A credit sale occurs when a business sells goods or services and allows the customer to pay at a later date. The seller records the transaction as an account receivable until the customer completes payment. Credit sales can enhance customer relationships and increase sales but also expose businesses to credit risk if customers default on payments.

Example: An automotive dealer sells a car for £15,000, giving the customer six months to complete payment. The dealer records the transaction as a credit sale and treats the amount as accounts receivable until payment is fully received. The customer pays £2,500 monthly over six months to complete the purchase.

‍