Fitch Supply Services received $1,000 cash from a customer; the amount was owed to the business from the previous month. What is the effect of this transaction on the accounting equation

Question

Business

Guest

24 July, 02:30

Fitch Supply Services received $1,000 cash from a customer; the amount was owed to the business from the previous month. What is the effect of this transaction on the accounting equation

+2

Answers (1)

Know the Answer?

Aggie · Answer 1

Decrease the accounts receivable account in assets section of balance sheet by $1,000

Increase the cash account in assets section of balance sheet by $1,000

Explanation:

The Accounting equation for any entity is represented by the following equation:

Assets = Equity + Liability

When the entity receive any amount from customer in respect of the any credit sale made to him, the account receivable in the asset section will be decreased by the that amount and the cash section in the asset section will be increased by that amount.

In this case, Fitch supply services shall

Decrease the accounts receivable account in assets section of balance sheet by $1,000

Increase the cash account in assets section of balance sheet by $1,000