Contessa Company collected $42,000 cash on its accounts receivable.The effects of this transaction as reflected in the accounting equation are:

Question

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Since Contessa Company collected cash on its accounts receivable, there is no change in the total assets (cash has increased by $42,000, while accounts receivable has decreased by the same amount). The transaction does not affect total liabilities since there was no borrowing or repayment of debt. Finally, since the collected cash is considered revenue, the company's equity will increase by $42,000. Thus, total assets, total liabilities, and total equity are unchanged.

Contessa Company Collected $42,000 Cash on Its Accounts Receivable