How Is Owner’s Equity Affected When Goods Or Services Are Sold On Account / Credit
When goods sold or services rendered on account, then it means that the business will receive the cash later on but the sales are recorded, recognized and earned by the business. In such a case, the Accounts Receivable / Sundry Debtors , being a current asset, is created as the business will collect the cash from customers against the Sales made. Sales, which is a direct revenue, is also created and it is the result of operating activities of the owner of the business. Example: Mr. A is a sole owner of his business. He performed services on account / credit to his customer, Mr. B for Rs. 2000. The journal entry to record for services performed is shown below: Accounts Receivable a/c 2000 ...