Question

Viscount Company collected $42,000 cash on its accounts receivable. How does this transaction affect the company's accounting equation?

Answer 1

Collecting $42,000 on accounts receivable increases cash and decreases accounts receivable by the same amount, leaving the overall accounting equation unchanged.

Step-by-step explanation:

When Viscount Company collected $42,000 cash on its accounts receivable, it affected the company's accounting equation by reducing accounts receivable and increasing cash. Both accounts receivable and cash are part of the assets in the accounting equation (Assets = Liabilities + Equity), so the overall balance of the accounting equation doesn't change. The cash account increases by $42,000, while accounts receivable decreases by $42,000, keeping the equation in balance.