Sales do not equal cash inflow because __________.

Question

sales are on the cash basis of accounting

companies do not necessarily collect cash at the time of sale under the accrual basis of accounting

sales include both merchandise and services

cash is sometimes collected at the time of sale

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Answer 1

The correct answer is:

companies do not necessarily collect cash at the time of sale under the accrual basis of accounting.

In accrual accounting, sales are recognized when they occur, regardless of when the cash is actually received. This means that sales revenue can be recorded even if payment has not yet been made, which leads to the distinction between sales and cash inflow.