Question

If the balances in both accounts receivable and accounts payable decrease during the year

A. the decrease in both the accounts receivable and accounts payable balances will result in a decrease in cash for the period.
B. the decrease in both the accounts receivable and accounts payable balances will result in a increase in cash for the period.
C. the decrease in the accounts receivable balance would result in an increase in cash for the period.
D. the decrease in the accounts payable balance would result in a increase in cash for the period.

Answer 1

Option C is the correct answer.

Step-by-step explanation:

If the balances in both accounts receivable and accounts payable decrease during the year, the decrease in the accounts receivable balance would result in an increase in cash for the period.

When accounts receivable decreases, it means that the company has collected more money from its customers. This increase in cash is reflected in the company's balance sheet. On the other hand, a decrease in accounts payable means that the company has paid off its debts to suppliers, resulting in a decrease in liabilities but not a direct increase in cash.