When should a business account for sales made on credit?

The appropriate timing for recognizing sales made on credit is when the service is performed or the product is delivered. This aligns with the accrual basis of accounting, which dictates that revenue should be recognized at the point of sale rather than when cash is received. Under this method, a transaction is recorded in the accounting period in which it occurs, reflecting the obligation to provide goods or services in exchange for payment, even if the payment has not yet been collected.

This approach ensures that financial statements accurately represent a company's performance and financial position. By recognizing revenue at the moment goods are delivered or services performed, businesses can provide a clearer picture of their income-generating activities and financial health.