In cash-based accounting, when does revenue from a credit card sale typically appear?

In cash-based accounting, when does revenue from a credit card sale typically appear?

• A. Immediately when the card is charged and funds are deposited
• B. Only when funds are deposited into the bank
• C. At the end of the period
• D. When the customer pays the credit card balance

Answer: (B)

Under cash-based accounting, revenue is recorded when cash is actually received. For credit card sales, the business doesn’t obtain cash at the moment the card is charged; funds are collected by the card processor and deposited into the business bank account after a settlement period. Therefore, revenue from a credit card sale is recognized when those funds are deposited, i.e., when cash inflow occurs. This timing reflects cash-basis rules rather than the moment of sale or the customer’s subsequent card payment.

Under cash-based accounting, revenue is recorded when cash is actually received. For credit card sales, the business doesn’t obtain cash at the moment the card is charged; funds are collected by the card processor and deposited into the business bank account after a settlement period. Therefore, revenue from a credit card sale is recognized when those funds are deposited, i.e., when cash inflow occurs. This timing reflects cash-basis rules rather than the moment of sale or the customer’s subsequent card payment.