A Business Collects $5,000 from Its Customer Which Was Owed

question 51

Multiple Choice

A business collects $5,000 from its customer which was owed since a previous month. How does this affect the accounting equation of the business?

• A)Assets increase by $5,000; liabilities decrease by $5,000.
• B)Assets increase by $5,000; assets decrease by $5,000.
• C)Assets increase by $5,000; liabilities increase by $5,000.
• D)Assets increase by $5,000; equity increases by $5,000.

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Definitions:

Unusual Items

Refers to uncommon or rare transactions that are not expected to occur frequently within the normal course of business.

Accounting Principles

Fundamental guidelines or rules that form the basis for accounting practices, such as relevance, reliability, comparability, and consistency.

Quick Ratio

A liquidity measure that indicates a company's ability to cover its short-term liabilities with its most liquid assets.

Percentage Increase

The proportional growth of a quantity over a specific period, calculated as the difference between the final and initial values divided by the initial value, multiplied by 100.