A Day Spa Accepted a Check from a Customer as Payment

question 197

Multiple Choice

A Day Spa accepted a check from a customer as payment for services. Unfortunately, the customer's check bounced. The journal entry required on the company's books as a result of this bank reconciliation item will

• A)decrease total assets.
• B)decrease stockholders' equity.
• C)Both a and
• D)have no net impact on total assets.

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Definitions:

Operating Activities

Activities directly related to the day-to-day operations of a business, such as selling products, providing services, and paying salaries, which generate cash flows from the primary revenue-producing activities.

Financing Activities

Transactions and events that affect a company's long-term liabilities and equity, such as issuing debt or equity, repaying loans, and paying dividends.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, not relating directly to the entity's usual line of business.

Noncash Investing

Involves transactions that do not directly involve cash but affect the investing activities of a company; for example, acquiring assets through a trade or a note.