On July 31,ALOE Inc.received $5,000 cash from a customer who previously purchased ALOE's products on account.What should ALOE Inc.record at the time it receives cash?

Question

Quizplus · Accepted Answer

When ALOE Inc. receives cash from a customer who previously purchased their products on account, it means that the customer has paid their outstanding Accounts Receivable balance. Therefore, ALOE Inc. should debit Cash for $5,000 and credit Accounts Receivable for $5,000 to reflect the transaction. Option A is incorrect because it wrongly assumes that ALOE Inc. is still owed $5,000 by the customer. Option C is incorrect because it involves Accounts Payable, which is not relevant to the transaction. Option D is incorrect because there is no mention of any service being provided by ALOE Inc. in the question.