Why are sales, sales returns and allowances, bad debts, cash discounts, accounts receivable, and allowance for uncollectible accounts all included in the same cycle?

The options for this question are the following:

A.  Keeping these accounts in one cycle helps the auditor keep each of these accounts close relationships in mind.

B.  These accounts are all part of the balance sheet and should therefore stay in the same cycle.

C.  These accounts should be in the same cycle because there are more transactions in these accounts than any other.

D.  Both A and B are correct.

The correct answer is B.  These accounts are all part of the balance sheet and should therefore stay in the same cycle.

Explanation:

The real or balance accounts, then, are those accounts that, when closing the accounting year, remain within the general balance of the company.

Recall that the balance sheet is composed of the assets, liabilities and equity of the company, then the real accounts with the accounts that correspond to these items.

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