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How would cash collected on accounts receivable affect the balance sheet? a) Increase assets and...

Question:

How would cash collected on accounts receivable affect the balance sheet?

a) Increase assets and increase equity

b) Decrease liabilities and increase equity

c) Increase liabilities and decrease equity

d) Increase assets and decrease assets

Accounts Receivable Journal Entries:

When cash is collected on accounts receivable, a journal entry must be recorded to account for the transaction. The journal entry would result in an increase to cash and a decrease to accounts receivable on the balance sheet.

Answer and Explanation:

The journal entry to record cash collected on accounts receivable is as follows:

Account Debit Credit
Cash $XXX
Accounts Receivable $XXX

Since cash and accounts receivable are both asset accounts on the balance sheet, the entry shown above would increase assets and decrease assets. Therefore, option "d" is the correct answer. Option "a" increases equity, so it is incorrect. Options "b" and "c" affect liabilities and equity on the balance sheet instead of assets, so they are also incorrect answers.


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Accounts Receivable Journal Entries

from Financial Accounting: Homework Help Resource

Chapter 3 / Lesson 20
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