Montgomery Equipment Rental Company received $1,000 cash from a customer; the amount was owed to the business from the previous month.What is the effect of this transaction on the accounting equation?

Question

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When a company receives cash from a customer for an amount that was previously owed, it means the company's cash balance increases because they now have more money. At the same time, the accounts receivable decreases because the customer has now paid off their debt, reducing the amount owed to the company. This transaction does not affect service revenue (since the revenue was recognized when the service was provided, not when the cash was received) or accounts payable (since this involves the company's own debts, not customer payments).

Montgomery Equipment Rental Company Received $1,000 Cash from a Customer;