What actions does QuickBooks Online take when an inventory sale is recorded on an invoice?

When an inventory sale is recorded on an invoice, QuickBooks Online accurately reflects the financial impact of the sale on the business's balance sheet and profit and loss statement. The correct answer highlights that QuickBooks will credit Inventory and debit Cost of Goods Sold (COGS).

When an item is sold, it reduces the available inventory that the company has. Therefore, the inventory account, which reflects the asset of the goods on hand, is credited to reduce its balance. Simultaneously, the associated cost of the sold inventory is transferred to the Cost of Goods Sold account, which is an expense account that reflects the cost incurred to produce the goods that were sold. This dual entry maintains the accounting equation where assets decrease with the sale while simultaneously reflecting the expense that reduces net income.

In contrast, a decrease of quantity without the appropriate transfer to COGS, increasing quantity when an item is sold, or debiting inventory would not appropriately align with standard accounting practices nor reflect the financial reality of the transaction. Thus, option C accurately describes the correct accounting entries made by QuickBooks Online during an inventory sale.