The Business Receives Cash from a Customer That Is Owed

question 62

Multiple Choice

The business receives cash from a customer that is owed to the company "on account," based on services rendered to the customer previously.How does the collection of the cash affect the accounting equation?

• A) Assets increase; owner's equity increases.
• B) Assets increase; liabilities increase.
• C) One asset increases; one asset decreases.
• D) Assets decrease; owner's equity decreases.

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Definitions:

Commercially Unreasonable

Actions or decisions in business that are not justifiable from a commercial standpoint, often leading to disputes.

Bona Fide Purchaser

An individual who purchases an item in good faith, without knowledge of any existing claims or defects on the property.

Security Interest

A legal claim or lien on collateral that secures the fulfillment of an obligation, often used in lending to ensure repayment.

Manufacturer

A company or individual that produces finished goods from raw materials in large quantities using tools, machinery, and labor.