Question

Collection of a $1,000 Accounts Receivable Select one:_____ a. decreases a liability $1,000; increases stockholders' equity $1,000 b. increases an asset $1,000; decreases an asset $1,000 c. increases an asset $1,000; decreases a liability $1,000 d. decreases an asset $1,000; decreases a liability $1,000

Answer 1

b. increases an asset $1,000; decreases an asset $1,000

Step-by-step explanation:

Collection of a $1,000 Accounts Receivable results in a debit of $1,000 to the cash account and a credit of $1,000 to the Accounts Receivables account.

As such the collection results in entries posted between two (2) asset accounts. The cash account increase by the amount collected and the receivables account decreases by the same amount. Hence, the right option is b. increases an asset $1,000; decreases an asset $1,000.