the type that inherently involves extending credit and creates accounts receivable is a credit sale.