FBLA Accounting Practice Test 2025 – Complete Exam Preparation

A sale on account refers specifically to a situation where a business sells goods or services to a customer with the understanding that payment will be received at a later date. This means that the customer is given credit and is allowed to buy now and pay later, often documented with an invoice that outlines the terms of the sale. This type of transaction reflects the concept of accounts receivable on the balance sheet, where the business is recognizing that it has a claim for payment from the customer.

In contrast, a sale for immediate cash payment requires customers to pay at the time of purchase, which is not the essence of a sale on account. Transactions settled through credit cards involve immediate payment processing and are considered cash sales from a financial reporting perspective, even though the customer may be using credit. A sale with no payment involved would not be classified as a sale at all since there is no transfer of value. Thus, the second option captures the nature of credit sales accurately, focusing on the delayed payment aspect that characterizes a sale on account.