When recording the sale of goods on credit, which accounts are typically affected?

When recording the sale of goods on credit, the primary accounts that are affected are Revenue and Accounts Receivable. This occurs because a sale on credit doesn't involve an immediate cash transaction; instead, it reflects an agreement where the buyer promises to pay in the future.

Revenue is recognized upon the sale of goods, reflecting the income earned from that transaction. Accounts Receivable, on the other hand, represents an asset indicating that money is owed to the business as a result of the sale. This means the company has a claim on the cash that will be received in the future from the buyer.

When this transaction is recorded, it reflects both the income generated by the sale and the expectation of future cash inflow, which is why these two accounts are directly impacted in this situation. This entry accurately illustrates the accrual accounting principle that revenue is recognized when earned, regardless of when payment is collected.