Receiving cash from customers on accounts affects which two accounts?

• A. Cash increases; Accounts Receivable decreases
• B. Accounts Receivable increases; Cash increases
• C. Cash decreases; Accounts Receivable increases
• D. Cash increases; Fees Earned increases

Answer: (A)

Receiving cash on accounts involves turning a receivable into cash. Accounts Receivable represents money customers owe you, an asset. When you collect that money, you increase Cash (another asset) and decrease Accounts Receivable, because that amount is no longer owed. The overall asset total remains the same (ignoring write-offs or discounts), but the composition changes from receivable to cash. Revenue isn’t affected by the collection itself since it was recognized when the sale occurred, not when the cash is received. So the two accounts impacted are Cash increases and Accounts Receivable decreases.