Question

Answer the following questions:

Q.1) Is collecting cash from customers accounts receivable an expense or revenue or neither ?

Q.2) Are cash receipts recorded as revenues?

Q.3) Is paying for accounts payable an expense?

Answer 1

Q.1) Is collecting cash from customers accounts receivable an expense or revenue or neither ?
Answer: ‘Neither’. Cash collected from accounts receivables is just a cash received transaction. Its neither an expense nor revenue. The revenues must have been recorded when the accounts receivables were originally recorded at the time of sale on account.

Q.2) Are cash receipts recorded as revenues?
Answer: No, not all cash receipts are recorded as revenues. Revenues are recorded when they are earned, whether in cash or on account. If Cash is collected from accounts receivables, it will not be recorded as revenues, as it has already been recorded as revenue at the time of sale on account.

Q.3) Is paying for accounts payable an expense?
Answer: NO, paying accounts payable is not an expense just like collecting from accounts receivables is not a revenue. Expenses had been recorded when accounts payable were created. Further payment to them is just a cash transaction to settle liability.