Question

A corporation received $550 from a customer as a deposit and the company uses cash basis accounting. The effect of this transaction is to: Group of answer choices

Answer 1

Answer: a. Increase assets

Step-by-step explanation:

The cash basis of accounting recognises revenues and expenses only when actual cash has been exchanged. As a result, when the customer paid the $550, this amount would be reflected immediately as a cash inflow to the company.

As cash is an asset, when it is received into the company it increases the asset account.

Answer 2

Answer: increase asset

Step-by-step explanation:

Cash basis accounting is an accounting method that is used to records revenue as at the point that the cash is received. Also, the expenses are recorded when expenses are paid in cash.

From the question, we are informed that a corporation received $550 from a customer as a deposit and the company uses cash basis accounting. The effect of this transaction is to increase assets.