A company collects a customer's account within the discount period.Indicate how this transaction would affect the following five financial statement items:
$\begin{array}{llllll}
&&& \text { Stockholders' } \
&\text { Assets } &\text { Liabilities } &\underline{\text { Equity }}& \underline{\text { Revenues }} &\underline{\text { Expenses }}\
\text { a. } & \text { Decrease } & \text { No effect } & \text { Decrease } & \text { Decrease } & \text { No effect } \
\text { b. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { Decrease } \
\text { c. } & \text { Increase } & \text { No effect } & \text { Increase } & \text { Increase } & \text { No effect } \
\text { d. } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect } & \text { No effect }
\end{array}$

Question

Quizplus · Accepted Answer

When a company collects a customer's account within the discount period, it results in an increase in cash (an asset) and a decrease in accounts receivable (an asset). Since the customer is paying within the discount period, the company will not receive the full amount of the invoice, resulting in a decrease in revenue. The transaction will have no effect on liabilities, stockholders' equity, or expenses.

A Company Collects a Customer's Account Within the Discount Period