Question

In: Accounting

If ending accounts receivable exceeds the beginning accounts receivable: A. cash collections during-the period exceed the...

If ending accounts receivable exceeds the beginning accounts receivable:


A. cash collections during-the period exceed the amount of revenue earned.
B. net Income for the period is less than the amount of cash basis income.
C. no cash was collected during the period.
D. cash collections during the year are less than the amount of revenue earned.

Solutions

Expert Solution

Solution

If ending accounts receivable exceeds the beginning accounts receivable:

The correct option is D. – Cash collections during the year are less than the amount of revenue earned.

Explanation:

The beginning balance of accounts receivable represents the revenue earned during the previous accounting period, but the collections are due in the future accounting period.

The current year revenue earned would increase the accounts receivable balance, while the cash collections reduce the accounts receivable balance.

So, if the cash collections during the current accounting period are higher than the ending accounts receivable balance would be lower.

Likewise, if the ending accounts receivable exceeds the beginning accounts receivable, it indicates that the cash collections during the year are less than the amount of revenue earned. The cash collections are due in the future accounting period.

ekkarill92 answered 2 years ago
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