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31 August, 17:33

Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11, Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?

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  1. 31 August, 19:09
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    No Net Impact on Pumpkin's Accounting Equation from collection of cash.

    Explanation:

    Sales transaction has already been recorded and there is a Account receivable with $500 balance which is an asset account. On January 11 Cash has been received and the transaction was as follows:

    Dr. Cash $500

    Cr. Account receivable $500

    Cash and Account receivable are both assets account therefore there will be no net impact on pumpkin's accounting equation one type of asset account balance is increasing the other type of asset account balance is decreasing when we post transaction.

    Accounting Equation

    Asset = Equity + Liability

    Dr. Cash + 500 0 0

    Cr. Account Receivable - 500 0 0

    Total Impact 0 0 0
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