What accounts are affected when a sale occurs?

When a sale occurs, the accounts that are directly affected include inventory, cost of goods sold (COGS), debtors (Accounts Receivable), and sales revenue.

When a product is sold, the inventory account decreases because the item is no longer in stock. This decrease in inventory reflects the cost associated with the goods that were sold, which is recorded in the COGS account. At the same time, the sales revenue account is credited, recognizing the income generated from the sale. If the sale is made on credit, the debtors account is affected because it represents the amount owed by the customer until payment is received. Each of these accounting entries reflects the economic activity and ensures that the financial statements accurately represent the organization’s performance and position.

Other options do not fully capture all the pertinent accounts tied to the sale. For instance, the second option discusses broad categories like assets and revenue without specifically detailing the individual accounts impacted by the transaction. The third option refers primarily to cash flows and expenses, which are typically involved in operational activities but do not pinpoint the specific accounts affected by a sale. Lastly, the fourth option mentions revenue and cash but does not articulate the role of inventory and COGS in the context of a sale, which are critical