Question

Montgomery equipment rental company 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?

Answer 1

The correct answer is that this payment will have no effect on the accounting equation.

The accounting equation is Assets=Liabilities + Owner’s Equity. The journal entry for this transaction will be a debit to Cash and a credit to Accounts Receivable for $1,000. Since both of these accounts are Assets there will be no change to the asset balance.