Question

On May 10, a business collected $3.600 on account. What journal entry is needed on that date?

A. Debit Accounts Receivable for $3,600 and credit Revenue for $3,600
B. Debit Accounts Payable for $3,600 and credit Revenue for $3,600
C. Debit Cash for $3.600 and credit Accounts Receivable for $3,600
D. Debit Cash for $3,600 adn credit Revenue for $3,600

Answer 1

The correct journal entry for collecting $3,600 on account is to debit Cash and credit Accounts Receivable. The firm's accounting profit is determined by subtracting explicit costs from total revenues, resulting in a profit of $50,000 for the given scenario.

Step-by-step explanation:

The journal entry needed when a business collects $3,600 on account on May 10 is: Debit Cash for $3,600 and credit Accounts Receivable for $3,600. This entry reflects the increase in the company's cash balance due to the money collected and the decrease in Accounts Receivable, representing the payment of a previously outstanding debt.

To address the self-check questions, the firm's accounting profit is calculated by subtracting the explicit costs from the total revenues. Therefore, if the firm had sales revenue of $1 million and they spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the accounting profit would be:

Accounting profit = total revenues - explicit costs

= $1,000,000 - ($600,000 + $150,000 + $200,000)

= $50,000.