What happens to revenue when a company sells goods on credit?

When a company sells goods on credit, it recognizes revenue based on the accrual accounting principle, which states that revenue is recorded when it's earned, not necessarily when cash is received. This means that upon the sale of goods on credit, the company reports the revenue immediately in its income statement, reflecting the sale regardless of the payment timing.

The correct answer indicates that revenue recorded as a result of selling goods on credit will increase the figures represented on the income statement. This increase shows the company's earnings from sales regardless of whether the cash has yet changed hands. The sale will subsequently create an accounts receivable entry on the balance sheet, reflecting the amount owed by the customer.

In the context of the other options, the notion that revenue decreases does not apply, as credit sales lead to revenue recognition rather than a reduction. Likewise, claiming that revenue remains unaffected contradicts the concept of revenue recognition, since a legitimate sale has occurred. While revenue does increase instantly in accounting terms, the emphasis here is on the reporting on the income statement, showcasing the association between credit sales and revenue growth.