To debit accounts receivables and credit sales is the typical entry under:

Question

Options

• AFictitious account payables
• BFictitious account receivables
• CFailure to write off account receivables
• DFailure to write off account payables

• A
  14% (5)
• B
  78% (29)
• C
  3% (1)
• D
  5% (2)

Explanation

Fictitious accounts receivable fraud involves recording fake (non-existent) credit sales - and the journal entry for any credit sale is always debit Accounts Receivable / credit Sales, making B the correct answer. The fraudster inflates both revenue (Sales) and assets (AR) simultaneously with this entry, creating the appearance of legitimate business activity that never occurred.

Why the distractors are wrong:

• A (Fictitious AP): Creating fake payables uses the opposite logic - debit an expense, credit Accounts Payable - to inflate costs, not revenue.
• C (Failure to write off AR): This is an omission fraud (not recording a bad debt write-off), not the creation of a new entry; no debit to AR or credit to Sales is involved.
• D (Failure to write off AP): Similarly an omission - failing to remove a paid or forgiven liability - completely unrelated to the AR/Sales entry.

Memory tip: Think "fake sale = fake receivable." Every real credit sale debits AR and credits Sales; fictitious AR fraud simply pretends that sale happened, using that identical entry - so the entry itself is the giveaway.

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