Which type of sale occurs when the client pays immediately in cash at the time of service?

Which type of sale occurs when the client pays immediately in cash at the time of service?

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

Answer: (A)

When payment is made in full at the time the service is provided, it’s a cash sale. This means the sale is settled immediately, creating a cash inflow and no accounts receivable. Revenue is recognized at the point of sale because payment is received right away, so there’s no extension of credit to the customer. In contrast, a credit sale involves waiting for payment after the service, a pro forma sale is an initial or estimated invoice rather than a finalized, collected sale, and an installment sale collects payments over multiple periods.

When payment is made in full at the time the service is provided, it’s a cash sale. This means the sale is settled immediately, creating a cash inflow and no accounts receivable. Revenue is recognized at the point of sale because payment is received right away, so there’s no extension of credit to the customer.

In contrast, a credit sale involves waiting for payment after the service, a pro forma sale is an initial or estimated invoice rather than a finalized, collected sale, and an installment sale collects payments over multiple periods.