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?
Assets increase and liabilities decrease.
Assets decrease and liabilities decrease.
No net effect on the accounting equation.
Assets increase and stockholders' equity increases.

Answer 1

Answer:

No net effect on the accounting equation.

Explanation:

Given that,

On January 1, Products sold to a customer on account = $30,000

On January 10, Cash collected from a customer = $30,000

Accounting equation is as follows:

Assets = Liabilities + Stockholder's equity

On January 10,

The cash of $30,000 is received from the customer which increases the assets by $30,000 and reduces the accounts receivable by $30,000 which is also a part of assets. Therefore, there is no change or impact on the accounting equation.