Glossary
Credit sale
A sale where the customer takes the goods now and pays later.
What it means
A sale of goods on which payment is deferred, creating a trade receivable until the customer pays.
Example
Selling RM1,000 of goods on 30 days' credit creates a RM1,000 trade receivable.
Why it matters
Credit sales drive the sales ledger and the collection of receivables, affecting cash flow timing.
In practice
A credit sale is recorded by debiting the customer's account in the sales ledger and crediting the sales account. No entry touches the bank until the customer pays. It creates a trade receivable, which is a current asset in the statement of financial position. It still counts as revenue in the income statement straight away, under the realisation concept.
Sell goods for RM2,000 on credit. Sales rise by RM2,000 and a RM2,000 receivable is created. When the customer settles, you debit bank and credit their account, which clears the receivable.
The contrast is a cash sale, where payment is immediate, so the bank or cash account is debited at once and no receivable arises. Both give the same sales revenue. Only a credit sale exposes the business to the risk of non-payment. That is why irrecoverable debts and the allowance for receivables relate to credit sales and not cash sales.
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Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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