| Definition: | A customer buys a product or service from a company. The customer does not pay cash at the time of purchase. The customer promises to pay the cash later. The company extends an informal, temporary loan to the customer. Usually the customer pays the cash in one or two months. This transaction increases the asset Accounts Receivable and increases the equity account Revenue. If the customer bought a product, this transaction also decreases the asset account Inventory and decreases equity through the Cost of Goods Sold expense account.
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