Question

Glass Corporation sold merchandise to a customer for $30,000 on credit on July 15. The customer paid Glass the amount on July 31. Under the accrual basis of accounting, how should Glass record the transaction?

Answer 1

Under the accrual basis of accounting, Glass Corporation should record the transaction in two steps: an increase in accounts receivable and sales revenue on July 15, and a decrease in accounts receivable and an increase in cash on July 31.

Step-by-step explanation:

Under the accrual basis of accounting, Glass Corporation should record the transaction in two steps:

On July 15, Glass Corporation should record an increase in accounts receivable (an asset account) and an increase in sales revenue (a revenue account). The journal entry would be:

Accounts Receivable $30,000

Sales Revenue $30,000

On July 31, when the customer pays the amount, Glass Corporation should record a decrease in accounts receivable and an increase in cash. The journal entry would be:

Cash $30,000

Accounts Receivable $30,000