NOCTI Accounting Foundations Practice Test

When a cash sale occurs, cash being received increases your assets, and you’ve earned revenue that must be recorded. Record this by debiting Cash and crediting Sales Revenue. This reflects the cash inflow and the recognition of the sale.

If the sale were on credit, you’d debit Accounts Receivable instead of Cash. The other options misstate either revenue and inventory relationships or cash flow: debiting inventory or crediting cash alone wouldn’t properly reflect the sale revenue in this scenario, and debiting sales revenue would reduce revenue rather than recognize it.