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When a business collects revenue, how is the accounting equation affected?
When a business collects revenue, how is the accounting equation affected?
Expert Solution
Collection of revenue: Sales revenue is recorded on the date of sale. The collection of sales revenue may occur on a later date. On the date of sale, the amount that is due from the customer is recorded under the head accounts receivables. Accounts receivables is a current asset account. When a collection of revenue is made on a later date, the accounts receivables account is credited and cash is debited. Cash is also a current asset. So, when collection of revenue is made, there is no effect on the accounting equation as both the accounts that are affected are current asset accounts.
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