Sales do not equal cash inflow because __________.

Question

sales are computed on the accrual basis of accounting

sales include both merchandise and services

cash is sometimes collected at the time of sale

sales are on the cash basis of accounting

Answer 1

Sales do not equal cash inflow because sales are computed on the accrual basis of accounting.

In accrual accounting, revenue is recognized when it is earned, regardless of when cash is actually received. This means that there can be a disconnect between the sales recorded and the actual cash inflows, as some sales may be made on credit and not result in immediate cash collection.