A Company Collects a Customer's Account Within the Discount Period

question 75

Multiple Choice

A company collects a customer's account within the discount period.Indicate how this transaction would affect the following five financial statement items:
$\begin{array}{llllll}&&& \text { Stockholders' } \\&\text { Assets } &\text { Liabilities } &\underline{\text { Equity }}& \underline{\text { Revenues }} &\underline{\text { Expenses }}\\\text { a. } & \text { Decrease } & \text { No effect } & \text { Decrease } & \text { Decrease } & \text { No effect } \\\text { b. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { Decrease } \\\text { c. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { No effect } \\\text { d. } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect }\end{array}$

• A)Option a
• B)Option b
• C)Option c
• D)Option d

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Definitions:

Transactions

Economic events or conditions that result in changes to the financial position of a company and can be measured in monetary terms.

Indirect Method

The indirect method is a method of reporting cash flows from operating activities in the cash flow statement, starting with net income and adjusting for non-cash transactions and changes in working capital.

Net Cash Provided

The total amount of cash generated by a company's operating activities in a specific period, reflecting its ability to generate cash from its core business.

Inventory Account

An account in the financial statements that represents the value of goods a company has in stock, either finished goods, work in progress, or raw materials.