The asset created by a business when it makes a sale on account is termed
A) accounts payable
B) prepaid expense
C) unearned revenue
D) accounts receivable

Question

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When a business makes a sale on account, it means that the customer has not paid immediately, but promised to pay at a later time. This results in an asset for the business in the form of an "accounts receivable," which represents the amount owed by the customer to the business. Option A, accounts payable, refers to the amount owed by a business to its suppliers or vendors. Option B, prepaid expense, refers to a payment made by a business in advance for a future expense. Option C, unearned revenue, refers to the amount received by a business for a service or product that has not yet been delivered or performed.

The Asset Created by a Business When It Makes a Sale