Question

Assuming that the accrual basis of accounting is used, when a company collects the cash from a credit sale to a customer,

-accounts receivable increase.

-total assets increase.

-the company records an increase in sales and an increase in cash.

-total assets decrease.

-there is no change in the total assets of the company.

Answer 1

It seems to me the question is not clear an complete but according to my understanding from the Question :

Accrual basis states that revenues are reported on the income statement when they are earned. Where as under cash basis of accounting revenues are reported on the income statement when the cash is recieved. The result of accrual accounting is an income statement that better measures the profitability of the company during a specific time period.

When a company collects cash from Credit sale customer. According to accrual basis:

1. Journal entry on the date of sales would be Accounts Recievable account would be debited where as the Inventory account would be credited.

2. Later date on recieving cash the journal entry would be Cash account would be debited where as Accounts recievable account would be credited.

Which mean that on the day of recieving cash , Accounts reecievable account would decrease by the amount of goods that had been sold on that particular date. And the Cash account would increase by the same amount. Therefore there would be a no effect in the total Current Assets.

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