New Register here for RBI, SEBI & NABARD strategy workshop! April 9 at 7 PM

    Question

    When the goods are sold on credit, the following

    happens?
    A Inflow of Cash Correct Answer Incorrect Answer
    B Increase in Creditors Correct Answer Incorrect Answer
    C Decrease in Creditors Correct Answer Incorrect Answer
    D Increase in Debtors Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    When the goods are sold on credit, the company does not receive the cash but a promise to be paid by the person buying the goods. These are the debtors or accounts receivables for the company. The journal entry for this particular transaction is: Dr. Debtors/Accounts Receivables                         Cr. Sales/Revenue As such the impact is that the debtors of the company increase.  

    Practice Next