If Revenues Are Recognized and Recorded When Earned, the Company

question 78

Multiple Choice

If revenues are recognized and recorded when earned, the company is using the:

• A)cash basis of accounting.
• B)accrual basis of accounting.
• C)adjustment basis of accounting.
• D)the expense basis of accounting.

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Definitions:

Credit Sales

Sales made by a business where the payment is deferred to a later date, typically recorded as accounts receivable until payment is received.

Debit Balance

An account balance that occurs when the total of debits in an account exceeds the total of credits, typical for asset and expense accounts.

Bad Debt Expense

An expense recognized by businesses for accounts receivable that are considered unrecoverable and written off.

Net Credit Sales

The total value of sales made on credit minus any returns or allowances, indicating the actual revenue generated from credit transactions.