Recognize the revenue too!

Dollar Sign As Symbol For Money Or CashWe have learned in previous units that when a service is completed the business recognized revenue by crediting the service revenue account. In the same way, in addition to accounting for inventory, a merchandise business also has to recognize revenue from the sale. To recognize revenue, the merchandise business will:

  1. Debit cash or accounts receivable depending on if cash was received or the good was sold on account
  2. Credit sales revenue