Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

When accounts receivable are collected, which of the following is the correct effect on the accounting equation?

Assets increase; equity increases

Assets decrease; liabilities decrease

One asset increases and another asset decreases; total assets remain unchanged

Assets remain unchanged; liabilities increase

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Verified step by step guidance

Understand the accounting equation: Assets = Liabilities + Equity. This equation must always remain balanced.

Identify the transaction: Collection of accounts receivable means cash is received from customers who previously owed money. Accounts receivable (an asset) decreases, and cash (another asset) increases.

Analyze the effect on total assets: Since one asset (accounts receivable) decreases and another asset (cash) increases by the same amount, the total assets remain unchanged.

Confirm there is no impact on liabilities or equity: The collection of accounts receivable does not involve liabilities or equity, as it only affects asset accounts.

Conclude the correct effect: The correct effect on the accounting equation is that one asset increases (cash) and another asset decreases (accounts receivable), with total assets remaining unchanged.