Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 17 - No. 22)
What is the effect on the accounting equation when a business receives cash from a customer on account?
Assets increase, liabilities increase.
Assets decrease, liabilities increase.
Assets decrease, equity increases.
The composition of assets changes; no net effect.
Explanation
Cash (an asset) increases, while Accounts Receivable (another asset) decreases.
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