Record a cash sale of $750 when cash is received.

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Prepare for the Fundamentals of Accountancy, Business, and Management (FABM) 1 Exam. Study efficiently with multiple choice questions and detailed explanations. Enhance your knowledge and succeed in your exam with confidence.

Multiple Choice

Record a cash sale of $750 when cash is received.

Explanation:
When a cash sale is made, you increase the cash you receive and recognize the revenue earned at the point of sale. Cash is an asset and goes up with a debit, while Revenue (Sales Revenue) increases with a credit. Therefore, the correct entry is to Debit Cash 750 and Credit Sales Revenue 750. This shows you received cash and earned revenue right away. The other possibilities don’t fit because they either reverse the direction of the asset and revenue effects or treat the transaction as a collection on a prior receivable rather than a new cash sale. Debiting revenue or crediting cash would misstate the inflow and the earned revenue, and crediting Accounts Receivable would imply there was an outstanding bill being paid, not a cash sale.

When a cash sale is made, you increase the cash you receive and recognize the revenue earned at the point of sale. Cash is an asset and goes up with a debit, while Revenue (Sales Revenue) increases with a credit. Therefore, the correct entry is to Debit Cash 750 and Credit Sales Revenue 750. This shows you received cash and earned revenue right away.

The other possibilities don’t fit because they either reverse the direction of the asset and revenue effects or treat the transaction as a collection on a prior receivable rather than a new cash sale. Debiting revenue or crediting cash would misstate the inflow and the earned revenue, and crediting Accounts Receivable would imply there was an outstanding bill being paid, not a cash sale.

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