The Net Effect of the Entries to Recognize the Collection

question 66

Multiple Choice

The net effect of the entries to recognize the collection of a previously written-off account under the allowance method will

• A) increase total assets and total equity.
• B) increase total equity only.
• C) decrease total assets.
• D) have no effect on total assets or total equity.

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Definitions:

Perpetual Inventory System

An inventory accounting practice that instantly processes and records purchases or sales utilizing computerized point-of-sale systems alongside enterprise asset management software.

Merchandise

Products that are purchased and traded during business operations, usually in a retail or wholesale environment.

Perpetual Inventory System

An inventory management system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Net Method

An accounting technique used for recording purchases where the purchase is recorded net of any trade discounts offered by the supplier.