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A company collected $100,000 cash from a customer who both received and was billed for the goods last quarter. Which of the following items would be increased by this cash collection transaction? Cash, Revenue, Current Assets, Accounts Receivable, Cash from Operations

User Moleboy
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2 Answers

21 votes
21 votes

Final answer:

The collection of $100,000 would increases both Cash and Cash from Operations while decreasing Accounts Receivable, with no impact on Current Assets or Revenue for the current period. The firm's accounting profit from the provided information would be $50,000, calculated as sales revenue minus total expenses.

Step-by-step explanation:

The cash collection of $100,000 by a company from a customer who was previously billed would result in an increase in the company's Cash and Cash from Operations. Since the billing took place last quarter and the goods were delivered at that time, the Revenue would have been recognized in the previous quarter, so current period revenue would not be affected by this transaction. However, the collection reduces the Accounts Receivable as the customer's debt to the company is paid off, without changing the total Current Assets as one component increases (Cash) and another decreases (Accounts Receivable).

The self-check question provided can be answered as follows: if a firm had sales revenue of $1 million and incurred expenses totaling $950,000 ($600,000 for labor, $150,000 on capital, and $200,000 on materials), then the firm's accounting profit would be the difference between the sales revenue and the expenses, which equates to $50,000.

User Mike Partridge
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3.2k points
10 votes
10 votes

Answer:

Debit the Cash Account: $100,000

Credit Accounts Receivable: $100,000

Step-by-step explanation:

Cash will increase by $100,000 and

Accounts Receivable will decrease by $100,000.

Both accounts are asset accounts. The account equation will remain in balance.

User Anjruu
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