Question

On January 1, Brad Inc. sold $30,000 in products to a customer on account. Then on January 10, Brad collected the cash on that account. What is the impact on Brad's accounting equation from the collection of cash on January 10?

A) No net effect on the accounting equation
B) Assets increase and liabilities decrease.
C) Assets decrease and liabilities decrease
D) Assets increase and stockholders' equity increases

Answer 1

A) No net effect on the accounting equation

Step-by-step explanation:

The event will not effect the Accounting equation because both of the accounts Cash and Account receivable will be treated in the transaction which are the assets accounts. The cash balance will increase and Account Receivable balance will decrease as a result of this transaction. Net effect to the Asset side of the accounting equation will be zero.