Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 37 - No. 43)
What is the effect of a decrease in accounts receivable on the accounting equation?
Assets increase, Liabilities increase
Assets decrease, Liabilities decrease
Assets decrease, Assets decrease
Assets increase, Assets decrease
Explanation
A decrease in accounts receivable increases cash and decreases accounts receivable; thus, the composition of the assets changes.
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