P10-14 The following information was taken from the 2005 financial statement of the AB Corporation: Accounts receivable, Jan 1, 2005 $30,000 Accounts receivable, Dec 31, 2005 $40,000 Sales ( all credit sales) $480,000 Note: No accounts receivable were written off or recovered during the year

The following information was taken from the 2005 financial statement of the AB Corporation:
Accounts receivable, Jan 1, 2005 $30,000
Accounts receivable, Dec 31, 2005 $40,000
Sales ( all credit sales) $480,000

Note: No accounts receivable were written off or recovered during the year.

a) Determine the cash collected from customers by the AB Corporation in 2005

The cash to be collected from customers by the AB Corporation in 2005 can be calculated as follows: -

Accounts receivable, Jan 1, 2005 $30,000
Add: Sales ( all credit sales) $480,000
Total $510,000
Less: Accounts receivable, Dec 31, 2005 $40,000
Cash to be collected $470,000

b) Comment on why cash collected from customers differed from sales.

Cash collected from customers differed from sales because sales are credit sales, which will be collected at the later date. Therefore, the cash collected and the sales amount will have different balance amount.