When a credit sale is omitted, the effect on the accounting equation is:

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BlackTom AI · Accepted Answer

To analyze the effect of omitting a credit sale, we must consider what the sale would normally impact in the accounting equation.

Option a: No overall effect. This is incorrect because omitting a credit sale removes both revenue recognition and the corresponding asset (accounts receivable) that would have been recorded. That creates an imbalance rather than no effect.

Option b: Revenues will be understated and Assets will be overstated. This is not plausible because omitting the sale would not cause assets to rise; rather, it would fail to record the anticipated asset (accounts receivable) from the sale, so assets would not be overstated.

Option c: Revenues and Assets will be overstated. This cannot be correct because omitting the sale means we are not recognizing revenue or the asset; that would not push either measure upward.

Option d: Revenues and Assets will be understated. This aligns with the normal consequence of omitting a credit sale: we fail to record earned revenue and the associated accounts receivable, causing both revenues and assets to be understated.

In sum, the omission prevents both the revenue recognition and the asset creation that would accompany a credit sale, resulting in understatement of both components of the equation.

FNDN Accounting 2025 STD O2

When a credit sale is omitted, the effect on the accounting equation is:

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