What is the general ledger impact from a cash sale?

The correct choice describes the appropriate accounting entries for a cash sale, specifically highlighting that there is a credit to the inventory asset and a debit to the cost of goods sold (COGS).

When a company completes a cash sale, it recognizes revenue and also accounts for the cost associated with the inventory that has been sold. The entry that credits inventory is made because the sale of goods results in a decrease in inventory assets on the balance sheet, reflecting that those goods are no longer owned by the company. Concurrently, debiting the cost of goods sold recognizes the related expense on the income statement, which matches the expenses incurred to generate the revenue from the sale. This matching principle is fundamental in accounting, ensuring that revenues and the associated costs are recorded in the same period.

The other options do not accurately reflect the financial impact of a cash sale:

• One incorrectly suggests an increase in COGS and a decrease in inventory, which occurs in other contexts such as sales returns.
• Another option incorrectly accounts for an accounts receivable entry, which is not applicable in a cash sale scenario since the transaction is completed instantly with cash.
• Additionally, one option suggests debiting COGS and crediting Sales Income, which misrepresents the revenue recognition aspect