Future Business Leaders of America (FBLA) Accounting Practice Test

What is a charge customer?

1. A customer who pays in cash

2. A customer who is issued a credit card

3. A customer to whom a sale on account is made

4. A regular retail customer

The correct answer is: A customer to whom a sale on account is made

A charge customer refers specifically to a customer to whom a sale on account is made. This type of customer typically does not pay for the goods or services at the time of purchase but rather is billed at a later date. In this arrangement, the customer can take the item home immediately, while the payment is deferred, creating an account receivable for the seller. This is a common practice in business-to-business transactions and certain retail situations where credit is extended to trusted customers. The concept of a charge customer is essential in accounting as it reflects the establishment of credit terms and the management of accounts receivable. Recognizing who qualifies as a charge customer helps businesses track outstanding debts and manage cash flow effectively. Understanding this distinction is crucial for anyone involved in accounting or financial management, as it directly impacts financial reporting and decision-making.