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What types of transactions give rise to accounts receivable?

Question:

What types of transactions give rise to accounts receivable?

Cash Basis of Accounting:

The cash basis of accounting is a simple approach to accounting for a business where transactions are recorded when cash exchanges hands. This method is ideal for a very simple business that deals in small cash sales, but can make it difficult to assess how valuable or profitable the business is.

Answer and Explanation:

A transaction where revenue is earned but cash does not exchange hands give rise to accounts receivable.

When a business makes a sale of goods or provides services and then gives the customer an invoice, the transaction is recorded as a debit to accounts receivable and a credit to revenue. Once the customer pays for the goods or services, cash is debited and accounts receivable is credited.


Learn more about this topic:

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Accounts Receivable: Definition, Process & Examples

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 1
72K

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