Distinguishing profit from cash receipts
A fictional business records $1,000 of revenue for a service already delivered, but its customer will pay next month. Under accrual accounting, what is the immediate effect of that revenue transaction?
A
Cash necessarily increases by $1,000 on the service date.
B
No revenue can be recognized until the customer pays under accrual accounting.
C
The customer’s unpaid balance becomes a business expense solely because payment is delayed.
D
Revenue and a receivable increase, while cash does not yet increase.
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