BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
yes
|
|
|
no
|
Detailed explanation-1: -Collection of Cash from a Sale Cash is an asset account. Revenue increases stockholders’ equity. This increases the left side and right side of the accounting equation by the same amount, which keeps it in balance. For example, if you collect cash for a $500 sale, assets and stockholders’ equity each increase by $500.
Detailed explanation-2: -When cash is received, the cash account is debited. When cash is paid out, the cash account is credited.
Detailed explanation-3: -Capital represents the owner’s investment or equity in a business. When a business receives cash, it is always recorded as an increase to cash and a decrease to an expense. Liabilities represent amounts owed to creditors. In the fundamental accounting equation, assets are added to liabilities.
Detailed explanation-4: -Stockholders’ equity is increased when cash is received from customers in payment of previously recorded accounts receivable. The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.