Atkins Company collected $1,750 as payment for the amount owed by a customer fro

Question

Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins?

Assets would decrease $1,750 and liabilities would decrease $1,750

One asset would increase $1,750 and a different asset would decrease $1,750, causing no effect

Assets would increase $1,750 and liabilities would increase $1,750

Assets would increase $1,750 and equity would increase $1,750

Liabilities would decrease $1,750 and equity would increase $1,750

Explanation / Answer

Journal entry at the time of sale was as follows

Accounts receivable       $1,750

       Sales                                     $1,750

At the time of receipt of above credit, following entry will be passed

Cash              $1,750

       Accounts receivable       $1,750

So, at the time of collection, one asset would increase and a different asset would decrease $1,750, causing no effect

So, option B is the correct option                 

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