In a sale on account, which accounts are debited and credited?

• A. Debit Cash; Credit Sales Revenue
• B. Debit Accounts Receivable; Credit Sales Revenue
• C. Debit Inventory; Credit Accounts Receivable
• D. Debit Sales Revenue; Credit Accounts Receivable

Answer: (B)

When a sale is made on account, you recognize revenue now and set up a receivable for the customer’s promise to pay later. The proper entry increases the asset Accounts Receivable (debit) and increases Sales Revenue (credit). Debiting AR records that the customer owes you money, while crediting Sales Revenue records the income from the sale, which increases owners’ equity. If the customer pays later, you’d debit Cash and credit Accounts Receivable to reflect the receipt.

The other options don’t fit because they either involve cash when there isn’t cash received yet, or they would debit revenue (which would decrease it) or swap the asset and revenue effects, not properly recording the sale on account.