Record a sale on credit for $1,200.

• A. Debit Sales Revenue 1,200; Credit Accounts Receivable 1,200
• B. Debit Cash 1,200; Credit Sales Revenue 1,200
• C. Debit Expenses 1,200; Credit Revenue 1,200
• D. Debit Accounts Receivable 1,200; Credit Sales Revenue 1,200

Answer: (D)

When a sale is made on credit, you recognize the revenue and record receivable for the amount owed by the customer. Revenue increases owners’ equity, so it is credited. Since no cash is received yet, you debit an asset—Accounts Receivable—to reflect the amount the customer still needs to pay. Cash is not affected at the time of a credit sale.

This entry, Debiting Accounts Receivable and Crediting Sales Revenue, correctly shows that the business has earned revenue while establishing a receivable for future cash collection. Other options would either imply cash was received, record an expense, or misstate which accounts are affected.